Outsourcing

We know that outsourcing isn’t for everyone.  However, if you need support, and you don’t want the hassle, cost or legal obligation of employing, outsourcing is an option worth considering.

The True Cost of Employment
It is said that to get the true cost of employing staff, you need to add approximately 40% to the salary.  You may need to consider many of the following factors, all of which bring an additional cost, over and above an employee’s basic salary:

• Time spent recruiting
• Agency fees (around 20% of salary +VAT)
• Advertising fees
• Providing an employment contract
• Requesting references
• Verifying ID, credit checks
• Staff handbook
• Internal procedure manual
• Grievance/disciplinary policy (required by law)
• Induction plan and initial training
• Ongoing training (industry, systems, processes)
• Employer liability insurance
• Statutory sick pay (£109.40 PW for 2023/24)
• National Insurance
• Maternity leave, paternity leave
• Flexible working rules
• Pension benefits (auto-enrolment scheme)
• Additional benefits (DIS, PHI, PMI)
• Payroll management
• Holiday pay (minimum 5.6 weeks pa)
• IT equipment, IT support
• IT software, IT licences
• Cost of premises, electricity, rates
• Telephony equipment, line rental, cost of calls
• Office equipment & furniture, maintenance
• Annual salary review, annual bonus
• HR support & advice
• Health and safety obligations
• Ongoing training and support
• Exam support, study leave, exam fees
• Review meetings & appraisals
• Setting objectives & monitoring progress
• Maintaining morale

Quiet Times
The above list is by no means exhaustive.  Don’t forget that when you employ someone, you’ll still need to pay their full salary even when there might be no work to do during quiet times, such as Christmas. 

You’ll also need to continue paying their salary whilst they’re on holiday. 

The Biggest Hidden Cost
It could also be said that the biggest hidden cost of all is the time spent managing staff, and being tied to the office to supervise them.  Furthermore, should you employ someone who perhaps turns out to be the wrong person for the role, it can be an extremely timely and costly mistake to rectify.  Being involved in disciplinary or grievance procedures is stressful at the best of times.  Then add on top the HR and legal costs involved.

Remember, an employment contract brings numerous legal obligations to that individual, which are not involved when you outsource.

Handing Over That Responsibility
In contrast, when you outsource rather than employ, someone else takes care of everything listed above.  You can have access to dedicated long-term and experienced support, without having to make a long-term commitment yourself.  Furthermore, you can have someone who is available when you need them, yet only pay when they actually perform a task on your behalf.

FCA Principles and Responsibilities
You can read about the FCA’s expectations when it comes to outsourcing HERE.