NUTSHELL: What’s the true cost of taking on a new IT employee?

It’s a big decision to take on a new employee, particularly during tough economic times. But the need for fresh and current IT skills has never been greater, given the fast pace at which technology is evolving. Businesses are therefore regularly forced to decide how and where they can acquire these skills from, and more broadly, how to resource IT in general.

The typical options available are to:

• Outsource IT, either entirely or in part, to an IT Managed Services Provider

• Augment specific skills on a flexible basis using IT contractors

• Invest in new, permanent IT staff

It’s never an easy decision, and many organisations choose to adopt a blended model that includes some, if not all, of these options. However, wherever viable, the preference is generally to invest in full time employees.

So, what does it really cost to take on a new member of staff in IT? There’s often a tendency to think purely in terms of the salary package. But whilst it’s true that this is usually the biggest proportion of the overall cost, it’s not the full picture. Here’s a broad look at the cost elements to consider:

Salary and Benefits

This is essentially made up of basic annual salary (in the IT industry, salaries are well above national averages), plus additional mandatory costs (such as National Insurance and pension contributions), plus any additional benefits an organisation chooses to offer (such as health insurance, car allowance, and performance bonuses).

General Overheads

Some organisations choose to attribute a proportion of overheads like office rent, utilities, and telecommunications costs, to each employee. This is a matter of personal preference (and indeed accountancy). However, even discounting these costs, expenses such as software licences, laptops, peripherals, and mobile phones, are directly attributable to an individual employee. And especially for IT staff, who tend to require high-end equipment and premium versions of licences, these can really add up.

Personal Development

Technology doesn’t stand still, so it’s important to factor in sufficient provision for training and development to keep skills up to date and relevant. Failure to do this immediately devalues the overall investment in an employee in comparison to engaging an expert contractor or outsourcing to an IT Managed Services Provider.

Management

IT staff require the same level of management as any other employee would. But they also tend to benefit more than most from mentoring and peer working to help them evolve their skills. Given the higher-than-average salary levels within IT, these managerial costs should not be dismissed.

Absences

Finally, there’s the issue of absences, both planned (such as annual leave) and unplanned (such as sickness, compassionate leave, jury service and maternity/paternity leave, etc.). Within IT, particularly for operational roles that keep an organisation's engines running, they can end up costing more than just the individual’s lost productivity. Such roles are business critical and require cover from elsewhere, incurring additional costs.

In a Nutshell: The true cost and overhead of taking on an IT employee can end up being significantly more than anticipated, often upwards of 50 per cent more than the salary cost in question. A key contributor to this is the need to invest in, maintain, and evolve, specialist, high-value technical skills. Organisations should therefore assess their IT resourcing models with their eyes wide open, and consider a balanced hybrid resourcing model to save costs.

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