Comparing Consulting Network Administration to Hiring an Employee

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Despite recent economic shifts to hire more contract labor, the business owners I know feel the $100+ per hour they pay a consultant would be better used hiring a $30 an hour employee. This is a challenge our IT company is facing as our clients grow and become large enough to afford a full time network administrator, in lieu of hiring an IT services company. To fight off losing business for as long as possible, I’ve worked up the following to provide my customers with a more realistic comparison of the costs. This comparison has been done many times before by others, but I wanted to do something specific to our field.

Indeed.com lists the position of Network Administrator earns an average of $66,000 per year.1 Let’s assume a range of $100 to $125 per hour for a typical consulting firm (although our company charges $88 at the moment). The simplest comparison would be to take the typical 2,087 hours divisor, leaving you with $31.62 an hour.2 However, let’s take into consideration benefits, working hours and capacity utilization.

Benefits

The average employee will be paidaround $4500 in health insurance benefits, as of 2012.3 If not at first, you will eventually be giving them 2 weeks paid vacation. And, the workers will take the average 3 days of sick leave per year.3 Lastly, let’s not forget employment taxes and other costs. Rather than play with the numbers, I’ll take a note from MIT and multiply their salary times 1.4, or $92,400 ($44.29 per hour).4

Working Hours

Assuming an 8 hour work day, we need to exclude some hour to make our hired employee more comparable to a consultant, billing only for hours worked. During an average 8 hour work day, an employee will:

  • Take multiple bathroom breaks: 48 minutes (Per Ford Motor Company)5
  • Waste time “slacking off”: 60 minutes6
  • Assigned Break Times/Smoke Breaks: 30 minutes
  • Reading Email: 16 minutes7
  • Meetings: 1 hour per day7

These numbers vary, and could be argued. That said, your employee has cut that 8 hour work day down to 4.43 hours of actual work time (1155.67 hours per year).

Capacity Utilization

Lastly, let’s talk about how much of the employees working time they can use efficiently. Having a full time employee means they will be there every day, regardless of the workload. On days where there are no server crashes and the paperwork is all caught up, they may only get 2 hours of productivity in. On other days they may bump into a problem that a more skilled consultant could handle in minutes, but they need hours of research. I’ve seen various numbers of efficiency, but inthebackforty.com did a similar analysis and used 85% as their average.8 This takes our productive time down to 3.76 hours per day (980.89 hours per year).

A True Employee Cost

Disregarding all the other human resource hassles having an employee present, you are left paying $92,400 for 980 hours of work per year, or $94.28 per year. While this is a slightly better rate than a consultant, it leaves you with all the risk and no flexibility. We have not factored in the cost of training the employee, paying consultants for inter-employee time or vacation time, and hiring consultants for jobs outside the scope of their job. If the employee quits the day before your server crashes, your company may lose days of productivity. If the work load shrinks, you will likely hold onto the employee even though their capacity utilization drops to 75% or 50%. If it grows, you will hire another employee who you have to train and find a great deal of work to fill their capacity, or consult their position and lose efficiency in the cooperation between your employee and the consulting firm.

All of these considerations made, I suggest paying only slightly more per hour for a consulting firm that is contractually obligated to complete your projects, monitor your security and maintain your business systems is the best decision a small to medium business can make for their IT. Lastly, I found the article from inthebackforty listed below while doing this research. It covers the same topic, but I highly recommend it.

  1. http://www.indeed.com/salary/Network-Administrator.html
  2. http://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/computing-hourly-rates-of-pay-using-the-2087-hour-divisor/
  3. http://kff.org/other/state-indicator/single-coverage/
  4. http://web.mit.edu/e-club/hadzima/how-much-does-an-employee-cost.html
  5. http://goyetteassociates.com/wage-and-hour-victories/bathroom-breaks-when-can-an-employer-regulate-the-timing-and-length-of-an-employees-trips-to-the-restroom/
  6. http://www.sfgate.com/jobs/salary/article/2013-Wasting-Time-at-Work-Survey-4374026.php
  7. https://www.atlassian.com/time-wasting-at-work-infographic
  8. http://www.inthebackforty.com/blog/2013/10/consultants-vs-employees

 

Author

Michael Thomas

Michael Thomas is a “Solution Architect” for a small IT services firm in south Texas. He has been working around computers for over a decade, but has been performing network admin/systems admin tasks for about 2 year. Michael plans to move towards development and is currently learning a variety of platforms and languages. Originally planning to become an attorney, Michael went to the University of Houston-Victoria for a BA in both Psychology and English. Dissuaded by watching too many Law and Order:SVU episodes, he opted to pursue his passion of all things tech. When he is not at work, Michael is taking tech classes online, flying his quadcopter, remodeling his home and watching episodes of Eli the Computer Guy. Michael wants to learn more than anything else and welcomes comments or further information on topics he may discuss. Feel free to contact him through Geek Brain Dump or directly through email. michaelthomas1234@gmail.com

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