In last week’s post we discussed how important it is to understand your facility’s cost structures, especially when it comes to staffing. We also covered employee health care, performance, stability, and retention.
This week we’re answering the question: When it comes to deciding between hiring full and part-time employees, how do you quantify your decision?
There is no cookie-cutter answer for how you balance your team. It requires a deep understanding of your operations and your people. Nonetheless, here's how you might make a more informed decision.
Find Your Base Per-Employee Costs
If you step back and think about it, you’ll realize that you incur costs for recruiting, onboarding and training for every employee, regardless of how many hours they work for you. Start by identifying all the sources of costs that go into each individual you hire:
- Recruiting, including advertising, selection and interview time
- Onboarding, including time to set up in systems, orientation, and licenses
- Training, both initial and ongoing
- Management time
- Loss of productivity for set-up, driving, or other non-revenue generating activities
- Uniforms, vehicles, equipment and software licenses, including replacements and renewals
- Dedicated or incremental office space
- Unemployment taxes (these vary per state and company, but are usually estimated over a base portion of the individual's earnings)
Note that for these purposes, productive hourly costs are indifferent, as you'll incur them regardless of whether the work is distributed among full-time or part-time employees.
One-time costs such take into account both start-up costs for new accounts and ongoing costs for replacements. For example, recruiting & onboarding would take into account turnover expectation:
Start-Up costs would be estimated as ($cost-start * #employees)
Ongoing costs would be estimated as ($cost-start * #employees * %turnover)
Keep in mind, all your costs above will need to be estimated based on the expected cycle and then normalized for the same time period for all items, so you can be sure you're comparing apples to apples. If you're starting a new account, you may want to start by totaling costs over the expected lifetime of that account, then dividing by the number of periods. For example:
Total Costs for 3 years (including start-up) /36 Months = Monthly Cost
Find the Incremental Costs for Full-Time Employees
Next, determine what your expected additional costs will be for full-time employees. These include:
- Average cost of healthcare, based on expected levels of opt-in (you would get this by dividing the total amount expensed by the total number of full-time employees during a period)
- Other benefits offered to full-time employees
- Loss of productivity for longer hours
Determine Your Optimal Employee Distribution
If your total per-employee cost exceeds your incremental full-time employee (FTE) cost, you are better off utilizing full-time employees. If the converse is true, you are better off utilizing part-time employees. You would determine this by comparing the total costs for the job.
Let's use a job that will require 220 labor hours per week as an example. Here all costs were normalized for a week's period. Note numbers are rounded for practical purposes.
You calculated a cost of $120 per week per employee, regardless of hours worked.
You calculated a cost of $20 additional per full-time employee.
FTE needed: 220 hrs / 37 hrs per week = 6 FTE
PTE needed: 220 hrs / 28 hrs per week = 8 PTE
Non-wage costs for FTE: 6 FTE x ($120 + $20) = $840 per week = $43,680 per year
Non-wage costs for PTE: 8 PTE x $120 = $960 per week = $49,920 per year
In this example, your best option financially would be hiring 6 full-time employees, saving you a net of $6,240 per year. This example illustrates a small team with small savings, but as you look at larger teams, the differences become more significant, and therefore informed choices become more important.
There are occasions where part-time employees will still be a smart choice and can provide sources of efficiency:
- Limited schedules of operation: If you can only provide service from 8-12, it does you little good to hire a full-timer, unless there is alternate, productive work for the balance of his or her time.
- Ramp-up: If you don't yet have a revenue stream to sustain a full-time position, part-time workers can help offset some of the risk of incurring additional liabilities.
- Career path: Some individuals prefer working part-time when they are involved in other activities, such as studies, or are returning to the labor force from parental or health leave. This can provide them the opportunity to scale up with you.
By taking this financial approach to determining if your organization needs full or part-time facility employees, you can see big cost savings and improved efficiency.
Keep in mind that not all factors are financial; you still need to ensure your decisions align with your company values and your employee needs as well.