Employee vs. Outsourcing

Why are advisors outsourcing instead of hiring, training and maintaining another employee?

Just TAKE A LOOK!

Cost of Hiring a New Employee

1. How much does a new employee really cost?

A. Monetary costs

  • Space & Furniture
  • Hardware & Software
  • Cost of recruitment, including background checks and drug testing
  • Initial and ongoing Training & Continuing Education
  • Benefits (vacation, IRA, 401K, health insurance, etc.).
  • Replacement (during scheduled and unscheduled leave)
  • Workers Compensation
  • Employment taxes (FICA, FUTA, state unemployment tax).
  • Other employee insurances (employment practice liability Insurance, bond & cyber)
  • Cost of hiring a payroll company to pay, manage and keep track of employee benefits

B. Emotional and Motivational Costs

David J. Drucker, in The Best-Kept Secret in Financial Planning, says, “If you ignore [an] employee’s personal growth needs in conjunction with the other benefits you provide him or her, you will lose that person. If you indulge personal growth needs, you are involved in a personal relationship with that person. It is in attempting to navigate this dilemma that employers lose employees or, perhaps worse from an efficiency standpoint, get involved in helping them solve serious problems in their lives, like drug addiction, divorce, or chronic tardiness.”

2. What will happen if this person gets a better offer or just leaves your company?

Then all that money, time and emotional energy has been wasted and you will need to start all over again.

Outsourcing Back Office Work

1. Save money!

There’s  no need to spend money on:

  • Space & Furniture
  • Hardware & Software
  • Cost of recruitment, including background checks and drug testing
  • Initial and ongoing Training & Continuing Education
  • Benefits (vacation, IRA, 401K, health insurance, etc.).
  • Replacement (during scheduled and unscheduled leave)
  • Workers Compensation
  • Employment taxes (FICA, FUTA, state unemployment tax).
  • Other employee insurances (employment practice liability Insurance, bond & cyber)
  • Cost of hiring a payroll company to pay, manage and keep track of employee benefits

 All of these must be afforded by the business that you are outsourcing your work to.

2. There is no personal attention required. While you may create a personal bond with your virtual partner, there is no emotional or motivational costs attachment. You are dealing with another “business.”

3. The need to succeed is the outsourcing firm’s motivation.  Because their business needs to survive just like your business needs to survive, they must uphold their reputation. Competition and the need for the business to succeed creates motivation. When they help you succeed, they succeed. It’s a win-win situation.