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    Vacancy Factor for Compensation

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    Hi, how do I calculate vacancy factor for compensation? Every year we do a budget and every year compensation expenses comes in favorable to budget due to open/term positions. So my boss wants me to include a vacancy factor to reduce the budget compensation expense. My boss said it should be based on a historical % of compensation savings. So do I look at the actuals reported for compensation expenses vs. what was budgeted last year and divide the savings by last years actuals to get a % and then multiply that % by the new budget for compensation expense?

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    Step 1
    Historical compensation savings may not be a good indicator of open/term positions. For example, if the number of open/term positions was 5 and the total number of positions was 25. If the budgeted compensation at the rate $40,000 per position was $1,000,000 and the actual compensation was $900,000, it appears to be favorable but is not so. The actual compensation should have ...

    Solution Summary

    This posting gives you a step-by-step explanation of calculating the vacancy factor for compensation. The response also contains the sources used.

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