Did you ever stop to consider how much an employee really costs you? It’s far more than a base salary, of course. There’s the initial cost of recruiting and the possibility of travel and relocation costs. When you hire someone, you pay at least three different taxes (Social Security, Medicare and unemployment), benefits.
You’re also paying for time spent on onboarding and conquering the learning curve. New hires need help with everything from setting up their workstations or computers to learning who to ask about certain questions and even finding the bathroom. Those small hidden costs add up.
Then there is “opportunity cost,” the price you pay for work that gets done badly or not at all, and employees burnt out by overtime.
Finally, there are costs associated with education, training and development.
If you read our post in November 2013 called “Turning Your Workforces’ Skills and Performance Gaps Into an Opportunity,” you’ll see that the percentage of your employees that are pulling their weight is probably very small. But the post also says that successful companies have training and development plans for every employee that can double the median revenue per employee.
How can you decide if an employee is worth the expenditures? There is a formula called “the multiple,” that you can apply to an employee’s base salary. To find the multiple for your business or industry, add up all the costs associated with hiring an employee and divide by their base salary. If the total costs were $80,000 and the base salary was $50,000, the multiple is 1.6. Use an online calculator to calculate the total cost and add any additional costs specific to your business.
In an industry like supply chain, where hiring needs are rising but the talent supply is dwindling, you may discover that the total cost of bringing new employees on board is too high for your business. If so, consider working with a specialized recruitment firm like ZDA Supply Chain Recruiting. With our years of experience and our nationwide network of supply chain, planning, transportation, distribution, manufacturing and procurement professionals, we can find supply chain professionals with the skills and experience you need, which will cut your costs in the long run. Contact us anytime to find out how we can help you find supply chain talent that’s worth your time and money.