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Cost Reduction

The True Cost of Hourly Labor

Carter Stanley
January 7, 2020
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I spent the early part of my career in Corporate Finance for many recognizable names in consumer goods manufacturing, and no matter how sophisticated the financial reporting system was, figuring out what hourly labor truly cost was always quite an exercise. If answering this seemingly simple question is difficult for a large Fortune 100 company to answer, it is not surprising that many of the businesses I talk to on a weekly basis simply are not educated on the true cost of their “$10/HR” labor.

In a nutshell, costs can be broken down into 3 buckets:
  • Wages
  • Benefits
  • Taxes
In each of those buckets are a multitude of different cost items that are often strewn out through a company’s accounting system.


labor costs can be divided into 3 categories: Wages, Benefits, & Taxes


So, let’s try and figure out what a $10/HR employee that works full-time 50 hours a week really costs:


labor costs divided into wages, benefits, taxes and insurance to demonstrate the costs of a full-time employee


From this example, we determined that a $10/HR FTE can cost as much as $14.47 / HR!!! This does not even include the overhead costs associated with operating your hourly workforce. These costs could include: Recruiting costs, HR personnel, payroll software, time clock equipment, uniforms, and much more.

The point here is that many companies invest a lot of resources and money to maintain a large force of hourly workers and the fact of the matter is that it is expensive , complicated to manage and gives a company no flexibility; often becoming a barrier for a company to grow. The company in this example is paying over 40% on-top of their $10/HR and is receiving little to no added value.


The Veryable Solution

The good news is that a better way does exist! With the On-Demand Labor Platform from Veryable, a company can limit the number of FTEs they carry to only what is necessary to run the day to day operations and utilize Veryable Operators to tackle the rest. Not only does On-Demand labor offer you the ability to instantly add workers based on what is actually needed, but the single cost nature of the platform eliminates up to 11 different types of labor costs and does not require a team of accountants to understand!

In our next part of the series, we will explore how to determine the true cost of your hourly labor by factoring in worker productivity and time actually spent conducting value-add opportunities. This is often overlooked by many businesses and furthers the case for a new labor paradigm.

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Carter Stanley

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