As a small business owner, you’ll eventually get to the point where you realise you just can’t do everything yourself. You need some help. Someone who can manage the bookkeeping, for example, or help you with marketing and social media. Or just keep your diary in order.
In this article
- What are the real costs of taking on an employee?
- How to calculate the true cost of employing someone
- How long does it take to pay back your recruitment costs?
- What are the benefits of virtual assistant employment?
- Analysing employment choices for your small business
- Virtual assistant employment vs permanent staff
At this point in your business journey, the critical decision you face is choosing between hiring a ‘traditional’ employee and a virtual assistant employment model. Understanding the true costs associated with hiring an administrative employee versus a virtual assistant is a key factor in deciding which is right for you.
This blog post delves into various aspects of both permanent and virtual assistant employment models, helping you determine which option provides the most value for your business.
What are the real costs of taking on an administrative employee?
When a business owner decides to hire an administrative employee, they encounter a variety of costs beyond just the salary. When you’re considering the costs of hiring, it is essential to consider the benefits, taxes, and insurance contributions that are part of going down the full-time staff route. The actual financial burden always extends further, impacting your overall budget significantly more than you may have initially anticipated.
Let’s look at what these costs might be.
Administrative employees require a physical workspace, which means companies must allocate funds for office space and equipment expenses. This includes buying computers, telephones, desks, and chairs, not to mention the ongoing maintenance of technology and infrastructure. Training and onboarding processes introduce another layer of expense, particularly if the employee needs specialised skills to perform their job effectively.
Then there’s the continual cost of overheads, such as utilities, supplies, and furniture, which cannot be overlooked. Hidden expenses lurk beneath the surface, with employee turnover, recruitment fees, and downtime during transitions influencing the overall cost-efficiency of hiring in-house staff. Even if your employee works from home, you’ll still need to provide equipment and benefits.
Here are examples of the additional costs you might encounter if you choose to hire rather than choose virtual assistant employment:
- Benefits and pensions: You will have to pay Employer’s NICs and a pension contribution at the very least.
- Office space: Costs for rent or lease, as well as equipment like computers and telephone systems.
- Training: Invested time and resources into getting new employees up to speed with the business and its processes.
- Other overheads: Includes furniture, utilities, and office supplies necessary for a functioning workspace.
- Turnover and recruitment: Hidden costs that add up with each new recruitment cycle or employee departure.
How to calculate the true cost of employing someone in a small business
Determining the actual costs of employing staff in a small business involves a thorough approach, considering various factors beyond merely salaries and wages. A genuine comparison with the flexible fees associated with virtual assistants, must include the direct and indirect costs of employment. Indirect costs include things like mandatory employer contributions, including national insurance and pension schemes, which virtual assistants exempt businesses from shouldering.
Recruitment-related expenses can be high – from advertising vacancies to the time invested in the hiring process. In contrast, hiring a virtual assistant can significantly reduce these costs. Training and onboarding, with their accompanying price tags, come into play, often contrasting with the reduced training need for specialised virtual assistants. Overhead costs, such as office space and equipment, do not apply to virtual assistants.
How long does it take to pay back the costs of recruiting an admin assistant?
The recruitment and training costs associated with hiring an administrative assistant have a substantial initial outlay that companies must plan for. These costs often take several months – up to 18 months in some cases – to recover, further complicating the financial landscape for one-person or small businesses operating with tight budgets.
Onboarding processes, including salary and benefits, increase the time required to achieve a break-even point when hiring a traditional employee. Virtual assistant employment, however, presents a contrasting picture, with notably lower upfront costs, largely because there are no recruitment fees or employer-provided benefits involved.
The agility and flexibility of virtual assistants accelerate financial recovery and offer adaptability that many businesses find beneficial. If a small business conducts a comparative analysis, the results often reveal a faster achievement of cost-efficiency and ROI with a virtual assistant than with permanent in-house staff. Here’s a quick breakdown:
- Recruitment costs: Including job advertisements, time spent interviewing, and legally-required background checks.
- Onboarding overheads: Additional salaries, training sessions, and relevant materials.
- Virtual assistant savings: No recruitment or benefit-related fees, which reduces the upfront financial load.
- Agility and flexibility: Quick adaptability to project needs without lengthy onboarding.
- Faster cost efficiency: Businesses often notice a quicker return on investment with virtual assistants.
What are the benefits of using virtual assistant employment?
Virtual assistants offer a cost-effective solution for businesses, mainly due to the elimination of expenses related to benefits, office space, and equipment – a stark contrast to the financial commitments tied to full-time employees. The inherent flexibility of virtual assistants presents another compelling advantage. They operate on adaptable work hours and can be enlisted on an as-needed basis, providing businesses with unmatched scalability and efficiency.
By delegating routine tasks to virtual assistants, employees can refocus on high-priority activities, boosting overall productivity. And, when you work with an organisation that covers a wide range of day-to-day tasks, you’ll find that the virtual assistant model facilitates streamlined operations, freeing business owners like you to focus on growth and strategic initiatives. In simple terms, this is what you get with the virtual assistant employment option:
- Cost-effectiveness: You pay for the work that is done. No additional costs.
- Adaptability: A good VA service will accommodate fluctuating workload demands all year round.
- Seamless service: With the right virtual assistant employment model, there’s no holiday or sickness cover to worry about – you get a seamless service.
- Productivity boost: Hiring a VA frees core staff to focus on strategic tasks instead of routine ones.
- Operational streamlining: Reduces the administrative burden, allowing leaders to concentrate on business growth.
Is using an experienced virtual assistant cheaper than employing someone?
Engaging an experienced virtual assistant will result in lower costs compared to employing a full-time, in-house staff member. Businesses save significantly on items such as benefits, office space, and equipment: expenses intrinsically tied to direct employment.
Virtual assistants frequently offer flexible payment options, which befit businesses by only billing for the hours they use. The lack of employee-related expenses like payroll taxes and paid leave further enhances the cost efficiency of hiring virtual assistants.
This financial advantage is particularly pronounced for startups and small businesses that are prioritising budget management. With such tangible savings and the ease of accessing high-calibre talent, virtual assistants prove to be an economically viable alternative to traditional employee models.
Analysing employment choices for your small business
Weighing the advantages and costs of hiring an administrative employee versus a virtual assistant is crucial for small businesses striving for efficiency and financial prudence. By understanding the true costs associated with traditional employment, businesses can make a financially-informed decision about which route to choose.
Ultimately, that decision rests on balancing your immediate business needs with long-term flexibility and cost management objectives.
Attracting the right staff can be a minefield and with recruitment agencies charging anywhere between 15 and 25% of your new employee’s salary it can be costly too.
So what are the true costs of taking on an admin employee versus virtual assistant employment? Here’s a quick way to calculate the true costs of employment.
Including everything from deciding to hire through to the end of your probationary period, estimate the cost of each activity as an hourly rate. This can include scoping the position, advertising, agency fees, interviews, profiling, aptitude testing, reference checking, writing letters and contracts, training and even the employee’s salary during the period they are not contributing.
Unfortunately that’s not the whole story though as the real cost of employment is actually much higher than the figure you just came up with. Let’s now consider the indirect costs associated with just the initial recruitment process:
- Lost productivity due to management’s involvement in the recruitment process.
- Either missed sales opportunities or missed opportunities to contribute to the company’s profits in an indirect way.
- Lost productivity within the role one month before and three months after recruitment.
It’s a fair assumption that these indirect costs can be at least as high as your direct costs. So the total cost of recruitment needs to include both which, when added together, can be considerable.
To fully understand the investment risk in a new employee let’s now calculate how long it takes to pay back the total cost of recruitment and achieve break even. Using an average weekly profit contribution per employee use the following calculation:
Total direct and indirect costs / Average weekly profit per person = weeks to achieve ROI
This calculation shows that it can take 12 to 18 months for a new employee to show a return on your investment and any time prior to that equates to a financial loss.
In contrast, outsourcing to a virtual assistant means there are no recruitment costs and time is not lost in search and selection. Outsourced VA services can provide all of the benefits of employing good people but without the costs, risks and commitment.
Even so, a VA can’t just come in and immediately understand everything about your business. They will still need some time to learn about the company to become fully effective, but if you choose the right VA solution, this will be managed for you, making sure that your investment is working for you from Day One.
Virtual assistant employment vs permanent staff
Choosing between virtual employee outsourcing services and permanent staff significantly impacts the organisational structure and operational costs. Virtual assistants provide flexible work arrangements, enabling businesses to tailor workforce size to current demands without the constraints of fixed working hour limitations typical of permanent staff. The financial relief from reduced overhead costs, such as office space, equipment, and employee benefits, makes virtual assistants an attractive option for many small businesses.
The key benefits here include:
- Flexible work models: Adjust your workforce based on current needs without being tied to office hours.
- Reduced overheads: Less financial commitment in terms of workspace, equipment and benefits.
- Specialised skills: A good VA service will cover all your administrative needs with skilled support.
- Technology-enhanced collaboration: Effective tools for project management and communication reduce costs and time.
Employees and virtual assistants both have their own merits but, overall, employing a VA for specific roles can work out cheaper than traditional employment. Our blog virtual assistants vs temps, employees, freelancers and agencies might also prove useful. At the very least, investigating the use of a virtual assistant could be a worthwhile interim step. Why not try these top ten tasks to outsource for small business and entrepreneurs?
If you think you might be someone who needs a virtual assistant or would like to learn more about our virtual assistant services you can call 0800 994 9016, or use our contact form in the menu above.