Articles

Outsourcing Business Administration Role Saves Money

August 27th, 2010

As a business owner there is a need to continually challenge what you do.   Just because something fitted into your business model a number of years ago doesn’t mean that it is appropriate today.   The business administration role falls into this category.

This article is kindly supplied by SMART who offer business administration and support around New Zealand.   You can find them at www.asmartbusiness.co.nz

Their mission is simple… to save business owners time & money.

How much money could you save by outsourcing?

Outsourcing can cost as little as a quarter of what it’ll cost you to employ someone to do your admin in-house.
We’ve surveyed many New Zealand business owners and asked them – how much do you think it costs to sit one full time staff member down in your office per year? Over 60% think it is $40,000.00 or less. And they are absolutely horrified about the real cost.

What is the true cost of employing staff?

Sources suggest that the full cost of employing someone is about one and a half to two times their wage or salary. NZ Hospitality Association estimates the actual cost of labour is 1.5 times their hourly rate. The travel industry in New Zealand estimate it costs $55K – $75K to sit each full time person down in your office for a year. How on earth can this be?
Obviously, costs vary by employment sector; here we’re looking at costs associated with office-based admin work. Let’s start with the obvious—salary and wage rates.

Average annual salary and wage rates

Administration Assistant $33,000
Call Centre / Receptionist $37,500
Accounts Clerk $46,125
Office Manager $60,000
Sourced from: Hayes Salary Survey

But it doesn’t end there!

According to Labour Cost Index which is put together by Statistics New Zealand, salary and wage rates are only 84.39% of labour costs.
To define the full cost of employing someone, you need to include all possible costs, such as recruitment, company insurances, employer taxes, ACC, Superannuation or KiwiSaver, training, infrastructure costs, consumables (tea, coffee, toilet paper etc), HR overheads, office set-up, software licences, computer hardware, a proportion of fixed costs (rent, power etc), parental leave, jury service, and so on.

So you need to include non-wage and compliance costs, office costs and the impact of employee turnover

But where can you find that information? Ideally, you need information that is defined by professional bodies such as accountants, or even Government Departments.

So here it is— credible facts from trusted sources who are in close touch with the most recent business information

…’straight from the horses mouth’…

Non wage costs of employees

According to the Labour Cost Index – Statistics New Zealand non-wage costs add 15.61% over and above the cost of salaries or wages:
Annual leave & statutory holidays 10.75%
Superannuation 0.97%
ACC employer premiums 1.61%
Motor vehicle available 1.89%
Medical insurance 0.35%
Low interest loans 0.03%
Other non-wage labour costs 2.27%
Total non-wage costs 15.61%
Sourced from: Labour Cost Index – Statistics New Zealand

Compliance costs per employee

Each year Business New Zealand in conjunction with KPMG conduct a survey to establish the compliance costs businesses face. This is the cost of administration time required to keep up with legislation, changes made by government or local government policies and then implement them. For businesses with less than 10 full time employees compliance costs average $632 per employee per year. Sourced from: kpmg.co.nz

Cost of employees office

What about setting up an employee in your office? And the office overheads?

  • Desk, chair, filing cabinet, computer hardware, computer software, phone (Initial cost) $4,000
  • Their share of the overheads (ongoing insurance, depreciation, power, phone, internet, and consumables like paper, toner, coffee and toilet paper) $7,500
  • Their workspace to occupy in your premises and share of common areas (ongoing rent and rates) $4,000

Total office costs $15,500

So what do employees really cost?

Example:
Salary and wage rate $40,000 $ 55,000
Non Wage costs (15.61%) $ 7,400 $ 8,586
Compliance costs $ 632 $ 632
Office costs $15,500 $15,500
Total cost of employing office or admin staff $63,500 $79,716

Cost of staff turnover

And that’s if you keep those employees. When an employee leaves, the cost to your business can be as high as 150—200% of an annual salary or wage. The costs of replacing an employee include lost customers who follow the departing employee; fill-in employees; placing advertisements, interviewing and recruitment; orientation, training and lost productivity as the new recruit comes up to speed. Depending how lengthy and complex their tasks, and the knowledge required, new employees can take anywhere from 4—13 months (or more) to reach 100% productivity.

Employees cost more than outsourcing

Outsourcing can cost as little as a quarter of what it’ll cost you to employ someone to do your admin in-house. Businesses don’t need a real live, warm-body, under-foot, on-site employees for phone answering, paperwork, bookkeeping or financials, payroll or order taking.
Are you looking a gift horse in the mouth? Get the last laugh. Contact Smart to find out how much time and money outsourcing your admin could save you. Click here now to enquire about Smart services

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