Topic Outsourcing HR / PEO,

How White Collar Businesses Control HR Costs

How White Collar Businesses Control HR Costs

Controlling costs is among the most challenging components of business, especially when it comes to HR costs associated with high employee turnover. According to the U.S. Bureau of Labor Statistics July 2021 Job Opening and Labor Turnover report, employee turnover is more prevalent than ever as we experience a series high of 10.9 million job openings and more than 4 million employees quit their jobs over the 12-month period.  

This challenge to reduce HR costs rings especially true for a white-collar company because turnover costs hit their businesses harder since the average salary is higher than blue-collar workers.  Moreover, the cost-per-hire of white-collar workers will generally be higher than blue-collar workers because it also costs more to replace a white-collar worker versus a blue-collar.    

Here is how white-collar companies save on HR costs even though they're impacted the most by employee turnover.  

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The Cost of Employee Turnover  

There's almost nothing more detrimental to your bottom line than employee turnovers. According to Legal Jobs, an employee's leaving can cost the company on average 33% of their annual salary, and the cost of replacing a trained employee can be more than 200% of their salary. This means average turnover costs can be around $15,000 for a median employee salary of $45,000. 

Calculating Cost-per-Hire  

Zippia reports that the average cost per hire is $4,425. However, the specifics of cost-per-hire depend on your hiring costs, such as employee salary and days required to hire a new employee. Using the additional statistic that "it costs up to 40% of an employee's base salary to hire a new employee with benefits," you could be looking at $12,000 for a base salary of $30,000, $18,000 for a base salary of $45,000, and $30,000 for a base salary of $75,000. To calculate your cost-per-hire, follow the formula: Cost Per Hire = (Internal Costs + External Costs) / Number of Hires 

Additional cost factors to consider: 

  • Recruiting Costs — includes all the advertisements you sent out to attract new talent and any outside resources you consulted with for recruitment help.  
  • Interview Costs — covers traveling for staff and candidates and the time it takes HR to set up and do the interview. When you factor in screening and tests before and after, the costs increase significantly.  
  • Training Costs — between the materials used, benefits provided, and the time it takes to fulfill the training, costs can add up quickly.  
  • Salary and Benefits — negotiating a new salary and oftentimes providing sign-on bonuses and other perks can lead to higher costs as well.  
  • Productivity Losses — employees won't be 100% productive on the first day or even the first year. In fact, it takes an average of two years for new employees to reach the same level of productivity as the worker they replaced.  

Learn more about what makes Questco different with this infographic

The Solution: Being an Employer of Choice  

An Employer of Choice is one that workers choose to work for even when they have alternative options. You can reach this status for a number of reasons, but it often requires one or more of the following:   

  • Great company culture 
  • Competitive salary and benefits 
  • Meaningful Work 
  • Engaged and happy workers 
  • A combination of retention best practices 

Either way, this means more talent will be willing to seek you out for a job, hoping an opportunity opens up for them. This will allow you to attract top talent to you without the added effort — which, in turn, lowers the time spent recruiting and interviewing.  
 
Likewise, it also increases retention which means less hiring is needed. In these wonderful cases, you can kick all those hiring costs to the curb and benefit from high employee retention, which can maximize a company's profits up to 4X.  

Become an Employer of Choice with HR Outsourcing  

Outsourcing specific HR functions can lower the cost of turnover by attracting and retaining top talent. It's also more cost-efficient than internal HR teams: 

An internal HR team can increase a company's hiring cost by as much as 50% or more — meaning an additional HR employee making $51,000 a year can cost your company around $4,250 a month in additional hiring costs.  

Other benefits include the following.   

  • Affordable Fortune-500 Benefits: You need to offer benefits that compete with large companies, but doing so may be price prohibitive for small and medium-sized companies. When you partner with a comprehensive HR outsourcing solution, you gain access to their master benefits plan negotiated by experts using economies of scale. This makes it tougher for competition to poach employees.  
  • Improved Company Culture: By relieving in-house HR of administrative burdens, you give them more time to prioritize a great company culture. This is significant because research reported by Culture IQ found that companies with strong cultures have seen a 4x increase in revenue growth, and 90% of employees at winning company cultures are confident in their company's leadership team.  
  • Retention Best Practices: HR outsourcing experts have experience with how to best retain employees. They can help with employee retention strategies and tactics such as "employee of the month" recognition programs.  

Reduce Turnover Costs with a PEO  

Professional Employer Organization (PEO) is the most comprehensive HR outsourcing solution available. Not only are they the only ones able to offer direct cost-savings on employee benefits like health plans, but they cost the same as less comprehensive HR outsourcing solutions like Administrative Services Organization (ASO). Take charge of your white-collar business by outsourcing your HR today. 

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Brandon Hartsaw

Brandon Hartsaw

Acting as the Chief Operations Officer, Brandon actively promotes an environment of creativity, collaboration, and individual ownership to empower Questco team members to deliver exceptional client experiences.