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Why Outsource?

The calculator below covers the main annual costs and factors associated with employees to determine an employee true hourly cost to your business.

The default figures in the calculator below are typical that a business may experience for an internal IT employee.
Please adjust the figures for your actual employee and business experience.

Note - The dominating factors that determine the employee true hourly cost are the employee activity factor and the employee efficiency factor that you experience. 100% activity is achievable by out-sourcing (you only pay for time worked), and by out-sourcing to specialists the efficiency factor also tends towards 100%. Productivity percentage is measured as the 'employee activity percentage' multiplied by the 'employee efficiency percentage'.

Employer's and Employee's Figures and Assumptions

Employee Cost Item Annual Cost Comments
Annual Salary: £   Salary including bonuses
Office Costs: £   eg: rent, business rates, gas, electricity, telephone etc
Employer's National Insurance: £   12.8% of Earnings above £5,715 (2009/2010) - see HMRC
Pension Contributions: £   2005 average was 6.3% for defined contribution schemes (see Govt stats)
Computer Provision: £   Hardware, software and support
Training: £   Training courses and materials
Other Employee Benefits: £   eg: car benefits, BUPA, life assurance, canteen
Other Employee Costs: £   eg: business travel costs, consumables
Total Cost p.a.: £    

Day Item Days Per Annum Comments
Weekday Days:   days Calculated as 365.25 x (5 / 7)
Paid Bank Holidays:   days England and Wales Bank Holidays (Govt website)
Holidays:   days  
Average Sickness Days:   days 2008 CBI/AXA Survey average
Training Days:   days  
Maternity / Paternity Leave:   days Average maternity & paternity leave per employee p.a.
Other Days:   days  
Working Days Available:   days  

Other Variables Value Comments
Employee Contract Hours per Week:   hours  
Employee Management Percentage:   % Employee management cost as % of employee's cost
Employee Activity Percentage:   % Percentage of the day actually spent working
Employee Efficiency Percentage:   % Efficiency of work compared to a specialist

Your Info Value Comments
Your Email Address:     If you wish, we will also email you the results
Email Next Calc Results:     Tick for an email of the next re-calculated results

Scroll down to see the calculated results

Employee True Cost Results

Employee true cost per active hour = £88.93 per hour
This is calcuated as follows:

1) Employee cost per paid day (260.9 days pa) = £48,998 / 260.9 = £187.80 per day

2) Employee cost per attended day (206.2 days pa) = £48,998 / 206.2 = £237.62 per day

3) Employee cost per attended hour (7 hour day) = £237.62 / 7 = £33.95 per hour

4) Employee cost per managed attended hour = £33.95 x 110% = £37.35 per hour

5) Assuming the employee is 60% active on each attended day (personal emails, refreshment breaks, social chatting etc):
   Employee cost per active hour = £37.35 / 60% = £62.25 per hour

6) The final factor is how efficient is the employee in his/her job relative to the equivalent out-sourced specialist. If the employee works at 70% of the efficiency of a specialist, then the final result is:
Employee true cost per active hour = £62.25 / 70% = £88.93 per hour

NOTE - There are many other costs associated with employees than have not been allowed for in the default calculation above (e.g. company vehicle provision). Please use the 'other' form entries to adjust your calculation.

Other Results

Employee Annual Salary: £30,000 per annum
Employee Daily Rate of Pay: £114.99 per each of the 260.9 annual work days
Employee Hourly Rate of Pay: £16.43 per work hour
Employee Productivity: 42% Calculated as (Employee Activity %) x (Employee Efficiency %)
Employee True Hourly Cost: £88.93 per hour
Employee Cost Factor: 5.41 x employee hourly rate
Employee Cost Factor (100% productive): 2.27 x employee hourly rate
The calculation above is an illustrative and typical basic example of the main employee associated costs incurred by employers. Actual experience for employers and a class of employee can differ from the calculation above, and can depend on many factors.
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