This report analyzes whether it is more cost effective for a company to hire new employees or authorize overtime for current employees over a one-year period. It finds that the total annual cost of current employees through salary, insurance, taxes and other expenses is $1.7 million. Authorizing 1 hour of overtime per day would cost $200,000 annually. Hiring a new employee involves additional headhunter, training and miscellaneous costs. For adjusting staff, hiring 1.8 new employees would be cheaper than authorizing overtime, but hiring management would not be as cost effective as overtime.

1. New Hire verses Overtime
Analysis
A M C o m p a n y
8 / 1 2 / 2 0 1 1
Anna Mathis
This report is to showcase whether hiring new employees is cheaper over a year
time period than authorizing over time for the employees already employed.

2. 1 | P a g e
New Hire verses Overtime Analysis
The option to hire a new employee verses having the hourly employees work overtime is always a difficult decision. This report will reveal which
solution is more cost effective.
Employee Costs
An employee costs more than just a salary. This employee costs the company insurance as well as payroll taxes. The employee also costs the
company miscellaneous costs as well. The miscellaneous will not be included in the estimation portions of this this report. However, for the
sake of argument the total miscellaneous cost for 30 employees is $57,060 annually and $4,755 per month.
Employee Salary
The first analysis showcases the cost of the current employees for the company. The table below displays that the total current salary for all
employees on the team is $1,488,583.10. The average paid out salary for the month is $124,048.59. This is dispersed amongst 30 staff
members, not evenly.
Number of
Employees
Current Actual Annual
Salary
Average Estimated
Annual Salary per
Person
Average Monthly
Salary per Hire
Average Estimated
Weekly Salary per Person
Estimated Hourly
Salary per Employee
Management 5 $ 417,500.00 $ 83,500.00 $ 6,958.33 $ 1,605.77 $ 40.14
Adjusting Staff 20 $ 936,963.10 $ 46,848.16 $ 3,904.01 $ 900.93 $ 22.52
Clerical Staff 5 $ 134,120.00 $ 26,824.00 $ 2,235.33 $ 515.85 $ 12.90
Total Staff 30
Weekly Salary Total $ 28,626.60
Monthly Salary Total $ 124,048.59
Annual Salary Total $ 1,488,583.10 $ 1,488,583.10

3. 2 | P a g e
Insurance Costs for Current Employees
The second analysis was based on the insurance costs for the current team of employees. The table below displays that the total insurance for
the current employees is $144,000.00 dollars. These values are rounded to nearest hundreds place. The average cost of insurance for the
month is $12,000.00, evenly distributed.
Number of Employees Annual Insurance Cost Monthly Insurance Cost Weekly Insurance Cost
Management 5 $ 4,800.00 $ 400.00 $ 92.31
Adjusting Staff 20 $ 4,800.00 $ 400.00 $ 92.31
Clerical Staff 5 $ 4,800.00 $ 400.00 $ 92.31
Total Staff 30
Weekly Costs $ 2,769.23
Monthly Costs $ 12,000.00
Annual Costs $ 144,000.00
Payroll Tax Costs for Current Employees
The third analysis was based on the payroll taxes that are paid by the company for each employee. This tax is 6% of the total annual salary of
the employee. The table below showcases that the total payroll tax paid is $89,314.99 for the year. This breaks down to $7,442.92 a month,
evenly distributed amongst the types of employee staffing.
Number of Employees
Annual Salary of Type
of Employee
Annual Cost of
Payroll Tax
Monthly Cost
of Payroll Tax
Weekly Cost of
Payroll Tax
Management 5 $ 83,500.00 $ 5,010.00 $ 417.50 $ 96.35
Adjusting Staff 20 $ 46,848.16 $ 2,810.89 $ 234.24 $ 54.06
Clerical Staff 5 $ 26,824.00 $ 1,609.44 $ 134.12 $ 30.95
Total Staff 30
Weekly Tax Total $ 1,717.60
Monthly Tax Total $ 7,442.92
Annual Tax Total $ 89,314.99

4. 3 | P a g e
Total Cost of Current Employees
The total cost of the current employee team is $1,721,898.09. Including the miscellaneous costs, the employees cost $1,778,958.51. This breaks
down to $148,256.51 a month. This includes salary, payroll taxes, insurance costs and miscellaneous costs paid by the employer.
Number of
Employees
Average Estimated
Annual Salary per
Person
Annual Insurance
Cost
Annual Cost of
Payroll Tax
Total Annual Cost Total Monthly Cost Total Weekly Cost
Management 5 $ 83,500.00 $ 4,800.00 $ 5,010.00 $ 93,310.00 $ 7,775.83 $ 1,794.42
Adjusting Staff 20 $ 46,848.16 $ 4,800.00 $ 2,810.89 $ 54,459.04 $ 4,538.25 $ 1,047.29
Clerical Staff 5 $ 26,824.00 $ 4,800.00 $ 1,609.44 $ 33,233.44 $ 2,769.45 $ 639.10
Total Staff 30
Weekly Cost Total $ 33,113.42
Monthly Cost Total $ 143,491.51
Annual Cost Total $ 1,721,898.09
Total Cost of Over Time
If the employer decided to only authorize 1 hour overtime for 5 days a week for the hourly staff, annually it would cost $200,828.08 for the year.
Number of
Employees
Estimated
Hourly Salary
per Employee
Estimated Overtime
per Hour per Hourly
Employee
Estimated Overtime
for All Hourly
Employees per Day
Estimated Overtime
for All Hourly
Employees for 5
Days
Estimated Overtime for
All Hourly Employees for
5 days for 52 weeks
Monthly Cost OT @
1hr/day
Annual Cost OT @
1hr/day
Management 5 $ 40.14 $ - $ - $ - $ - $ - $ -
Adjusting Staff 20 $ 22.52 $ 33.78 $ 675.69 $ 3,378.47 $ 175,680.58 $ 14,640.05 $ 175,680.58
Clerical Staff 5 $ 12.90 $ 19.34 $ 96.72 $ 483.61 $ 25,147.50 $ 2,095.63 $ 25,147.50
Total Staff 30
Annual Over
Time Total Costs
$ 200,828.08
If the employer includes the overtime costs, the total annual costs would be $1,979,786.59. Monthly, the employees including overtime would
be $164,982.22.

5. 4 | P a g e
New Hire Costs
When an employer hires a new employee, there are additional costs. Some of these may include head hunter costs (15% of annual salary for
hired employee), training costs and additional miscellaneous costs. In this section the report will explore all of these. The company that this
report was designed for uses head hunter firms and trains their employees. Therefore, these two items must be included in the total costs of a
new hire.
Training Costs
Training is on a per hire need. This process depends on whether a human resource person is on staff or is not. For this company, they hire a
human resources firm to do necessary training on policies. The company does all other training in house. The human resources firm costs $58 an
hour and the cost of a current staff to train is on average $29.01 per hour. If the employee needs 1 hour with the human resources and 5 hours
with a staff member, it would cost an additional $203.05 for the year.
Total Cost of a New Hire Based On Position
The table below showcases the average annual, monthly and weekly costs of each type of new staffing hire. The average estimated annual costs
include a miscellaneous cost of $1,902 per employee and the $203.05 for training purposes. These values are then split up accordingly for the
next columns.
Number of Employees Cost of Head Hunter
Average Estimated Annual
Costs per Hire
Average Monthly Cost per
Hire
Average Weekly Cost per Hire
Management 1 $ 12,525.00 $ 107,940.05 $ 8,995.00 $ 2,075.77
Adjusting Staff 1 $ 7,027.22 $ 63,591.32 $ 5,299.28 $ 1,222.91
Clerical Staff 1 $ 4,023.60 $ 39,362.09 $ 3,280.17 $ 756.96

6. 5 | P a g e
Comparison between New Hire Costs and Over Time Costs
In this section of the report, the analysis is shown in the below table. Depending on the type of staffing that the company wishes to hire, the
following breakdown would occur.
Monthly Hire
Costs per Hire
Monthly Over
Time Costs
Annual Hire
Costs
Annual Over
Time Costs
Differences of Monthly
New Hire Cost and OT
@ 1 hr/day
Differences of Annual
New Hire Cost and OT
@ 1 hr/day
# of Hires Possible
Management $8,995.00 $- $107,940.05 $- $8,995.00 $107,940.05
Adjusting Staff $5,299.28 $14,640.05 $63,591.32 $175,680.58 $(9,340.77) $(112,089.26) 1.8
Clerical Staff $3,280.17 $2,095.63 $39,362.09 $25,147.50 $1,184.55 $14,214.59 0.4
The conclusion being that it would make best sense to hire a new employee verses authorizing overtime. This is not best if the company wanted
to hire a full time management staff. It would work best for if the company only wanted to hire a full time adjusting staff.
More analysis would need to be pursued to discover whether a combination of overtime and a new hire would work better verse a new full time
and new part time employee.