Enter your current number of employees and the average hourly wage of those employees into the calculator to estimate outsourcing savings.

Outsourcing Savings Formula

The following equation is used to calculate the Outsourcing Savings.

S = 251*8*#E*AHR*OSR

• Where S is the total savings of outsourcing ($/year) • #E is the current number of employees • AHR is the current employees average hourly rate ($/hr)
• OSR is the outsourcing savings rate
• On average this is in the range of 35%-75%

What is Outsourcing Savings?

Definition:

Outsourcing is the process of moving a particular segment of a business to a location or area with lower average wages in order to reduce costs.

This is typically done at some expense to quality, but the often small decrease in quality is outweighed by the decrease in expenses.

How to Calculate Outsourcing Savings?

Example Problem:

The following example outlines the steps and information needed to calculate Outsourcing Savings.

First, determine the total current number of employees working in the business segment. In this case, the work to be outsourced currently has 50 employees.

Next, determine those employees current hourly wage. For this example, the current hourly wage is $15/hr. Next, determine the savings percentage through outsourcing. In this scenario the savings percentage is 60% on the hourly rate. Finally, calculate the total yearly savings using the formula above: S = 251*8*#E*AHR*OSR S = 251*8*50*15*.60 S =$903,600.00