The holiday period is fast approaching and companies are starting to explore various recruitment options in anticipation of temporary surges in demand and short-term staffing gaps resulting from employees taking time off. Ironically, while business may be booming, company directors and key management personnel are taking more cost conscious decisions in response to the harsh economic climate
Direct employment has in the past, been the preferred recruitment route for many employers, but the true cost of employment is the subject of recent debate amongst many business owners and directors, especially as legislation and costs steadily increase. There are obvious and hidden costs of employment which can dramatically increase a company’s overall expenditure, and many now question their current recruitment strategies, especially as the economic environment gets even harsher.
Over time, a considerable amount of research has been conducted on the effects of outsourcing and there are claims that cost savings of up to 15% can be achieved through outsourcing of non-core activities. This basic cost advantage as well as the increase in service quality and efficiency makes outsourcing a viable option for companies trying to save costs, penetrate new markets or stay within the ambit of the law.
Admittedly, today’s dynamic business world demands more than the traditional outsourcing benefits of low cost and high levels of expertise. These are a given- a natural advantage. The issues that demand attention currently are speed/instant results, constant innovation and focus, especially in highly competitive markets where too many players are fighting for too few clients or in regulated industries or practices, where legislation demands constant education and process improvement within companies.
Even though there is a gradual change in the dynamics of client demands, especially with the more business savvy clients, many companies have commonly cited focusing on core competencies as the major driver of their outsourcing decisions. Through this process, companies are able to redirect outsourced resources toward the activities of greater value as there is now pressure on companies to deliver superior value across all levels of the organisation, both in back office and front office transactions.
These days, financial outsourcing has especially become more common as price-sensitive companies look for cheaper and more effective solutions to bridge gaps in staffing without compromising skills. There are also the peaks and troughs of the business cycle, where demand can fluctuate rapidly and to such a large extent that it is an obviously bad business decision to keep staff in full time employment in order to satisfy temporary demands in staffing. For finance especially, input is needed in various degrees during a financial year, so it makes little business sense for some companies to have a full time Finance Director, or finance controller, or even a devoted credit controller all year round. If cost management is high on your agenda, here are a few considerations you can use to evaluate the efficiency and suitability of the employment route, especially as the holiday approaches :
1. Salary – If you are considering recruiting, in addition to the gross salary, you need to consider actual recruitment fees, selection and training and development costs. You also have medical insurance, share options, bonuses, profit sharing rewards, company cars, mobile phones, staff discounts, staff entertainment, critical illness, life insurance etc. On the contractual side, there is no guarantee on the investment you make in staff and stringent employment laws protect most employees.
2. National Insurance- This involves not just the cost of NI, but the administrative burden and the risk of non-compliance
3. Pension: Pension administration is becoming the biggest red tape headache for small companies including regulatory issues, if done wrong. From 2012, it will be compulsory for employees to contribute to employee pension schemes, thereby increasing employers’ liability even further.
4. Benefits: There is a huge cost associated with providing and managing staff benefits including some of those mentioned in (1) above. This will be specific to individual companies.
5. Overheads: These include office equipment, IT., office space, management time, consumables, liability insurance (and the cost of getting it wrong in the first place), depreciation on capital equipment and administrative overheads
6. Recruitment- Procurement costs, management and interviewer time, personnel administration, recruitment fees- which are on average 15-30% of gross salary.
7. Utilisation: A typical utilisation figure is substantially less than 100%, and in most cases may be nearer to 60%. Employee distractions include company meetings, phone calls, emails, social media, surfing, banter and talking to co-workers, refreshment breaks, self directed learning, and other activities that result in unproductive time and significantly affect the utilisation figure.
8. Holidays: Holidays not only cost companies money, they usually occur at the busiest time. In addition to statutory holidays, downtime also includes paternity, maternity leave, jury service and sickness leave.
There are obviously many reasons to outsource and many companies are beginning to recognise this need, and are gradually reducing the use of full-time employees to manage activities or roles that require periodic input or specialist input that could be better delivered through outsourcing. Of course, outsourcing will probably never replace every employment activity, but it is worth considering which fits where within your organisation and ensuring you have the right kind of resource in place, especially this season.
For interim management support, please visit us at imtb.uk.com or mail chinwe@imtb.uk.com or info@imtb.uk.com . You can also call us on 0845 129 9900/ 01582 516300. IMTB provides specialist Interim Managers at levels up to FD, CEO, CFO and COO. IMTB operates without geographical limitations and our quality candidates have particular strengths in Finance and Accounting solutions. Our core services are:
• Baby Interims- Our Executive Maternity Cover Service
• Healthy Interims- Our Long Term Sickness Cover/ Project Support
• Charity Interims- Our 3rd Sector/ Charity/ NFP Interim Management Service (15% rebated back)
