Description
Work From Home-Cost Analysis
Cost Information to drive a decision –
WORK FROM HOME
What is Work From Home
• A Company may converts some of its jobs - to “work at home jobs” by allowing some of its employees to get access to companies server and work on their personal/company provided PC’s, during normal office hours while sitting at their home. • Aims to address the need of mid-sized and large enterprises to provide access to collaborative business applications and services to their employees working in remote areas.
How it all started
• With the sub-prime crisis of the US and a slowing of the world economy, companies today need to have a firm hand in dealing with costs. • Traditionally, the ways to deal with a slowdown were – decrease in increments, decrease in hiring of new employees, making deadlines more strict and so on. • However, today employers are realizing these may not be the best ways to reduce costs.
• The Silicon Valley bust in US gave birth to the concepts of flexi-time and working from home, which have proved to be efficient methods of reducing costs.
Why “Work from Home”?
BENEFITS
• Huge benefits often resulting from increased productivity
• Increased productivity creates need for fewer employees • Reduction in relocation expenses • Ability to hire from larger geographic area and not necessary to relocate candidates • Recruiting advantages/Lower recruiting costs • Ability to attract better candidates
Why “Work from Home”?
BENEFITS • Lower absenteeism costs • Reduction in office space • Reduction in general office expenses • Lower equipment maintenance costs • Potential cost savings in employee benefits
CASE : IT / ITES Industry
Growth & Challenges
Industry
The Indian ITeS industry, according to a recent Nasscom study, could grow by 45-50 per cent per annum over the next 5 years and provid 2 million additional jobs. Infrastructure requirement
One of the biggest challenges that ITeS organisations face is the increasing cost of providing services in urban markets in the light of increasing real estate.
Employee Retention
Productivity and Efficiency
Introduction to Company
• Company : A small start up IT firm located in a metropolitan City. • No. of People : 6 employees. • Work timings : 9 am to 6 pm – 6 days a week
What drives the Decision?
1) Employee retention or Turnover Cost The more the employee earns, the greater the expense of replacement. An executive can cost two to three times their annual salary Infrastructure Cost: --- Office space --- Parking space --- Electricity Other Utilities Costs: --- Subsidised Lunch --- PC and other hardware --- Transport facilities
2)
3)
Employee retention or Turnover Cost
No. of Employees leaving 1) Separation Costs ($) cost of exit interviewer's time (+) cost of admin functions related to termination (+) separation pay 2) Replacement Costs ($) Preemployment administrative expenses (+) cost of attracting applicants (ads, agencies etc.) (+) cost of entrance interviews (+) postemployment information gathering (payroll, benefits, policies, and procedures, employee records) (+) cost of Pre-employment medical exam (+) Joining Benefits (Bonus) 3) Training Costs ($) cost of informational literature (manuals, brochures, policies) (+) Training cost by external vendors. TOTAL EMPLOYEE TURNOVER COSTS * Vacancy Costs ($) cost of additional overtime (+) wages and benefits saved due to vacancy TOTAL EMPLOYEE TURNOVER COSTS 2 2007 INR 1,000 2,000 80,000 2,500 49,000 10,200 70,000 57,400 60,000 10,200 96,000 438,300 4,200 (40,000) 402,500 4 2008 INR 2,000 4,000 160,000 5,000 98,000 20,400 140,000 114,800 120,000 20,400 192,000 876,600 12,600 (120,000) 769,200
Case for strategic cost management
• A more strategic approach that aligns company strategy with operating efficiency is necessary. • Analyzing high-level operational efficiency. 1 Managing work loads – • Too often, companies try to reduce costs by cutting the work force without addressing the work load itself. While payroll costs go down in the short term, the same amount of work must be completed by fewer people. This may lead to higher employee attrition and can spiral down profits and performance.
Case for strategic cost management
2 • Rising Real Estate Cost • With the expansion of the IT/ITES/BPO sector more and more number of recruits are required for increased amount of outsourcing work. • The real estate prices have soared in India over last 3-4 years. In some areas like Pune and Hyderabad, they have more than tripled and it is expected to rise even further. Overall, Indian markets performed exceptionally, posting 36% rental growth collectively, highest across the globe in 2007. • The highest growth in rentals was achieved by Kolkata’s Rashbehari Connector with an increase of 86% to Rs 65 per sqft a month, followed by Powai in Mumbai at 83%, Andheri and Malad recorded 71% and 64% respectively.
Case for strategic cost management
• • • • • 3 • Intangible Benefits Often the Intangible benefits exceed the tangible cost benefits. Work Life Balance for Employees. Employee Motivation. Reduced Stress. Increased productivity.
Cost Benefit Analysis
Capital costs (INR) Yrs depreciate d over Other setup costs (INR) Per annum costs (INR) Revenue Capital
COSTS Office infrastructure setup Server costs Server maintenance Worker support& management Training Remote support Worker setup Laptop x 6 Home office furniture x 6 Anuual Maintenance Home Broadband payments to staff x 6 Total setup costs Alternative per annum costs Total per annum costs BENEFITS Retention Cost Separation Costs Replacement Costs Training Costs Vacancy Cost Infrastructure Office space released - p/a saving parking space released - p/a saving Electricity / Water Utilities Subsidiesed Lunch Transportation facilities Total benefit per annum Cost / Benefit
52,000 --
4 -3,000 10,250 4,000
13,000
188,700 30,000
3 5 30,000 6,750
62,900 6,000
270,700
13,250 40,750 81,900 122,650
Per annum 166,000 498,200 212,400 (107,400) 270,000 135,000 32,500 21,600 115,200 1,343,500 1,018,800
Cost Benefit Analysis
Year by Year figures over 4 years (INR) COSTS Year 1 Office infrastructure setup Server costs 52,000 Server maintenance 4,000 Flexi worker support & management Training 3,000 Remote support - (ongoing costs expected to 10,250 reduce by 25% each year after first year) Flexi worker setup Laptop x 6 188,700 Home office furniture x 6 30,000 Annual Maintenance 30,000 Home broadband payments to staff x 6 6,750 Totals per yr Cumulative Totals BENEFITS Retention Cost Separation Costs Replacement Costs Training Costs Vacancy Cost Infrastructure Office space released - p/a saving parking space released - p/a saving Electricity / Water Utilities Subsidiesed Lunch Transportation facilities Totals per yr Cumulative Totals Balance 324,700 324,700 Year 1 166,000 498,200 212,400 (107,400) 270,000 135,000 32,500 21,600 115,200 1,343,500 1,343,500 1,018,800 Years Year 2 Year 3 Year 4 4,000 4,000 4,000 8,750 6,650 5,050
30,000 6,750 49,500 374,200 Year 2 166,000 498,200 212,400 (107,400) 270,000 135,000 32,500 21,600 115,200 1,343,500 2,687,000 2,312,800
30,000 6,750 47,400 421,600 Year 3 166,000 498,200 212,400 (107,400) 270,000 135,000 32,500 21,600 115,200 1,343,500 4,030,500 3,608,900
30,000 6,750 45,800 467,400 Year 4 166,000 498,200 212,400 (107,400) 270,000 135,000 32,500 21,600 115,200 1,343,500 5,374,000 4,906,600
Types of work and skills suited to home working
• Telesales and marketing • Customer service
• Consultancy and professional services, such as accountancy or HR administration
• Writing, editing, research and translation • Some types of administrative work
Potential Limitations
• Difficulty of managing home workers and monitoring performance • Possible deterioration in employees' skills and work quality • Initial costs of training and providing suitable equipment, including adaptations to meet health and safety standards and the needs of disabled employees • Difficulty of maintaining staff development and upgrading skills
Potential Limitations
• Risk of information-security problems • Increased telecommunications costs
• Risk of communication problems and a sense of isolation among home workers
• Can be harder to maintain team spirit
Facts from companies
• AT&T realizes approximately $15,000,000 in saving through enhanced employee retention. • According to NORTEL, the cost to relocate an employee to another city can run as high as $100,000. It can cost $2,500 just to move an employee from one cube to another. • The entire cost to outfit and equip an employee to work from Home is made up in the first year if only 3.5 days away from work can be saved, i.e. time lost due to a doctor's appointment, ill child, employee illness, other personal situation that requires time away from an office. That number drops to 1.5 days in subsequent years. • American express home workers are 43% more productive than their office workers.
Learning
? Home working isn't for everyone. It's best to have a clear idea from the start of how home working could fit the needs of your business. ? Companies over the globe have realised that the intangible benefits of work from home outweighs the tangible cost benefits over the period of years
Thank You
doc_782479390.ppt
Work From Home-Cost Analysis
Cost Information to drive a decision –
WORK FROM HOME
What is Work From Home
• A Company may converts some of its jobs - to “work at home jobs” by allowing some of its employees to get access to companies server and work on their personal/company provided PC’s, during normal office hours while sitting at their home. • Aims to address the need of mid-sized and large enterprises to provide access to collaborative business applications and services to their employees working in remote areas.
How it all started
• With the sub-prime crisis of the US and a slowing of the world economy, companies today need to have a firm hand in dealing with costs. • Traditionally, the ways to deal with a slowdown were – decrease in increments, decrease in hiring of new employees, making deadlines more strict and so on. • However, today employers are realizing these may not be the best ways to reduce costs.
• The Silicon Valley bust in US gave birth to the concepts of flexi-time and working from home, which have proved to be efficient methods of reducing costs.
Why “Work from Home”?
BENEFITS
• Huge benefits often resulting from increased productivity
• Increased productivity creates need for fewer employees • Reduction in relocation expenses • Ability to hire from larger geographic area and not necessary to relocate candidates • Recruiting advantages/Lower recruiting costs • Ability to attract better candidates
Why “Work from Home”?
BENEFITS • Lower absenteeism costs • Reduction in office space • Reduction in general office expenses • Lower equipment maintenance costs • Potential cost savings in employee benefits
CASE : IT / ITES Industry
Growth & Challenges
Industry
The Indian ITeS industry, according to a recent Nasscom study, could grow by 45-50 per cent per annum over the next 5 years and provid 2 million additional jobs. Infrastructure requirement
One of the biggest challenges that ITeS organisations face is the increasing cost of providing services in urban markets in the light of increasing real estate.
Employee Retention
Productivity and Efficiency
Introduction to Company
• Company : A small start up IT firm located in a metropolitan City. • No. of People : 6 employees. • Work timings : 9 am to 6 pm – 6 days a week
What drives the Decision?
1) Employee retention or Turnover Cost The more the employee earns, the greater the expense of replacement. An executive can cost two to three times their annual salary Infrastructure Cost: --- Office space --- Parking space --- Electricity Other Utilities Costs: --- Subsidised Lunch --- PC and other hardware --- Transport facilities
2)
3)
Employee retention or Turnover Cost
No. of Employees leaving 1) Separation Costs ($) cost of exit interviewer's time (+) cost of admin functions related to termination (+) separation pay 2) Replacement Costs ($) Preemployment administrative expenses (+) cost of attracting applicants (ads, agencies etc.) (+) cost of entrance interviews (+) postemployment information gathering (payroll, benefits, policies, and procedures, employee records) (+) cost of Pre-employment medical exam (+) Joining Benefits (Bonus) 3) Training Costs ($) cost of informational literature (manuals, brochures, policies) (+) Training cost by external vendors. TOTAL EMPLOYEE TURNOVER COSTS * Vacancy Costs ($) cost of additional overtime (+) wages and benefits saved due to vacancy TOTAL EMPLOYEE TURNOVER COSTS 2 2007 INR 1,000 2,000 80,000 2,500 49,000 10,200 70,000 57,400 60,000 10,200 96,000 438,300 4,200 (40,000) 402,500 4 2008 INR 2,000 4,000 160,000 5,000 98,000 20,400 140,000 114,800 120,000 20,400 192,000 876,600 12,600 (120,000) 769,200
Case for strategic cost management
• A more strategic approach that aligns company strategy with operating efficiency is necessary. • Analyzing high-level operational efficiency. 1 Managing work loads – • Too often, companies try to reduce costs by cutting the work force without addressing the work load itself. While payroll costs go down in the short term, the same amount of work must be completed by fewer people. This may lead to higher employee attrition and can spiral down profits and performance.
Case for strategic cost management
2 • Rising Real Estate Cost • With the expansion of the IT/ITES/BPO sector more and more number of recruits are required for increased amount of outsourcing work. • The real estate prices have soared in India over last 3-4 years. In some areas like Pune and Hyderabad, they have more than tripled and it is expected to rise even further. Overall, Indian markets performed exceptionally, posting 36% rental growth collectively, highest across the globe in 2007. • The highest growth in rentals was achieved by Kolkata’s Rashbehari Connector with an increase of 86% to Rs 65 per sqft a month, followed by Powai in Mumbai at 83%, Andheri and Malad recorded 71% and 64% respectively.
Case for strategic cost management
• • • • • 3 • Intangible Benefits Often the Intangible benefits exceed the tangible cost benefits. Work Life Balance for Employees. Employee Motivation. Reduced Stress. Increased productivity.
Cost Benefit Analysis
Capital costs (INR) Yrs depreciate d over Other setup costs (INR) Per annum costs (INR) Revenue Capital
COSTS Office infrastructure setup Server costs Server maintenance Worker support& management Training Remote support Worker setup Laptop x 6 Home office furniture x 6 Anuual Maintenance Home Broadband payments to staff x 6 Total setup costs Alternative per annum costs Total per annum costs BENEFITS Retention Cost Separation Costs Replacement Costs Training Costs Vacancy Cost Infrastructure Office space released - p/a saving parking space released - p/a saving Electricity / Water Utilities Subsidiesed Lunch Transportation facilities Total benefit per annum Cost / Benefit
52,000 --
4 -3,000 10,250 4,000
13,000
188,700 30,000
3 5 30,000 6,750
62,900 6,000
270,700
13,250 40,750 81,900 122,650
Per annum 166,000 498,200 212,400 (107,400) 270,000 135,000 32,500 21,600 115,200 1,343,500 1,018,800
Cost Benefit Analysis
Year by Year figures over 4 years (INR) COSTS Year 1 Office infrastructure setup Server costs 52,000 Server maintenance 4,000 Flexi worker support & management Training 3,000 Remote support - (ongoing costs expected to 10,250 reduce by 25% each year after first year) Flexi worker setup Laptop x 6 188,700 Home office furniture x 6 30,000 Annual Maintenance 30,000 Home broadband payments to staff x 6 6,750 Totals per yr Cumulative Totals BENEFITS Retention Cost Separation Costs Replacement Costs Training Costs Vacancy Cost Infrastructure Office space released - p/a saving parking space released - p/a saving Electricity / Water Utilities Subsidiesed Lunch Transportation facilities Totals per yr Cumulative Totals Balance 324,700 324,700 Year 1 166,000 498,200 212,400 (107,400) 270,000 135,000 32,500 21,600 115,200 1,343,500 1,343,500 1,018,800 Years Year 2 Year 3 Year 4 4,000 4,000 4,000 8,750 6,650 5,050
30,000 6,750 49,500 374,200 Year 2 166,000 498,200 212,400 (107,400) 270,000 135,000 32,500 21,600 115,200 1,343,500 2,687,000 2,312,800
30,000 6,750 47,400 421,600 Year 3 166,000 498,200 212,400 (107,400) 270,000 135,000 32,500 21,600 115,200 1,343,500 4,030,500 3,608,900
30,000 6,750 45,800 467,400 Year 4 166,000 498,200 212,400 (107,400) 270,000 135,000 32,500 21,600 115,200 1,343,500 5,374,000 4,906,600
Types of work and skills suited to home working
• Telesales and marketing • Customer service
• Consultancy and professional services, such as accountancy or HR administration
• Writing, editing, research and translation • Some types of administrative work
Potential Limitations
• Difficulty of managing home workers and monitoring performance • Possible deterioration in employees' skills and work quality • Initial costs of training and providing suitable equipment, including adaptations to meet health and safety standards and the needs of disabled employees • Difficulty of maintaining staff development and upgrading skills
Potential Limitations
• Risk of information-security problems • Increased telecommunications costs
• Risk of communication problems and a sense of isolation among home workers
• Can be harder to maintain team spirit
Facts from companies
• AT&T realizes approximately $15,000,000 in saving through enhanced employee retention. • According to NORTEL, the cost to relocate an employee to another city can run as high as $100,000. It can cost $2,500 just to move an employee from one cube to another. • The entire cost to outfit and equip an employee to work from Home is made up in the first year if only 3.5 days away from work can be saved, i.e. time lost due to a doctor's appointment, ill child, employee illness, other personal situation that requires time away from an office. That number drops to 1.5 days in subsequent years. • American express home workers are 43% more productive than their office workers.
Learning
? Home working isn't for everyone. It's best to have a clear idea from the start of how home working could fit the needs of your business. ? Companies over the globe have realised that the intangible benefits of work from home outweighs the tangible cost benefits over the period of years
Thank You
doc_782479390.ppt