True Cost of Staff Compensation

Staffing is probably the most challenging task and time-consuming tasks faced by any organization. It can also be the most expensive part of operating a business. Without good people, all enterprises cannot effectively pursue their goals and achieve objectives.

How do you find qualified job candidates? How long does it take to recruit, hire, and train new people? How will you evaluate them to ensure they can deliver upon your objectives? How does staffing fit within your overall business plan? Once you have connected with others, you still need to engage, recruit, qualify, orient, and control. This is the management side of building an effective staffing infrastructure. Even if you find the right people, they may not consider your offer. Compensation is another element that will determine the quality of the candidate. As the old saying goes…“You Get What You Pay For”.

Real staffing costs of a company are more than salary considerations. Whatever you decide to pay an employee must be multiplied 125 to 135 percent. Why use a multiple? Because overhead costs add to overall payroll expenses and ultimately affects your profits. Additional soft costs of staffing include benefits, time off, taxes, supplies, office use incidentals, and more. For example, a $50,000 annual salary will likely cost more than $63,000 in payroll expense and may have detrimental results to a budget if soft costs are not pre-planned. Many entrepreneurs and mangers do not realize the soft costs until after they occur.

An effective solution is to outsource some or all of your staffing - at least in the beginning. Working with a professional business process outsourcing (BPO) firm can take much of the initial load off your back and still allow you to have full control. A BPO firm will provide expert management functions at a significantly reduced cost compared to hiring direct employees. You can set up and initiate faster using a BPO. While the BPO is performing assigned duties, you can work on recruiting a permanent staff to eventually transition away from the BPO. In fact, the BPO can assist you in the recruiting of their replacement.