The True Cost of Employees
Founder & CXO
The True Cost of Employees
Companies outsource accounting functions for many reasons: to overcome a talent shortage, to gain specialized expertise, to scale their staff fast enough to keep pace with growth. But perhaps the biggest reason a company considers outsourcing in the first place is to cut costs. They want to do the same (or more) for less.
This raises a fundamental question – Does it really cost less to pay a service provider to do that same thing as an in-house accountant? Answering that question requires a careful cost-benefit analysis. However, the potential cost savings of outsourcing start to become clear once you consider the true cost of an employee.
What a Single Accountant Costs
According to the Bureau of Labor Statistics, the median salary for accountants in 2019 was $71,550. Depending on your location, hiring an accountant may cost less than that, or significantly more. You also have to factor in costs on top of the base salary.
Employers are also responsible for paying Social Security and Medicare taxes, unemployment insurance, and worker’s compensation. On average, those taxes will add almost $8,000 to the cost of a $70,000 salary by one estimate.
Benefits packages inflate the true cost of an accountant even further. Even the most basic health insurance coverage adds thousands of dollars to labor costs. Companies that also offer dental, vision, life insurance, and 401k benefits – all important for recruiting accountants in short supply – will pay even more. In total, the average benefits package adds close to $10,000 to the cost of a $70,000 salary.
Simple arithmetic shows that hiring a full-time accountant in most parts of the country will cost approximately $88,000 – and that’s just for direct compensation. There are also indirect costs like the cost of a desk and software subscriptions for a new employee. Plus, many companies offer perks like free food or company retreats that grow more expensive as the ranks expand. Whether these costs total a figure in the hundreds or the thousands, it’s fair to conclude that the average accountant costs upwards of $90,000 per year.
The Economics of Outsourcing Accounting
Knowing what an in-house accountant would cost, compare it to the cost of outsourcing. Remember, it’s not necessarily a one-to-one comparison because you don’t hire a single outsourced accountant so much as enlist the help of a diverse accounting team.
Estimate how much work the average accountant could accomplish in a single year. Then explore how much you would pay an outsourcing firm to complete the same amount of work. In many cases, outsourcing costs less by a wide margin. When you also account for the agility, intelligence, and experience that outsourcing firms make available on-demand, it’s obvious that it costs less and delivers more value than a single in-house accountant ever could.
Explore if your organization should outsource accounting. Schedule a meeting with the team at Ximplifi.
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