The cost of an unfilled senior tech role is the revenue the role would have generated or protected, minus the salary you did not pay while it sat empty. For a tech role, count two to three times the average revenue per employee; for an executive, three. With the example below, a role open for 3 to 6 months puts roughly $97,000 to $194,000 of revenue at risk and a net loss of $56,000 to $111,000.
What is the formula for the cost of a vacancy?
The formula below follows Built In’s cost of vacancy method:
- Average daily revenue per employee = annual revenue ÷ number of employees ÷ 260 working days.
- Role-specific daily revenue = step 1 × an impact multiplier: 1 for entry-level, 2 for high-impact roles such as sales, tech and product, 3 for executives. Confirm the multiplier with finance.
- Revenue lost = step 2 × working days to fill the role.
- Payroll savings = (salary × 1.314) ÷ 260 × working days to fill. The 1.314 adds benefits at 31.4% of salary, a U.S. Bureau of Labor Statistics figure cited by Built In.
- Cost of vacancy = payroll savings − revenue lost (a negative number is a net loss).
For reference, Built In cites an average time to fill of 42 days from SHRM; senior tech and executive searches usually take longer.
What does it look like with real numbers?
Illustrative example (not PSRH data). A company with $20 million in annual revenue and 100 employees leaves a senior engineer role ($130,000 salary, impact multiplier 2) open. Daily revenue per employee is $769.23; role-specific daily revenue is $1,538.46; daily payroll cost with benefits is $657.
| Role open for | Working days | Revenue at risk (USD) | Payroll not paid (USD) | Net cost (USD) |
|---|---|---|---|---|
| 3 months | 63 | 96,923 | 41,391 | -55,532 |
| 6 months | 126 | 193,846 | 82,782 | -111,064 |
What costs does the formula leave out?
It does not count overtime and burnout on the remaining team, delayed launches, customers lost to slower delivery, or the cost of the search itself. Those are real, but they are hard to put in a formula, so treat the table as a floor. The other side of the equation is what a bad executive hire costs.
Frequently asked questions
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Source: Built In, “Cost of Vacancy Explained” (method, multipliers, 31.4% benefits, 42-day SHRM figure as cited there).
