To Insource or Outsource? What’s Your Employee’s Time Worth?

Here is a straightforward calculation you can use.

A majority of small to medium businesses have tasks that don’t require the hiring of an employee to complete them. One-time projects are a good example of this. But is it a good idea to have those tasks performed by the staff you already have? Or is better to outsource that kind of thing? We’d like to help you decide on what’s the best choice for your bottom line.

The first step in making that choice is knowing what your employee’s time is worth. There’s several ways, but an Inc. magazine columnist suggests using this equation:

(Annual salary + Monetary value of benefits) / Number of real hours worked per year

Here’s an example. Fred & Sally work around 1920hrs a year in a small retail business. Their salary is $60K, and they receive bonuses and benefits totalling an extra $15K. Therefore, their time is worth $39 an hour ((60’000 + 15’000) / 1920).

If Fred & Sally each spent 5hrs a week maintaining or updating all the PC’s and IT equipment for the business, it would cost their business around $1560 per month. That’s expensive, considering we at Intellect IT can perform updates to PC’s in less time, and quite possibly for less money.

Aside from not making financial sense, it’s not good business sense to have employees perform extra tasks that are unrelated to their role. And because there’s only so many hours in a workday, extra tasks result in employees focussing less time on the work for which they were employed. To achieve everything, they might rush their work, reducing its quality or leaving it open to error.

Additional tasks may increase employee dissatisfaction, or resentment for having to do those extra tasks. What if they had to work more hours just to get everything done during their normal workday? A particularly sore spot for those who don’t receive paid overtime.

If you know what your employees’ time is worth, you’ll immediately know if it’s better to insource, or outsource those extra tasks your business has. And If you find it makes no sense to have your staff perform routine or one-time IT tasks, call us and let’s chat about taking care of that for you.

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