Dollars and Sense: I can't afford to use an agency!

 Are you open to a surprise? 
It’s natural to focus on the fees an agency like BOLT charges for our services and compare them to the cost of putting an ad on Craigslist and a few other job sites and conclude it’s cheaper to do it yourself (DIY).  That is the conventional wisdom.  As is so often the case, the reasoning might be conventional, but wise it’s not!  In fact it can just be wrong.
Using an agency like BOLT to find employees does seem more expensive to find a new employee, and if you live in a perfect world it could be.  However, what’s surprising is that if you use an agency’s skills properly, you actually save money.  Sound crazy?  Follow me and see where we go.
We’ll do an apples-to-apples comparison of costs of hiring for a $15 an hour clerical position.  First let’s look at the costs to you if you do the hiring in house.
DIY:
It’s not hard to spend $500 on job postings and ads.  You can plan on 6 hours of staff time screening responses.  Let’s give that $300 in labor and overhead costs.  (Note that these days an ad for a clerical person can easily produce hundreds of resumes.)  Now you’ve selected your interviewees.  You can easily spend 3 hours preparing and conducting interviews.  Add another $150 labor and overhead.
Congratulations!  You’ve selected your new employee.  Remember, that day one will entail all the payroll and tax documents.  Add another $200 to put that together.  The first two weeks’ salary at $15 an hour works out to $1200.  But wait!  Don’t forget to add your overhead burden for payroll taxes, benefits,  FUTA, SUTA and Worker’s Comp.  We’ll use 30% for this.  You can also plan on another 20 hours of staff time training and supervising, add $1000.
Going it alone: 
So far, after recruiting, hiring and getting your new clerk through the first two weeks your costs look like this:

New Hire Costs

In house
Job Listings

$500.00

Screening

$300.00

Interviewing

$150.00

Start up, Day One

$200.00

2 weeks pay ($15/hr + 30%)

$1560.00

Training and Supervision

$1,000.00

Total

$3,710.00



Outsourcing:
Now let’s look at using an agency like BOLT.  We’re going to assume that you trust the agency’s recruiter to identify candidates, screen and interview for you, since you’ve provided a clearly defined job description and specified certain skills that you would like tested and scored.  Let’s see how those costs compare:

In house BOLT
Job Listings

$500.00

0

Screening

$300.00

0

Interviewing

$150.00

0

Start up, Day One

$200.00

0

2 weeks pay (includes 30% burden)

$1,560.00

$2,040.00

Training and Supervision

$1,000.00

$1,000.00

Total

$3,710.00

$3,040.00

Costs after two weeks:

$670.00

That’s right, you can expect to pay more to get your new employee to the end of the first two weeks if you do the hiring yourself rather than calling us!  Of course that savings will diminish with time, but this is the score after two weeks.  Surprised?  Don’t be.  It gets better!
Strolling back through the car wash
If you never have had that ideal candidate call to say that he’s taken another job, or the person that looked great, interviewed perfectly and came on board and then suddenly left with no explanation, you don’t need to read any more.  However, if you live in the real world, you know there are no sure bets.  When it comes to people, even the best can have sudden problems pop up in their lives and that put you back at square one on the hiring game board.
Now be honest, do you always pick a winner when you select a new employee?
It’s possible that before the month is out you’ll be back recruiting for this position again for any number of reasons.
If that happens, here’s what things look like.
Do over costs:

In house

First time Second time
Job Listings

$500.00

$500.00

Screening

$300.00

$300.00

Interviewing

$150.00

$150.00

Start up, Day One

$200.00

2 weeks pay (includes 30% burden)

$1,560.00

Training and Supervision

$1,000.00

Total

$950.00

$3,710.00

In house costs after second hire

$4,660.00

This is where the premium paid to people like us pays off.  As much as we’d love to say every one of our employees is successfully placed with clients 100% of the time, the truth is we’re in the same world as you.
However, our business is matching clients with reliable people.  Since we’re in the business, we keep an inventory of people ready to go for many positions.  Very often they are people who’ve worked for us on other assignments.  We know them.  While we’re not perfect, we think we can beat the averages more often than not.  Still for the sake of comparison, we’ll assume our first candidate flopped too.  So the costs to you for using an agency to get you to the same 2 week point looks like this:

BOLT

First time Second time
Job Listings

0

0

Screening

0

0

Interviewing

0

0

Start up, Day One

0

0

2 weeks pay (70% markup includes 30% burden)

$2,040.00

Training and Supervision

$1,000.00

Total

$3,040.00

Total Agency costs to you after second hire

$3,040.00

You don’t need to adjust your glasses!  In this, case using an agency saved you $1620.00 to get your employee two weeks into the job.
It probably won’t surprise you to find that we are in business for the same reason you are.  Our profit in a temp-to-hire order comes from a good placement and a period of longevity before you decide to hire the employee we’ve placed with you.
Historically, that period is 520 hours, or about three months.  So let’s look at your costs after 520 hours, assuming the same 30% burden/70% markup that includes the 30%:

Costs after 520 hours In house BOLT
Initial Costs

$4,660.00

$3,040.00

Pay (with 30% burden/70% markup)

$10,140.00

$13,260.00

Total cost at 520 hours

$14,800.00

$16,300.00

Conclusion
So here you are.  To identify, interview and select an employee for a $15 an hour clerical position using your own resources will cost you close to $15,000 at the end of three months.  To pick up the phone, call us and outsource your expenses and heartache will cost you $1500 more over three months, or $16,300.
As you can see if your employee left you after two weeks of training and pay and we got it right the first time that $1500 premium becomes very cheap insurance, indeed!
In other words, for an arguably small premium you can only hire people that you come to know very well.  After three months you’ll know their strengths, weaknesses and you will know them personally.  If something happens before you hire them permanently, pick up the phone and we’ll have a replacement pronto!  When you deal with human beings, it’s hard to get a better guarantee than that!
Remember, too, that we’ve used the highest pricing we would typically charge.  In these trying times we are certainly willing to work with you to find pricing that will work for both of us.  The same holds true on the 520 hour conversion.
Obviously, that only improves matters for you.
Remember, there are many ways to go about the hiring process.  When choosing among them be careful to consider all your costs before you decide going it alone is best for you!  Please see the adjacent article about other ways to use an agency that can often deliver the people you need, when you need them.

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