One step in determining if white label outsourcing is right for your business is to compare the cost of an outsourced resource to hiring an in-house resource. Simply comparing the salary of an in-house resource with the hourly rate for a white label outsourcing resource is not an apples to apples comparison. You must calculate the fully burdened cost of the in-house resource which includes both direct and indirect costs.
Adding WordPress development resources – any employees for that matter – to your small business costs more than just the hourly wages or salaries you pay them. There are additional costs you incur such as:
- taxes
- benefits
- supplies
These additional costs increase the actual employment costs. Any calculation of the fully-burdened labor cost must be the full hourly cost to employ a worker for the hours actually worked. This calculation must include wages and the “burden” of the additional costs. Following the steps below, you can calculate the fully-burdened labor costs which can help you make an apples-to-apples comparison of in-house resources versus white label outsourcing.
Calculating Fully Burdened Cost of In-House Resources | Direct Costs
- Start with the in-house employee’s hourly wage and the number of hours per year you get for that wage. For this example, let’s use an annual salary of $50,000/year. There are 52 weeks in a year and a normal work week is 40 hours per week which means the employees is available to work 2,080 hours per year. $50,000 per year / 2,080 hours per year = $24.04 per hour
- Employees miss work each year for holidays, vacations and sick time. Let’s assume you have a very healthy employee (0 sick days) who gets 2 weeks paid vacation and 10 paid holidays (New Year’s Day, MLK Day, President’s Day, Memorial Day, 4th of July, Labor Day, Thanksgiving and Day After, Christmas Eve, Christmas Day). Now, instead of purchasing 2,080 hours of labor for $50,000 you are really only purchasing 48 weeks x 40 hours per week = 1,920 hours. This makes the hourly rate $50,000 per year / 1,920 hours per year = $26.04 per hour
- If you’ve had other employees in the past, check your records to determine the amount of annual costs you pay in addition to an employee’s hourly wage that are directly related to his job. Be sure to include:
– payroll taxes
– insurance
– benefits
– meals
– supplies
– training costs
For our example, let’s assume you pay 6.2% in Social Security taxes, 1.45% in Medicare, 6.2% for unemployment taxes (this is low but a good starting point), $500 per month in benefits and $2,000 per year in supplies, software, hardware, training and other miscellaneous expenses. Note that you are NOT including the cost of office space in this calculation, which means actual hourly costs are even higher. These costs add a total of $14,925 per year to the cost of your employee. $64,925 per year / 1,920 hours per year = $33.82 per hour
White Label Outsourcing Cost Comparison
Using our example above, hiring a WP developer for $50,000 per year actually costs $64,925 per year. Assuming 4 weeks per year of non-productive time for vacations and holidays means an annual availability of 1,920 hours. This results in an fully burdened hourly cost of $33.82 per hour. Compare that to “renting” a white label outsourcing WordPress developer from us from $21/hour.
