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Arriving at the actual cost of finding and hiring new talent involves truly understanding the process from start to finish. And while some businesses may go into the hiring process somewhat blind, knowing the true cost of hiring can help you identify where it makes sense to cut costs, as well as where it would be wise to spend more. In some cases, not hiring at all and choosing to work with an outsourced helpdesk provider may make more sense. After all, a bad hire is costly for your managed service provider (MSP) business, and if your business is small you may not have the cash available to attract a quality hire. It’s better to avoid scrimping and saving and get it done right the first time around.

Hire too fast and you’ll leave money on the table, which comes right off the top of your profitability. Hire too slow and your customer experience can suffer, causing downstream renewal and referral issues. The best way to determine your cost per hire is by breaking the total cost down into its component costs. Once you do that, it quickly becomes evident which costs are optional or nonnegotiable.

The cost of hiring

According to a report by the Society for Human Resource Management (SHRM), employers dedicate an average of $4700 to filling a position. Of course, your cost of hiring will vary depending on the length of the search, the nature of the role being filled and the salary range. The question is, how much should you be spending?

Typically, employers should spend somewhere in the range of 16 to 20% of their hire’s annual starting salary. Entry-level positions will be a lot closer to the low end of that range. The search for someone to fill just one highly technical, specialized or in-demand role can be quite lengthy, requiring more support and a larger budget. More than half of organizations identified a lack of qualified labor as being their major challenge, so if you can find a qualified candidate, they may receive a higher offer or better benefits elsewhere. On the other hand, if you’re looking to fill 25 identical positions at the same time, it’s a lot easier to share costs across numerous hires, potentially reducing the cost per hire by a wide margin. In a similar vein, if you hire for the same role regularly, it becomes easier to perfect your process over time.

From internal costs like HR salaries, employee relocation and applicant tracking software to external costs like agency fees and advertising costs, the list of hiring expenses is long. Not all costs will apply to business, it’s nevertheless surprisingly easy to underestimate the true cost of hiring.

Let’s break down some of the most significant costs associated adding new members to your team, shall we?

Recruiting costs

There are a lot of potentially hefty costs involved in recruiting the right candidate. These include promoting the job listing far and wide and working with a recruiting form. Once you identify a pool of potential fits, there’s time and resources to be spent on conducting interviews, followed by various screening, background checks and other pre-employment assessment tests. Using quality recruitment software is one potential way of expending less time (and therefore money) during this process!

It’s also worth considering that while different types of hires naturally require different processes, even an employee applying for a position at a minimum salary could end up costing your business a significant amount in turnover costs.

The cost of training

Once recruited, new hires don’t tend to be completely and immediately productive. Realistically, it may take several months for them to become accustomed to the new flow. Of course, once a new hire is behind the wheel, companies also need to do all they can to facilitate the transition to healthy productivity. How? By providing employee training, of course.

Although proper training is crucial, it turns out that it’s also one of the steepest investments you’ll make in your business. Your business might lose anywhere between 0.5% and 3% of its total revenue in the time required to get a new employee up to speed. In 2023, companies spent an average of $1207 a year on training per employee. And new hires devoted an average of 42.1 hours to undergoing this training. To truly get a handle on training costs, it’s important to consider all the costs associated with structured training and relevant materials, as well as the time cost of managers and coworkers.

The cost of workplace integration

Yet another set of costs that shouldn’t be glazed over is workplace integration. More and more these days, businesses are tuning in to the needs of their employees—beyond simply providing a decent enough chair and desk. Effective workplace integration might extend to carving out meaningful space for a new employee within the company, or on the production floor.

Helping them fit in and get along with other staff is also an essential aspect of integration. There are a number of material needs that may need to be met as well. These may include customized employee software, a company cell phone, travel funds, a company vehicle, and any special equipment required to get the job done—or facilitate it.

Of course, in some businesses, these considerations are a lot more integral than in others. An IT employee working in telecommunications, for instance, is more likely to require specialized equipment than someone whose job takes place 100% in-office, or in an industry that’s more standardized production-wise.

Outsourcing as a solution to mitigate an MSP’s true hiring cost

When you choose an outsourcing option like Sherweb Helpdesk Services, much of this equation is solved automatically.

It can be incredibly challenging to predict the number of calls that will come to helpdesk, especially as you add on new products or if you’re just getting started. To run a well-organized team, this type of intelligence needs to be forecasted months in advance. If your team is small and you’re making resourcing decisions by playing the balancing game of assigning staff to wait for the phone to ring or a ticket to come in while they’re multitasking on a project, your customer experience is bound to suffer.

With Sherweb Helpdesk Services, you can choose the support model that makes the most sense—per seat or per ticket—or full-time dedicated support to optimize your IT helpdesk, all while maintaining the level of service your customers deserve. As your business and team structure evolves, so too can your plan. Sherweb’s 24/7/365 white-label support saves you from that sinking feeling of getting a text late Sunday night with an issue that needs to be solved. Our team is on it and your customers will feel taken care of.

How to make the best strategic hiring move for your MSP business

In today’s competitive job market, attracting and retaining top talent is essential to your MSP business’s success. But before you hire someone new, understanding your break-even point is key. Assessing whether or not it’s worth the true cost to hire is an important strategic move that can help you figure out whether hiring in-house or implementing an outsourced helpdesk is the better fit for your business’s specific size and goals.

Ultimately, it’s never a bad idea to conduct a thorough cost-benefit analysis. Not every employee will end up as profitable as they appear on paper, but a comprehensive assessment certainly reduces your risks. Because even when there’s behind-the-scenes disagreement about the best approach to hiring (if any), profits remain the undeniable driver of your business!

Once you have a detailed breakdown of all you can and should spend on a hire, you can get down to the business at hand: bringing the right people on board, whether that’s a new in-house hire or white-label helpdesk services.
 

Looking for a partner to help you navigate the ins and outs of outsourcing and position your MSP for growth? Check out our partner guide

Written by The Sherweb Team Collaborators @ Sherweb