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At Automaly our services include sales campaign outsourcing, from an outsourced individual Sales Development Rep (SDR) up to a full team, depending on requirements.
There are many benefits of outsourcing – less stress, quicker setup, less liability – but one of the main considerations of our clients is always the cost.
So what are the true costs of hiring an in-house sales team that you need to be aware of before deciding if outsourcing is for you?
To help you consider those costs we have conducted researched and completed this definitive guide on the true cost of hiring an in-house sales team. For the purposes of our calculations, we have based the figures on a small team of 3 SDR’s and 1 Sales Manager, based in the UK.
Some variable costs are incalculable and will be dependent on your business, but we have tried our best to consider all known fixed and likely costs and provided the links to our sources of data.
Step 1: Recruitment
As of Q2 2021, there has been a record rise in the number of vacancies (+356K) advertised in the UK and a significant corresponding increase in pay of 7.3%, reflecting the distortion in the job market (source: Reuters).
So with pay on the increase, and with significant competition for the best staff, it is more likely than ever that you will need to use a recruitment company to source candidates and promote your opportunity.
The pay that you offer your new staff needs to reflect the market conditions (see Step 2) and this could affect your recruitment costs.
However, let’s assume you are a shrewd negotiator and agree on a fixed cost of £7000 each for all four of your new recruits (recruitment costs can be up to 30% of annual salary).
Recruitment Costs: £28,000 per annum
Step 2: Annual Salary + Benefits + Commissions
In today’s competitive employment landscape your remuneration package needs to be reflective of the market conditions. You want the best staff right so this is going to be a major consideration (consider other perks such as gym membership, free food, travel costs, holidays).
According to research from Glassdoor, they have found (with a high degree of certainty) that the average base salary of an SDR in the UK is £31,525. Note, this may not include the data on the recent upward pressure on salaries in the UK.
The average base salary of a Sales Manager in the UK has been found by Glassdoor to be £44,444.
Employment costs don’t stop at salaries, let’s add a conservative 15% of base salary for each employee for commissions that’s around £20,850.
Any employer will know that employee costs don’t stop there but for the purposes of producing a reasonable calculation let’s assume another £750 per employee for additional employment benefits and incidentals (expenses, perks, gym membership, Friday drinks etc). That’s a total of £3000. So where do we stand?
Total Annual Salary + Benefits + Commissions: £162,869 per annum
Step 3: Employers NI and Pensions
As a UK employer, you will be liable for Employers national insurance. The Accountancy Partnership have this handy online calculator, we’ve done the sums for you based on the numbers above (don’t forget the commissions!).
Using this online guide the employers’ NI cost per SDR is approx £3783 and your sales manager is coming in at £5833 (ouch!).
Automatic enrolment in the UK means that employers must ensure that they are contributing to staff pension schemes. The latest contribution rates can be found on the pension regulator website, but on average employers are facing 3% of the salary costs as additional pension contributions. That’s around £4796 per annum in pension contributions.
Total Employers NI and Pension Contributions: £21,987 per annum
Step 4: Training Costs
According to Statista the average number of days per employee spent training is around 4.5. However, when recruiting new staff this can be considerable higher.
So whether you do your training in-house (paying other staff members to run) or you outsource this or do this online, it all has to be paid for.
For the purposes of our total let’s be cautious and assign an annual training cost of only £1250 per employee. That’s a total of £4000 for training.
Total Training Costs: £5,000 per annum
Step 5: Overhead Costs
Every employee will carry a share of your companies overhead costs. Everyone will need a computer, phone, software, paper, pens, desk, chair, tea (we’re English!), coffee, lights, heating, accommodation.
Even if you have already invested in some of these necessities your business is still carrying the cost of them on your balance sheet (in relation to computers, rent liabilities etc).
According to the IPD Blue Chip Office Index in 2016 the average employee cost as a share of overhead was £4,800. This seems to be the latest reliable data available so let’s fast-forward to 2021 and we can safely say that will be a minimum of £5,000 per employee.
Total Overhead Costs: £20,000 per annum
Step 6: Anticipated but unknown costs
You will know that with any business that having staff is an essential but also a stressful endeavour.
Most staff members will get sick, and in 2021 we are just coming out of a global sickness pandemic. On average (pre-covid) the average number of sick days per employee in the UK was 5.8 (source: Statista). That is 23 days per year for your 4 staff (or a whole month across your team) that your team is not selling.
You may also need cover for maternity leave, bereavement leave, or other likely but unquantifiable life events.
You may also need HR or legal support in the event of any dispute and of course, should one of your team leave you are back to the recruitment and training costs in steps 1 and 4.
However, not all of these events will happen every year so let’s just include the reliable data on sickness, which costs you both lost salary and lost productivity.
What you may lose is unquantifiable so for calculation purposes we will take an average total salary cost per day per employee from steps 2 – 4 above, and multiply this daily total by the average 23 days of sickness per annum across your team.
Anticipated Sickness Costs: £4,513 per annum
Other Likely Costs (maternity, legal, etc): Unknown
The Grand Total
As you may be aware and has been identified in this guide, the true cost of an employee is much more than just a salary.
As a reminder, we have assumed a team of 3 x SDR on a base salary of £31,525 and a single Sales Manager on a base salary of £44,444.
So what is the grand total for your small in-house sales team (not including all of the additional but unknown costs)?
Total Annual Sales Team Cost:
Average Annual Cost Per Sales Employee:
Average Daily Sales Team Cost*:
*based on 261 working days per year.
As a rule of thumb, and supported by various studies in the UK, the true cost of hiring employees ranges from 1.5 – 2x their base salary.
This only takes into account known costs and doesn’t include your costs (measured in time) as the Manager or Director of a business, or the costs of inactivity or lost opportunities due to performance, sickness, holidays etc.
Should you outsource your sales team?
Companies choose to outsource their Sales Team for a myriad of reasons, from lack of space to reducing stress, to testing a new product or service.
However, the cost is always one of the top considerations when deciding if to outsource your sales team.
So before you commit to over £900+ per hour for a small sales team, why not give Automaly an opportunity to offer a fixed price outsourced SDR service, complete with data, reporting, management and trained staff?
Automaly are sales and marketing automation consultants. We are passionate about how automation can improve businesses for the better.
Our services include software recommendations and training, buyer intent data, and sales outsourcing.
To find out more about how we can help you head over to our Pricing Page, enter your requirements and our team will get straight back to you.