Businesses that need a call center generally must decide whether to perform this function in-house or outsource it. This process requires you to calculate costs in a way that allows you to make a direct comparison between in-house and outsourced costs. Outsourcing is typically more cost-effective, whereas in house costs can be difficult to quantify. A lack of necessary information and oversimplified estimates also contribute towards the problem, which usually result in greatly underestimating the true cost of operating a call center in-house. The solution to developing a call center cost breakdown is to identify all of these costs and assign a specific value to them, even if it’s just a rough estimate.

Cost Types

A call center cost structure may be broken down into the following categories:

  • Labor
  • Technology
  • Management
  • Site

These categories account for the vast majority of expenses, but it will be necessary to strike a balance between cost accuracy and the time needed to estimate costs. Once you have an estimate of the costs of the above categories, they can be added together to determine the total agent per hour cost. This total will allow you to compare the cost of in-house and outsourced call centers.

It is important to understand how outsourced call centers charge their customers to make this comparison. Some will utilize flat rates, where others offer set hourly rates or pay per minute cost structures. For instance, Customer Contact Services offers pay per minute pricing with a base rate of minutes and overage options. This helps companies save money, as they only pay for call center services when they need it most – that is, when their phone rings.

Labor Costs

Labor costs are generally the easiest to calculate, since even salaried call agents earn the equivalent of an hourly rate. You must also add other employer expenses to this total, which typically includes the following:

  • Health insurance
  • Workers compensation insurance
  • Federal unemployment taxes
  • State unemployment taxes
  • Medicare
  • Social Security
  • Vacation time

These costs vary greatly, since not every employee pays all of them and state unemployment taxes vary by state. In the absence of specific information, a general rule of thumb is to add 33 percent onto the agents’ hourly rate to estimate their hourly cost.

Technology Costs

Your IT department should be able to provide the technology costs of an in-house call answering service, which include those needed to operate the automatic call distributor (ACD) that distributes incoming calls to agents. The nature of this cost primarily depends on whether the ACD is cloud-based or premise-based. In the case of a cloud-based ACD, monthly cost is often a simple matter of multiplying the monthly cost per agent by the total number of agents. You can estimate the annual cost of a premise-based ACD by dividing its total cost by its depreciation period, typically five years.

The total cost of servers and routers can vary greatly by organization, although this cost should typically be amortized over three years. The cost of software on each agent’s PC is more predictable, with $350 being a typical minimum figure. Software costs should also be amortized over three years, resulting in an annual cost of about $117. You can similarly estimate the cost of long-distance service at about $100 per month per agent.

Technology is generally included in the standard rate for outsourced call centers, including the cost of upgrades. These costs are often a deciding factor, as many businesses migrate to an outsource model when they need a new call center platform. Technology upgrades are essentially a form of risk mitigation for outsourced call centers, since they must bear the burden of managing IT resources.

Management Costs

The in-house call center cost breakdown includes the cost of supervisors, trainers and quality assurance (QA) personnel. Common ratios for these positions are one supervisor per 15 agents, one trainer per 50 agents and one QA person per 25 agents. You should also expect to need one IT person to support every 50 agents. The cost of attrition can be estimated from your call center’s average attrition rate and the number of hours needed to train a new agent. The cost of recruiting and interviewing agents is usually difficult to calculate, so this will tend to be a rough estimate.

An outsourcing partner may include associated management costs such as non-agent personnel in its fee structure, whether it is pay per minute or flat rate. The time spent coaching agents and performing project management is not a concern when a company outsources this function.

Site Costs

Site costs should be available from officials such as the Chief Finance Officer (CFO) or Comptroller, depending on your organization. These costs primarily include rent, utilities, insurance and internet access fees. The cost of regulatory compliance is becoming a more significant expense for call centers, as information collection becomes more tightly regulated. This is generally a soft cost, so a reasonable estimation can be challenging. Additional items in the call center costs structure include miscellaneous expenses like copiers, printers and office supplies.

Agent Time

The percentage of an agent’s time that a business pays for is a major factor in a call center outsourcing cost comparison. A business generally pays for all of an in-house agent’s work time, whether they’re on the phone, on a break, in training or some other activity. An outsourced model may only require the client to pay only for minutes spent on calls, which is typically about 85 percent of work time.

FTE Reduction

The non-wage cost of full-time employees (FTEs) is another important difference between call center models. The best call center outsourcers have staff members with specific expertise in optimizing a call center’s performance, including forecasting, management and staffing.

Great call centers should also use leading-edge technology to distribute calls efficiently, thus maximizing the average productivity time of its agents. The ability to cross-train employees allows outsourced call centers to optimize staffing to account for fluctuations in call volume. Furthermore, they can also use shared staffing pools to reduce staffing during periods of low volume. Another advantage of outsourced call centers is their ability to manage tasks that can be shifted in time, further increasing efficiency.

All of these capabilities allow the customers of outsourced call centers to reduce their FTEs without sacrificing quality of service. This savings is typically at least five percent as compared to an in-house call center.

Outsourcing Saves Money

Outsourced call centers are more affordable than in-house call centers for several reasons. Choosing this route means businesses don’t have to pay typical fees associated with employment, such as taxes and insurance, nor do they have to pay the costs of hiring, training and retaining employees.

To learn more about outsourced call centers and pay per minute pricing models, visit Customer Contact Services online today!

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