The Real Cost of an Unfilled Position: What Employers Often Overlook
By Sean Scheufler, OneSource Employment Solutions
KEY TAKEAWAYS
The added cost of covering a vacancy with overtime is the premium above straight-time wages, not the whole overtime bill. In the example below: an $800 premium on $2,400 of overtime pay.
An owner's own time covering the role is a real cost. Track what gets delayed: proposals, follow-ups, projects, not just the hours you worked.
Separate delayed work from work you've actually lost. A project turned down is different from filing that's a few days behind, and they shouldn't get the same dollar estimate.
Compare three things separately: actual spending, operational effects, and the full cost of help. Don't count the same effect twice.
Before you put off hiring for another month, take a look at your last few payroll reports. How much overtime is going toward covering that open position?
Then look at your own calendar. What have you had to put aside because you’re doing work you originally planned to hire someone for?
Sometimes, waiting is the right decision. You may not have enough steady work to support another employee, or you may need to rethink the role before filling it.
But it’s worth checking whether you’re actually saving money or just absorbing the cost somewhere else.
Start with the overtime
Overtime is a useful place to start because you can measure it. Look at the hours worked since the position became vacant and identify how much of that extra time is directly related to covering the opening.
Here’s a hypothetical example.
Two employees each work eight additional overtime hours per week for four weeks. Assume both have a regular rate of $25 per hour and all those additional hours are payable at time-and-a-half, or $37.50 per hour.
Over those four weeks | Wage cost |
64 hours paid at the $37.50 overtime rate | $2,400 |
Those same 64 hours at the $25 straight-time rate | $1,600 |
Overtime premium above straight-time wages | $800 |
California’s general overtime rules require premium pay for covered nonexempt employees when applicable daily or weekly thresholds are exceeded. Some hours require double time, and exceptions can apply, so use your actual payroll calculations rather than assuming every extra hour costs the same. CalDIR
That $2,400 is real payroll spending. But it would be misleading to call the entire amount an added cost compared with hiring. Someone doing those hours at straight time would still need to be paid.
The $800 premium is the difference in this example before considering other employment costs. A new hire also brings expenses beyond wages, including employer payroll taxes, insurance, recruiting, and training. Those belong in the comparison, too. Small Business Administration
The question is whether your current coverage arrangement still makes financial sense for the amount of work you need done.
Your time belongs in the calculation
If you’re a business owner, covering an open position may not show up as an extra payroll expense. You simply work more.
For the next week, keep track of the time you spend covering the vacancy. Include the operational work, but also the recruiting: reviewing applications, scheduling interviews, following up, and rearranging the schedule when someone isn’t available.
Then write down what you would have done with that time.
Perhaps there’s a proposal you haven’t finished. Maybe customer follow-ups are slipping, or you keep postponing a project that would make the business run better.
You don’t need to assign an inflated dollar value to every hour. Start by being specific about what’s being delayed. “I’m busy” is hard to make a decision around. “I haven’t followed up on three proposals because I’ve been covering the front desk” gives you something concrete to address.
Getting home on time matters, too, even when it doesn’t fit neatly into a spreadsheet.
Separate delayed work from work you’ve actually lost
When assessing the effect on revenue, I’d separate two situations.
One is work that gets pushed back but still gets completed. The other is work you can no longer take on.
For example, suppose a contractor turns down a project because the crew is already stretched too thin. That’s different from an office falling a few days behind on filing. Both deserve attention, but they shouldn’t receive the same dollar estimate.
Review your own records. Have you declined jobs, limited appointments, reduced operating hours, or issued credits because you couldn’t deliver on time?
Also look at customer service. Are calls going unanswered? Are customers following up more than once? Use actual examples rather than assuming every delay means a lost customer.
When estimating the financial effect of rejected work, account for the costs you would have incurred to deliver it. A $10,000 project would not have produced $10,000 in profit.
Keep uncertain opportunities separate from confirmed losses. Otherwise, it’s easy to make an open position look far more expensive than the evidence supports.
Ask the people who are covering
Before deciding that the current arrangement is working, talk to the employees doing the extra work.
Ask which tasks they’re falling behind on and whether the schedule is manageable. Find out what support would make the biggest difference. You may discover that a few hours of administrative help would be more useful than adding another person to the busiest shift.
Pay attention to extended hours as well. NIOSH identifies long work hours as a contributor to workplace fatigue, which can affect attention, reaction time, and judgment. That deserves consideration beyond the overtime bill. CDC
You don’t need to predict that someone will quit or assign a speculative turnover cost. But you should know whether your coverage plan depends on the same person continually agreeing to take on more.
Give the team a realistic update about the vacancy and what you’re doing about it.
Compare the options against the work you actually need done
Once you’ve reviewed the costs, resist jumping straight from “we’re short-staffed” to “we need another full-time employee.”
Start with the tasks and hours that need coverage. Is the workload consistent? Is it tied to a project? Do you need someone qualified to take over a whole role, or could support with a narrower set of duties free up your existing team?
For your comparison, keep three things separate:
Actual spending: Vacancy-related overtime, recruiting expenses, and documented costs such as customer credits.
Operational effects: Delayed work, management time diverted from other responsibilities, and work you couldn’t accept.
The cost of help: The full cost of an employee or staffing arrangement, including the time needed to get someone trained and productive.
Avoid counting the same effect twice. If a manager’s time covering a shift caused a particular sales opportunity to be missed, adding a separate lost-sales estimate on top of that same opportunity cost could overstate the total.
Also compare equivalent work. Sixty-four hours of overtime coverage and a full-time employee working 160 hours over four weeks are not the same purchase.
You may find that keeping the position open is reasonable for now. You may find that temporary coverage makes sense. Or the review may confirm that the business needs a permanent hire and a more focused recruiting effort.
Any of those is a better decision than continuing the arrangement without reviewing it.
Where outside staffing support fits
At OneSource Employment Solutions, we offer temporary staffing, temp-to-hire, and direct-hire recruiting. We also provide payroll and employer-of-record services, including payroll administration and onboarding support.
The right starting point depends on what’s holding you up.
For a short-term workload, I’d consider temporary coverage. For an ongoing role, I’d look at whether you need recruiting support for a direct hire or whether a temp-to-hire arrangement is worth discussing. When you’ve already identified the worker, the conversation may be about payrolling and employment administration rather than recruiting.
Outside help still needs to be managed. Budget time for orientation, clear instructions, and supervision. Temporary staffing also does not remove the client’s workplace-safety responsibilities; the staffing agency and host employer share responsibilities for protecting temporary workers. OSHA
A staffing arrangement should solve a specific problem at a cost you understand. It shouldn’t require you to assume that every vacancy is an emergency or that outside help will automatically be cheaper.
Have a role you’re trying to cover?
OneSource Employment Solutions works with businesses in Santa Cruz, Monterey, Silicon Valley, and throughout California on staffing and payroll needs. OneSource Employment
Send us the role, the hours you need covered, and roughly how long you expect to need help. Tell us what’s happening while the position stays open.
That gives us a starting point to discuss the options and what they would cost before you commit.
Call or text (831) 200-3239, or email info@1sourceemployment.com. OneSource Employment
FREQUENTLY ASKED QUESTIONS
How do you calculate the cost of an unfilled position?
Add up three things: (1) actual spending tied to the vacancy, like overtime premiums and recruiting expenses; (2) operational effects, like delayed work and management time pulled off other priorities; and (3) the full cost of filling the role, including taxes, insurance, and training time. Keep each category separate so nothing gets counted twice.
Is paying overtime cheaper than hiring?
Sometimes. The comparison that matters is the overtime premium, what you pay above straight-time wages, against the full cost of a new hire, not just their hourly rate. A new hire brings payroll taxes, insurance, recruiting, and training costs. Run both sides before deciding.
How long is too long to leave a position open?
There's no fixed number. The warning signs: overtime coverage that never ends, the same person absorbing extra work week after week, proposals or follow-ups slipping, and jobs you're turning down because the crew is stretched thin. If the arrangement has no end date, it's worth reviewing.
Should you use temporary staffing or hire directly?
It depends on what the work actually requires. For a short-term workload or a role you're still defining, temporary coverage makes sense. For an ongoing role with consistent hours, compare direct-hire recruiting against a temp-to-hire arrangement. Start with the tasks and hours that need coverage, not with the hiring method.
What costs do business owners most often miss?
Their own time. Covering an open position as the owner doesn't show up on a payroll report, but the proposals not written and follow-ups not made are real. Track what gets delayed for one week, being specific ("I haven't followed up on three proposals") beats a vague sense of being busy.
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