Staff augmentation vs permanent hires: The hidden costs of full time staff
Sally YauMarketing Coordinator
Staff augmentation is the process of augmenting your existing team with external specialists for a specific period of time. This allows companies to tap into a diverse pool of talent without the long-term commitment and expenses associated with full-time employees.
Companies are always looking for ways to boost efficiency and save money without sacrificing productivity. This is where staff augmentation helps.
“Labour costs on average are the most significant single cost to any business. It accounts for 70% of all expenses across companies”*
By maintaining low payroll expenditure while retaining high productivity via staff augmentation, businesses save significantly on labor costs. This blog explores the hidden costs associated with full-time staff and sheds light on the financial advantages of staff augmentation.
Time and money spent on recruitment, ongoing development and training
Recruiting and onboarding new employees is a costly process.
Recent data from the Australian HR institute reveals the cost of hiring an employee is around $23,860. The onboarding process alone can cost up to $5,500 per new hire! Not to mention the hours your team spends on crafting job ads, interviewing, tech testing and vetting candidates.
In addition, when an employee resigns, you have to repeat the same process again to find a replacement. This includes conducting another round of recruitment, onboarding, and the loss of productivity during the transition period.
Benefits & payroll tax
For permanent hires, besides paying a base salary, employers are responsible for providing payroll tax, superannuation, annual leave, sick leave and other company perks.
For example, on a base salary of $165,000 pa, you will have to pay an additional $8,993 on payroll tax, $21,450 on leave benefits and not to mention other expenses like bonuses, staff amenities, workspace and equipment etc.
With all things included, the cost of employing someone on a base of $165,000 pa is actually $336,643. This is a whopping 104% over their base salary! Not convinced? Check out our FT-employee cost calculator.
This is a stark difference to just paying a daily rate with no added expenses via staff augmentation. In the example above, you would only be investing $324,000 pa on the same specialist, saving you $12,643 pa.
Overstaffing and underutilisation
If you have a short term project, or need an injection of talent to meet a tight deadline, hiring a full time role may not be necessary as it is a temporary need and can lead to unnecessary overhead expenses.
Furthermore, hiring a full time employee for a job that doesn’t have sufficient workload can also lead to underutilisation. Speaking from experience, we have lost over $100,000 per underutilised staff in the past!
Staff augmentation provides you with fast access to pre-vetted candidates that can integrate with your existing team for any period of time. This way you don’t need to invest time and money on finding full time employees to satisfy temporary needs.
If you find yourself struggling to scale up or down flexibly, check out our Staff augmentation packages where you can engage our local specialists for as little to as long as you need.
On the other hand, if you are looking for an external team to self manage and deliver on your roadmap, check out our Ongoing development and support packages.
Augment your team with us
With over 21+ years of experience, our local staff augmentation team has a proven record of assisting companies like Atlassian, IPSI and Integrity accelerate delivery and boost performance. Moreover, you will gain immediate access to our available specialists and our existing database of candidates to help you fill skill gaps and scale your team, fast.
We have a thorough and impartial recruitment process that not only evaluates technical skills but also a culture fit to ensure our local specialists integrate seamlessly into your team.
In fact, we’re so confident in our local specialists, our technical and cultural selection process that we are willing to offer a replacement or refund guarantee if you are unhappy with the specialist we have placed in your team after 1 week – no questions asked!
What are you waiting for? Learn more about our Augment my team packages now.
*Paycor
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