Finding the perfect candidate for an open role is hard work. The time, effort, and coordination it takes to find qualified candidates, with the right skills and experience, can be difficult in today’s current labor market. With so many positions available right at a job seeker’s fingertips, it can be overwhelming for both potential job seekers and recruiters to find the perfect role and the perfect person. So what are the true costs of unfilled positions, and what effect does it have on businesses?
Employment Cost Index (ECI)
Businesses are forced to spend more money to recruit and retain workers. Losing an employee can cost a company 1.5 to 2 times the employees annual salary, or for hourly workers roughly $1,500 per employee. Filling a skilled labor or executive position can be even more costly. According to Propel HR, open executive seats can cost companies up to 213% of the employee’s salary; and skilled labor positions in tech can cost a company 100-150% of the employee’s salary.
Hiring and benefit costs are at an all time high. According to the Bureau of Labor Statistics, ECI (Employment Cost Index) measures the change in the cost of labor, free from the influence of employment shifts among occupations and industries. Although ECI has declined to 4.3% in 2023, this is still a higher ECI compared to previous years, and a significant percentage of salaries that employers are having to cover when finding a replacement.
Internal Costs
These costs are attributed to expenses for internal staff, business expenses and other resources needed for internal recruitment. This could be raising wages for existing employees to help with the workload of a vacant position, purchasing tools such as AI to help search for candidates, or to invest in pay data like WageScape to assist in making the best hiring decisions based on current compensation and market trends.
External Costs
These costs are accrued from external resources to help get the word out about open positions. This includes marketing materials like advertisements, social media campaigns, job boards, booths at job fairs, background checks, and drug tests.
Onboarding and Training
Once you have found the perfect candidate for your vacancy, you’ll have to spend time and money training and onboarding them. According to Training Magazine, the US spends an average of $954 training a new employee. In a recent report by Edume it costs an average of $1,252 to onboard a new employee, and will take up to 10 hours of HR time.
Calculate your Hiring Costs
If there is a vacancy in your company that you are needing to fill, it is important to calculate just how much it will cost the company to find that perfect employee to fill your role.
CPH is a metric that is used to help employers determine all costs associated with filling an open position. This includes all internal, external, direct, and indirect costs that will be needed to recruit and fill a position. According to the Society of Human Resources, the average CPH for an employer is $4,100.
You can calculate your company’s CPH using this formula:
Internal Recruiting Costs + External Recruiting Costs / by the Total Number of Hires = Cost Per Hire.
It is important to fill a job vacancy ASAP, otherwise the longer a role remains vacant, the more likely other employees will leave due to stress of taking on other’s workloads. You can alleviate this stress on your HR team, recruiters, and employees by staying ahead of the curve, with real-time labor market and compensation data from WageScape. Tap into the world’s largest labor market data set and get the insights you need to compete in today’s global hiring market. Monitor trends in hiring and pay behaviors, competition comparisons, job market trends, candidate supply and demand, find talent by category, calculate CPH, identify high turnover areas, and more!
Recent Comments