Skilled tech replacement cost: 3 planning steps

• Keep the general employee estimate separate from the plumbing technician estimate.
• Apply each percentage to the same annual pay.
• Track your own costs separately to avoid double counting.
• Check the range against past departures in your shop.

When a skilled tech gives notice, it is natural to focus on the job posting. The posting is only one line in the cost of a departure, though. The harder question is what the loss will cost your business, and a rough guess is not enough to plan with. A written range gives you something to test against your own records.

Two published estimates give you a place to start. One puts replacement at about 20 percent of annual wages. The other puts it at 50 to 200 percent of a skilled plumbing technician's annual salary. The gap between them is wide, so neither figure is a final answer for your shop. Both come from the same Contractor Magazine article, which is one reason to read the source before you rely on either number.

This article explains where each figure comes from and how to turn both into a planning range. Apply them to the real annual pay of the tech you are planning for.

The Contractor Magazine article says the Center "found that on average, replacing an employee typically costs approximately 20 percent of his or her annual wages, in a review of 22 case studies."

Two details in that sentence matter. First, the figure is about an employee in general. Treat it as a general employee benchmark rather than a measurement for plumbers or HVAC technicians. Second, the figure is an average from a review of 22 case studies. It summarizes those studies. It is not a quote for your shop.

The quote also uses the words "on average," "typically," and "approximately." Those words tell you the figure describes a usual result, not an exact one.

The Contractor Magazine article reports the estimate in these words: the cost "to replace an individual employee is estimated by Gallup to be 50 to 200 percent of the annual salary for a skilled plumbing technician, and depends on the position and experience level."

The quote ties the figure to two factors: the position and the experience level. Judge those factors using the role and hiring prospects in your business. Ask how the open role compares with the one that left, and how the experience of the person who left compares with what you could realistically hire.

The top of the Gallup range is four times the bottom.

The two figures are far apart. The low end of the Gallup range, 50 percent, is more than twice the 20 percent average from the Center for American Progress review.

Because the quotes describe different groups, do not average them into one number as if they measured the same thing.

The practical response is to plan with a range. Pick a low case and a high case, write both down, and say which end of the range fits the tech who is leaving. Seeing both numbers side by side shows how much your choice moves the cost.

Start with the tech's annual salary, then apply 20 percent, 50 percent, and 200 percent to it. The arithmetic does not forecast your costs. It only shows how far apart the two figures put the numbers for the same salary.

Use the table as a comparison. Multiply the actual annual pay of the tech who left by each percentage. If that person was paid by the hour, convert the pay to an annual figure first and note the hours you used, so the number can be checked later. Keep the source label next to each row so anyone reading the sheet knows which quote each number came from.

List your own costs separately and check for overlap before combining them with a percentage estimate. Costs worth listing include:

• Owner or lead time spent on writing the posting, interviewing applicants, and onboarding the new hire.
• Overtime or subcontractor work to cover jobs while the position is open.
• Training the new hire on your systems, vehicles, tools, and customer expectations.
• Slower work from the rest of the team while they absorb the departed tech's jobs.
• Jobs or customers you cannot serve during the gap.

These items are planning suggestions from general business practice. Put in your own estimates, based on your records or your best judgment, and label each one as an estimate. Use your technician overtime records to check coverage costs.

OpenStax's managerial accounting text makes a general point about labor costs in its section on cost drivers: "While the labor cost has changed, this decrease may only be temporary as a labor force with higher costs and different skills is often needed."

Treat this as a general labor-cost principle rather than a replacement figure for your trade. For a shop, that is a reason to ask what a replacement will cost over time, not only what the hire costs on the first day.

These scaled figures show the arithmetic, not actual wages or a predicted replacement bill.

Keep the general employee calculation separate from the plumbing calculations.

The result is a range, not one number. Look at the responsibilities of the open role and the experience of the person who left, and decide which end of the range those factors suggest. Plan from that end, and keep the other end visible so the team knows what the downside looks like.

The Contractor Magazine article says the number of unfilled positions in the plumbing labor shortage is anticipated to be about 550,000 by 2027. It also describes the causes of that shortage as "multi-faceted and compounding."

That is a figure for the plumbing labor shortage as a whole, not a count of openings in your market, and it cannot tell you how long your search will take. Use your recent hiring records to decide whether to plan for a longer search. A longer search means a longer gap, which can add to the costs in the list above.

The O*NET summary for plumbers, pipefitters, and steamfitters describes the work as: "Assemble, install, alter, and repair pipelines or pipe systems that carry water, steam, air, or other liquids or gases." You can read the full summary on the O*NET OnLine page.

That description is useful when you write the role for a posting or for your cost sheet. It shows the range of work a replacement has to handle, and a plain description makes it easier to see which costs apply. Because the summary covers plumbers, pipefitters, and steamfitters, an HVAC technician's job may not match it closely.

Write down the kinds of systems the departed tech worked on most often in your shop. Those are the systems to check first when you assess an applicant's skills, and they are the systems your training cost line should cover.

HVAC shops should treat the Gallup figure as a plumbing reference point. The Center for American Progress figure is about employees in general, so it does not settle the question for HVAC work either.

If your shop mostly does HVAC service, ask your own records first. Look at the pay of the people who left, how long their replacements took to bring up to speed, and what the gap cost in overtime and lost work. Use the two published figures only as a cross-check on those records, and say so on the sheet.

Use your technician scheduling guide when reviewing how team leads will cover the gap.

Today, choose a past departure and write down its annual pay and recorded coverage costs before answering these questions.

Does the figure's scope match my trade?

The Center for American Progress figure covers employees in general, and the Gallup figure covers skilled plumbing technicians.

How does the open role compare with the one that left, in responsibilities and in the work it covers?

Compare the actual duties of both roles before choosing a planning estimate.

How does the experience of the person who left compare with what I could realistically hire?

Use the experience you can realistically hire as the comparison.

What annual figure am I using, and where did it come from?

Use the departed tech's annual pay and record how you calculated it.

Which costs on my list have I already counted, and which have I left out?

Check each cost against your records and mark any possible overlap.

If you cannot answer a question, write that on the sheet. An open question is more useful than a number that hides an assumption.

Team leads see the gap in their own schedules, so ask them to add their estimates to the cost list rather than adding a separate guess later.

Be clear that the range is a planning tool, not a promise of what the departure will cost. Explain which quote each figure comes from and which costs are estimates. When the team understands the basis for the numbers, the sheet can be revised as they report what the gap actually costs.

For coverage planning, review your work order handoffs alongside the departing tech's responsibilities.

Do these steps before you post the job, so the range is ready while the decision is still open.

1. Write down the annual pay of the tech who left, converted to a yearly figure if needed.
2. Apply 20 percent, 50 percent, and 200 percent to that figure using the table above.
3. List your own costs for the gap, and check for overlap before combining estimates.

Then check the result against your own records. Look at past hires and departures in your shop, including how long each search took and what the gap cost in overtime or lost work. Where your records differ from the published figures, your records describe your own shop, so give them more weight than a published average.

Keep a short record of every departure so your next estimate uses your own numbers. Note the date the tech gave notice, the date the position was filled, the pay of the person who left and of the replacement, and the overtime or subcontract costs during the gap. A simple spreadsheet is enough.

Over time, these records give you a second source to compare against the 20 percent and 50 to 200 percent figures. They also show which costs in your list tend to be large in your shop, so you can focus your estimates where they matter most.