Planning for an Employee’s Market

Published on 1/16/2020 by David Webb

Tags: ATScandidatehumanresourcesmobilerecruitingrecruitingremoteworkrpostaffingtalentattractiontalentstrategytalentwarWorkforce

As the unemployment rate continues to remain low, companies are still faced with the challenge of finding the talent they need to fill roles. And with the cost per employee increasing in terms of compensation and benefits, it is more important than ever that the talented workers you hire are the right choice the first time, and that you have a solid foundation for how you manage your labor costs moving forward.


With increases two years in a row, the Employment Cost Index report from shows a 2.7 percent increase in compensation costs for private industry workers for the 12-month period ending in September 2019. Similarly, the same period showed a 2 percent increase in benefits costs as well. Wages and salaries increased by 3.1 percent from Sept. 2018 through September 2019.


This is great news for job-seekers, and indicative of organizations faring better on the books. However, employers must be mindful of how they can keep up with that trend, especially since how we have always calculated business labor costs continues to evolve, with changes in technology, remote workforces, and the rise in independent contractors.


Determining your formula


When determining the cost per employee, or labor costs, there are many elements to consider; companies don’t all necessarily follow the same formula to determine current compensation and they have to be sure to account for what the market will bear.


For example, cost per employee is more expensive in the tri-state area of the U.S. than in certain mid-west and southern states. shows that while the Houston metro saw increases at 1.8% for ECI, the NY-NJ-CT-PA area showed an increase of 4% for the same timeframe. Of course, there are certain constants such as social security tax, Medicare, etc. when generating cost-per-employee, but factoring in regional differences, state and local taxes, industry fluctuations, company need and more, costs per employee will certainly vary.


There are tools available to help you break down the cost of labor for a company. Labor Costs Calculators with pre-loaded formulas suggest how to plug in the associated business costs and walk through step-by-step how to arrive at a labor cost per employee. Business expenses such as recruiting, space, utilities, insurance, equipment and more, in addition to the salary, benefits and taxes paid, all contribute to the cost. Particularly to recruiting costs, in some instances, that can be a wildly ranging number if you don’t have an in-depth understanding of your actual recruiting spend. In our position paper, we take a deeper look at why recruiting costs are soaring and how to address it. Reiterating the point that hiring the best the first time around is crucial, you SAVE when you hire right the first time, considering the recruiting costs per hire is estimated to be around $4,000. Recruiting Costs Are Soaring



Building a sustainable workforce


If you are running a business, this information is nothing new and something that you continually refine regularly as you determine the compensation packages for new hires. But when you are starting out, it’s critical to have a solid foundation on what your staffing costs are and potentially might be. In this past article, an expert from the MIT Sloan School of Management offers practical advice for entrepreneurs on how to start devising your own formula. Given the time of the article, while the premise is the same you can swap out for changes to the tax rates, as well as equipment (for example, in this article, equipment is shown as providing a “PC and telephone system” to each worker; in current work environments and with new technology, these items could easily be swapped out for the cost of a laptop and mobile phone allowance).


For one issue particularly relevant to today’s changing workforce – the rise in freelance and “gig” workers – this expert notes that determining a split in full-time workers vs. leaving room for contract workers could minimize the pitfalls of hiring too quickly and not being able to sustain the payroll, to not having the people in place that you need to efficiently respond to business needs. Since it is estimated that by 2027 the majority of workers in the US will be contract workers, this idea rings truer than ever, so planning ahead is key.


Third-party solutions can help


At the onset, building your workforce can almost feel like a game of trial and error. Once you begin to understand the demand for your business, seasonality issues, and also accounting for rising costs beyond your control (like tax and medical insurance increases), your data will begin to uncover your plan. However, with employment costs continuing to show an upward trend, workforce demographics changing, and technology throwing a curveball at every turn, enlisting the help of experts to help manage staffing for you, like a traditional staffing agency, or an RPO, may start to make fiscal sense.


If staffing your workforce is an internal HR function, talent management platforms, like a premier tool like BrightMove, can help you organize all your recruiting and hiring procedures. Built for recruiters, by recruiters, BrightMove recognizes that our current employment landscape is no longer a buyers’ market; today you must sell careers to candidates but must do so while keeping rising costs in mind.









About the Author, David Webb

David is the CEO of BrightMove and is a seasoned technology executive & entrepreneur noted for creating successful businesses. Over his 25+ year career, David has developed multi-platform expertise in the domains of computer science, data analytics & business transformation. Starting in 1995, David worked with his best friend, Jimmy Hurff, to develop one of the world's first Internet job board and resume bank applications. David is the primary architect of BrightMove and has an active role in the product's evolution to this day. From then to now, David has been consistently helping his customers to build great teams, using best practices and world-class technology.

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