The Cost of an Unfilled Vacancy

Unfilled vacancies are an underappreciated drain on a company’s resources, impacting not just finances but also operations and reputation.

For businesses in the UK, particularly in specialised sectors such as energy, the cost of unfilled roles can be significant.

Matt Dickens, Director at Astute People, provides a data-driven breakdown of these costs, demonstrating how they vary across sectors, and outlines the solutions Astute People offers to address the issue of lost revenue through unfilled vacancies.

When a position remains vacant, the costs can escalate in several ways.

These include:

1. Overtime Payments:
   Existing employees are often asked to take on additional work to cover the vacancy. In sectors like construction, where projects are time-sensitive, this leads to increased overtime costs.
   According to the Office for National Statistics (ONS), UK employers spent over £27.3 billion on overtime pay in 2022, with energy sector employees working an average of 10.3 hours of overtime per week(Personnel Today).
   This is particularly significant in highly technical sectors where overtime rates are higher.
2. Increased Employee Stress:
   The Chartered Institute of Personnel and Development (CIPD) found that 79% of UK workers experience stress, with a significant portion attributing it to increased workloads from understaffed teams.
   Overstretched teams in the energy sector, where skills shortages are acute, are at an even greater risk of burnout(Personnel Today).
   Prolonged vacancies mean higher absenteeism and staff turnover, both of which have tangible financial impacts.
3. Delayed Projects:
   In industries like energy, unfilled roles can delay projects, leading to significant financial repercussions.
   For example, an analysis by the Energy Industries Council (EIC) found that each day of delay in a major energy project can result in financial losses ranging from £50,000 to £500,000 depending on the size and complexity of the project(Personnel Today).
   These delays may arise from the absence of critical roles like engineers, project managers, or technical specialists.

How to Calculate the Cost of a Vacancy:

Calculating the cost of an unfilled role involves a simple but effective formula that measures the revenue lost per day for every unfilled position.

1. Revenue Per Employee:

Start by dividing the company’s total annual revenue by the number of employees.

This gives you the revenue per employee, which reflects the income each staff member contributes.

1. Organisational Value Per Employee Per Day:

Next, divide the revenue per employee by the number of working days in the year (in 2024 there are 254 working days, accounting for weekends and public holidays).

This gives the potential revenue loss per day for each vacancy.

Example Calculation:

Annual Revenue:

Suppose a company has total annual revenue of £3.5 billion.

Number of Employees:

Assume the company employs 5,500 people.

To calculate the revenue per employee:

£3,500,000,000÷5,500=£636,363.64 per employee.

Then, divide this figure by the number of working days (254):

£636,363.64÷254=£2,504.57 per day

Thus, for each day a vacancy remains unfilled, the company incurs a loss of approximately £2,505 in revenue per employee.

The Long-Term Impact on an Unfilled Vacancy on Revenue

To quantify the potential revenue lost through an unfilled vacancy, consider the average number of days it takes to fill a vacancy.

In the UK energy sector, it takes approximately 67 days on average to fill a vacancy.

During this period, the business is losing out on the contributions that employee would make.

Using the data from above, where £2,505 potential revenue is lost per employee, over the average period of 67 days to fill a job in the energy sector, this would result in a total loss of £167,835 per vacancy.

The Role of Sector-Specific Costs

The cost of an unfilled vacancy varies significantly across sectors.

In the energy sector, for example, the organisational value of employees is considerably higher than in industries like retail or hospitality.

This is due to the technical expertise required and the high stakes of energy production and sustainability projects.

According to research from Energy UK, positions in the energy sector can contribute between £100,000 and £200,000 per year to company revenues, depending on the role.

For example, a vacancy in a critical technical position, such as a Project Manager for a nuclear plant or a Renewable Energy Engineer, could halt progress on a multimillion-pound project.

Such delays don’t just cost the business immediate revenue – they can also lead to reputational damage and future lost contracts.

The Reputational Impact

An overlooked cost of long-term vacancies is the potential damage to a company’s reputation in the eyes of prospective employees.

The longer a position remains unfilled, the more candidates begin to question why it hasn’t been filled.

In today’s competitive job market, job seekers are far less likely to apply for a position if the vacancy has been advertised for over a month.

This is particularly damaging in industries like energy, where companies compete for highly skilled professionals.

If a business is seen as slow to hire, candidates may perceive it as disorganised or overly selective, which can further deter top-tier candidates.

Astute People’s Recruitment Solutions

To address the challenges and high costs associated with prolonged vacancies, Astute People offers a range of recruitment solutions tailored to sectors like energy, nuclear, and renewables:

1. People Plus
   With an average time to fill of just 39 days, People Plus dramatically reduces the industry average of 67 days.
   This accelerated process is achieved by leveraging Astute’s 100,000-strong candidate database, deep industry expertise, and access to niche job boards.
   By shortening the time to hire, companies can save significant sums in lost revenue and operational inefficiencies.
2. People Solutions:
   For businesses requiring a more bespoke approach, People Solutions offers tailored recruitment strategies for large crewing-up projects.
   This can include bespoke microsites designed to showcase companies as employers of choice, ensuring that they attract the right talent more quickly.

Saving Money with Astute People

By using Astute People’s recruitment solutions, businesses can save thousands of pounds by:

• Reducing the average time to fill a vacancy, thereby minimising lost revenue and avoiding costly overtime.
• Leveraging Astute’s leading market knowledge and deep sector experience to find the right candidates quickly.
• Access to Astute’s highly experienced marketing team and vast social media presence.
• Accessing a large and diverse pool of candidates via Astute’s database and specialist job boards, ensuring roles are filled with the most qualified candidates.

The cost of a vacancy extends far beyond the immediate financial implications.

It impacts team morale, operational efficiency, and the company’s ability to attract top talent.

By reducing the average time to hire from 67 days to 39 days, Astute People can help businesses in the energy sector avoid costly delays and lost revenue, ensuring they stay ahead in a competitive market.

By partnering with Astute People, companies can save significant amounts on lost revenue, maintain their competitive edge, and secure the best talent to drive their business forward.