AN ALARMING number of UK organisations do not calculate how much they spend in total on remunerating staff (including base pay, variable pay, benefits and employer national insurance contributions), according to this year’s Annual Reward Management Survey from the Chartered Institute of Personnel and Development (CIPD). Almost half of the organisations surveyed (46%) fall into this category.
The survey shows that voluntary sector organisations are the least aware of their total remuneration spend, with 56% not calculating the full costs of what they offer to staff. Within the private sector, manufacturing/production and private services organisations fair only slightly better, with 48% and 40% respectively not being aware. It is a similarly bleak forecast for public sector employers, with 47% not taking this necessary step.
And of the organisations that calculate the size of their total remuneration expenditure, the vast majority (83%) are unable to break it down into its constituent elements (salaries, variable pay and benefits).
Charles Cotton, CIPD’s Reward Adviser, said: “It is a shame that our survey does not show that the tighter margins associated with the current recession are leading to greater scrutiny around pay and reward. This might have helped organisations avoid some of the job losses and redundancies we have seen recently.”
THE COSTS START LONG BEFORE THE EMPLOYEE’S FEET ARE UNDER THE DESK
Whilst managing ‘headcount and salaries’ is crucial, managing the cost of the entire recruitment process used to recruit the staff in the first place is just as important.
The cost of administering and managing the entire recruitment process does not appear in the management accounts. These costs can go undetected, and cost an organisation a small fortune.
For example, a recent National Audit Office survey found that there is the potential to reduce the Civil Service recruitment bill by up to 68%.
HOW MUCH DOES IT ACTUALLY COST TO EMPLOY SOMEONE ?
This is an interesting article in terms of organisations’ understanding of how much it actually costs to employ a member of staff. However, the overall costs run deeper, in terms of office space equipment etc ! You could quite easily add 30-40% to the salary bill, to estimate the total cost of employing someone.
In addition to the “total reward” costs of benefits etc, employers national insurance contributions are around 12% of salary plus there is the significant cost of pension provision, office space and equipment.
Consequently organisations who are growing should look seriously at outsourcing their non core activities such as HR and IT etc
Based on the “total cost” of employing someone there are huge savings to be made in buying the resource you need, when you need it. You also get access to a breadth of experience and the security of absence cover, which is not possible when employing an individual to carry out a support function.