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Cost Comparison: HRO versus Internal Hire

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When does it make sense to use an HRO instead of hiring within your company? The answer depends in part on your long-term strategic needs and plans for that position. But financially speaking, how do the numbers stack up?

According to the Society of Human Resource Management, an HR professional with up to five years as a generalist will cost you an average of $57,500 in this part of the country. If we then add about 17% of the gross wage to account for labor costs and other intangibles (as we discussed in a previous post), you end up with a conservative total of $67,275.

Now let’s compare that price tag to that of hiring through an HRO. The HRO cost will vary on a per-person basis, but up to a certain level the savings can prove dramatic. Smaller employers may pay around $800 per person per year, while larger employers would see that figure drop to around $550 per person per year.  At those rates you’d pay the HRO $4,000 per year for five employees ($800 x 5), or $13,750 for 25 employees ($550 x 25). The unit dollar amount continues to drop as you add hires.

Now take the $67,275 you were ready to spend on that internal HR generalist. Divide this number by, say, $500 per person. You could employ up to approximately 135 people through the HRO before you stop saving money over in-house HR. But the value doesn’t end there. The money you pay the HRO counts as a business expense, not employee payroll. That means that it’s non-taxable, and you don’t have to make FICA or FUTA payments on it. Further, our HRO model also includes payroll and tax services as well.

Intrigued? Contact us! We’ll crunch the numbers with you to see if HRO-based hiring meets your needs.

Dan Hettrich is the director of sales at Acadia HR located in Austin, Texas. He can be reached at dan@acadiahr.com or 512-745-2985.

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Written by Dan Hettrich

January 13, 2011 at 2:56 pm

Posted in Uncategorized

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