For Open Positions, Consider The Fully Loaded Burden Rates

Chris Czarnik, an experienced HR manager and author, provides insight into a way he says employers should look at open job positions. Czarnik has over 20 years of experience researching and educating businesses how to “recruit, retain and develop talent.”

Speaking at last October’s Farm Equipment Manufacturers Assn. Convention in Dallas, Czarnik dove into a concept he called the “fully loaded burden rate.”

The fully loaded burden rate contrasts with the simple idea of an employee being worth a given wage an hour. Rather it looks at the total actual cost of an unfilled position. For example, an employee may be paid $25/hour, but the impact of an unfilled position is always far greater.

Czarnik gave an example on how to calculate a fully loaded burden rate. If a machine generates $190 worth of goods an hour, that $25/hour wage of the employee running it would be subtracted from that $190 to $165/hour. Generally, a machine will run for 2,000 hours a year. Without that $25/hour employee operating that machine, the machine cannot contribute to the company.

“So we take 2,000 times $165 an hour, which gives us $330,000 a year,” said Czarnik. “We will generally have a 50% margin on our fully loaded burden rate, which means that we are no longer talking about a $25 per hour employee. We actually have a $165,000 per year cost to the business -- due to a talent shortage.”

Czarnik said viewing open positions by their wage, such as a $25/hour, may not seem too pressing of a role to fill, but looking at the fully loaded burden rate is more illustrative of the value of that position when filled.

“Nobody gets upset about not being able to find a $20 employee, but three unfilled positions means the total cost to the business of $500,000 a year. If you represented it on your P&L that way, I promise you that your board of directors or your stockholders are going to ask, ‘What's the problem and what are you doing to fix it?’”