Overtime vs. Temporary Staffing – A Cost Analysis

You’ve just won a three-month contract with a major new client – congratulations!  Now, you need to figure out how to get the extra work done. 

Should you pay your current employees overtime, or bring in temporary help?  Consider the following sample cost analysis.  It is based on an annual salary of $40,000 ($20.51/hr.), vs. time-and-one-half overtime, for one employee:

Cost Analysis

Expenses Paying Overtime Using a Temporary
Hourly Wage $30.77 $32.82*
Fringe Benefits** $9.54 $0
Administrative/Payroll*** $3.69 $0
Over 3 months x 450 hours x 450 hours
     
Total Cost $19,802.00 $14,767.20

 

Although this is just a sample exercise for illustration purposes, it clearly demonstrates the economic rationale for using temporary employees.  When you need additional productive hours on a temporary basis, staffing services can lower costs, reduce burnout and improve the productivity of your direct staff.

UNITEMP – New Jersey’s Staffing Economics Experts

Need help assessing the cost of a staffing strategy?  Contact UNITEMP.  Our experts will work with you to determine the most productive and cost-effective way to get your work done.

Cost Analysis Assumptions

* Temporary staffing rates vary by market, but the relationship (ratio) between pay rates remains the same.

** Fringe benefits include:  holiday pay, sick leave, vacation pay, personal days, insurance, F.I.C.A., S.U.I., F.U.T.A., worker’s compensation, etc., based on a national average of 31%.

*** Based on U.S. Chamber of Commerce national average statistic of 12%, which includes firms that pay no benefits.  For small firms with moderate benefits programs, this cost is typically 40-45% of payroll, and for larger firms with extensive benefits programs, the cost can be up to 100% or more of payroll.

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