What Are You Spending on HR?
The Indirect Costs of Employees
According to a study commissioned by the US Small Business Administration in 1995, the average cost per employee per year for a firm with fewer than 500 employees is $5,000. This cost includes the impact of all Federal regulatory paperwork and tax requirements placed on a company. While these costs may be “hidden”, in terms of the time your staff spends managing paperwork, make no mistake, they are real. Let’s look at the major cost components:
- Labor Accounting and Reporting Costs
Building and running labor costs reports including departmental or job costing labor reports.
- Journal Entries for labor costs, tax withholding, etc.
Federal, State, and Local Tax Filings
Regulatory Agency Reporting and Filings
- Human Resources Administration Costs
Background Checks (optional)
Pre-Employment Testing (optional)
Recruiting, Advertising, Resume Screening, Interviewing (optional)
Rewards and Recognition Programs (optional)
Training (Employee and Managerial)
- Benefits Administration Costs
Plan Acquisition Costs
Plan Enrollment Reporting and Administration
Plan Premium Remittance to Insurance Carriers
Employee Enrollment & Termination Reconciliation with insurance carriers
Annual Plan Enrollment, ERISA and HIPPA Compliance
Each of these cost categories above applies to each type of insurance your company wants to offer including:
Long Term Disability
Short Term Disability
Accidental Death & Dismemberment
Employee Assistance Programs
Flexible Spending Accounts
- Payroll Administration Costs
Employee time collection and reporting
Payroll errors handling
Third party inquiries administration for employment confirmations
Employee Garnishments, Child Support and Tax Levies
W-2 Printing and Reporting
- Compliance Costs
What would your company pay to transfer the risk for non-compliance fines and penalties for HR related employer responsibilities? Until your company has had a fine levied by a government agency, this may not seem to be worthwhile. A single fine can mean significant costs.
This list is not exhaustive and ignores other costs that may face an employer depending on the number of employees and the state in which the employees are located.