The True Cost of an In-House Employee vs a Managed Service Provider
$52,338: the average salary of an in-house Business Development Representative (BDR) in the USA - Dec, 2017.
A significant cost in itself... but this doesn’t even begin to tell the whole story. Factor in training, taxes, healthcare, admin, the daily coffee… and costs snowball from there.
Before all that there’s recruitment. And once your recruit is on board, what if they’re no good?
How Much Does an In-House Employee Really Cost?
Often referred to as a W2 employee in the USA, the true cost depends on the position and industry. Studies vary on exactly how much but it’s typically 40% to 100% on top of the salary, sometimes more.
For a $50,000 wage, that makes the standard range $70,000 to $100,000.
Recruitment is the first cost. In professional services this can be as high as $5,000 made up in job advertising, recruitment fees, interview time and admin.
Once on the books, extra costs come from taxes and benefits such as social security, medicare, and holiday pay, to admin and payroll costs.
Training then adds a huge sum. Think how much time you’ve lost training new employees in the past. In some positions it takes over 100 hours. One study even suggests it’s 1 to 2 years before an employee is ‘fully productive,’ and with turnover these days, they may have moved on well before that.
With all this you really have to hope you get the right employee! But most employers state they’ve made bad hiring decisions in the past. When 41% of people who responded to a Harris Interactive poll said the cost of a bad hire was $25,000, that’s some penalty!
The calculator on the right is a great little tool to highlight some of the major additional costs.
So now you see how the true cost of an in-house employee can be as much as double the salary, if not more, is there an alternative?
A Managed Service Provider
A great alternative is to utilize a managed service provider.
First off this will eliminate the expenses associated with an in-house employee from desk space to energy bills. Stats show companies of all sizes report significant reductions in operating costs.
According to Forbes: Aetna, where 14,500 of 35,000 employees don’t have an ‘in-office’ desk, shed 2.7 million square feet of office space, saving $78 million. American Express also reported annual savings of $10 to $15 million thanks to its remote work options.
The reasons to hire a managed workforce don’t just stop at costs savings. They include an increase in productivity due to less distractions, a wider pool of talent as you can hire from anywhere, and much more. Remote working accelerates growth.
Research from Aberdeen Group stated that half of top-performing companies employ flexible workers as more than 40% of their overall workforce. As a result, these companies are 30% more likely to grow their revenue by more than 10% every year. Combined with a reduction in expenses, this generates a great ROI.
If training and finding the right employee are a concern of yours, you can hire external workers or teams that are already highly trained and certified, ready to deliver from day one.
Furthermore, with technology the way it is today, it’s now easier than ever to communicate and there are some great tools to help you do this. The importance of being in the same office is greatly reduced.
What Approach Should I Take Now?
In-house employees are and always will be important for most businesses and the extra costs are part and parcel of the territory. Hey, we have a number of in-house employees ourselves.
But when it’s possible to use a managed external team, you should always consider it as an alternative, and in doing so, you will often find it’s the best solution. From inbound sales to marketing, customer support to customer success, the positions and possibilities are endless.