The Cost of Contract Staff - How to Accurately Calculate
Introduction
Contract staff are hired employees that are part of an organisation on a contractual basis, usually for a specific period and task. These employees bring in increased expertise and knowledge in particular business areas without the burden of having a full-time employee or needing to utilise their own staff. However, before using contract staff, businesses must understand the true costs of the contracts and how to accurately calculate the cost of the people they hire.
Types of Costs Associated with Contract Staff
The cost of contract personnel is typically calculated using an hourly rate that is decided upon by the organisation, the contractor and the recruitment agency (if applicable). The hourly rate will differ based on various factors, including the contractor’s experience, level of expertise, and the company’s internal wage rates. In addition to hourly rates, the cost of contract staff must also include benefits, such as national insurance, pension, holiday and sick pay. Training costs must also be factored into the cost of the contract staff, including both onsite and online training.
Hourly Rates
Hourly rates are the basis for determining the cost of contract personnel and can be influenced by several factors. These factors include the contractor’s level of experience and expertise, the type of task to be undertaken, the business’ internal wage rates, and the contractor’s needs. It is essential to consider all of these factors when calculating the cost of the contract personnel. The cost of an hourly rate can be calculated by taking the total number of hours needed to complete the task and multiplying that number by the agreed-upon hourly rate.
Benefits
Long term contract personnel are also eligible to receive most of benefits that a company may offer permanent employees. These must also be considered when calculating the staff's cost. These benefits may include health insurance, pension, gym, holiday and sick leave.
Training
Contract personnel may also need adequate training to correctly complete the task. Onsite training may be necessary and should be considered when calculating the cost of the staff. Additionally, online training should be considered, as this can be a cost-effective and efficient way to train contract staff.
Calculating the Cost of Contract Staff
There are a few essential considerations when calculating the cost of contract staff. First, it is crucial to consider the length of the contract and the number of hours needed to complete the task. This will give businesses an estimate of the cost for the duration of the contract. In addition, any associated benefits, such as health insurance, retirement benefits, and vacation and sick leave must be considered, as well as the cost of any training that may be necessary for the staff.
Estimating the Cost of Contract Staff
Businesses can estimate the cost of contract staff by considering the length of the contract, the number of hours needed to complete the task, and the cost of any benefits or training. Once these factors have been appropriately estimated, businesses can determine how much employing the contract staff will cost.
Cost Savings
Businesses can also look for ways to identify cost savings when using contract staff. One way to do this is to ask the contractor to propose solutions that would reduce the cost of the contract. Another way to reduce costs is to look for ways to minimise the length of the contract or the number of hours the contractor will need to work. This could potentially reduce the cost of the contract.
Conclusion
Calculating the costs associated with contract staff ensures businesses maximise the benefits of hiring them. By considering the duration of the contract, the number of hours needed to complete the task, the cost of any benefits or training, and potential cost savings, businesses can accurately and effectively determine the cost of contract staff. The price of contract personnel varies, but understanding the cost of the staff is vital to ensuring successful and cost-effective partnerships.
Should you need any help or advice in calculating the cost or an idea of market rates, please do not hesitate to contact our friendly team on 01628 337250.