The True Cost of an HR Employee in Singapore: Beyond Salary (and why Consultants may be the Answer)

Hiring an HR employee (or any employee for that matter) may seem straightforward and often largely focused on salary. The true cost of a full-time HR hire however, extends far beyond that monthly paycheck. Businesses are increasingly recognising these less than obvious expenses and turning to HR consultants like Prescient HR as a more strategic and cost-effective solution.

Let's shine the spotlight and examine the real financial implications of having an in-house HR employee versus engaging external expertise.

The Hidden Costs of a Full-Time HR Employee in Singapore

While the base salary is the most obvious expense, it's just a small piece of the puzzle. Here's a breakdown of the often-overlooked costs:

• Mandatory CPF Contributions: As an employer in Singapore, you're legally obligated to contribute to your employee's Central Provident Fund (CPF). For the majority of employees who are under 55, the employer's share at the time of writing is 17%. For example, on a $5,000 monthly salary, you'll contribute an additional $850 per month to CPF.
• Bonuses: From performance and variable bonuses to Singapore's special practice of the 13th-month bonus, bonuses can vary greatly and take a significant portion of the budget.
• Employee Benefits: To attract and retain talent in Singapore's competitive market, offering comprehensive benefits is crucial. These can include:
  • Health Insurance: Providing medical coverage for your employee and potentially their dependents can be a substantial recurring cost.
  • Statutory Leave (Annual, Sick, Public Holidays, etc.): While legally mandated, paid time off represents a period where the employee is not directly working on projects but still drawing a salary.
  • Non-Statutory Leave (Marriage, Compassionate, etc.): Although not legally mandated, it is very common practice for companies to provide additional days of paid time off in the interest of employee welfare. Again, this means time when an employee is not directly working but still drawing a salary.
  • Other Perks: Depending on your company circumstances, you might offer dental benefits, wellness programs, transport allowances, or subsidised meals, all adding to overall expenses.
    

• Training and Development: To ensure your HR employee stays updated with the latest regulations, best practices, and industry trends, you'll need to invest in training programs, workshops, and certifications. This includes both onboarding and ongoing professional development.
• Office Space and Infrastructure: A full-time employee requires a dedicated workspace, including a desk, chair, computer, and access to shared resources like printers and meeting rooms. This contributes to your overhead costs, including rent, utilities, and maintenance.
• Recruitment and Onboarding Costs: The process of finding, interviewing, and hiring an HR employee itself incurs costs, including advertising, agency fees (if used), background checks, and the time spent by your existing team on the recruitment process. Onboarding also requires time and resources for paperwork, system setup, and initial training.
• Potential Underutilization: Depending on the size and needs of your business, a full-time HR employee might not always have a full workload, leading to potential underutilisation of their skills and a less-than-optimal return on investment.

The Strategic Advantage of HR Consultants

In contrast, engaging HR consultants offers a more flexible and often more cost-effective approach. Here's why:

• Pay Only for What You Need: You engage consultants for specific projects or on an hourly/retainer basis, meaning you only pay for the expertise and time you actually utilise. This eliminates the ongoing fixed costs associated with a full-time hire during quieter periods.
• Access to Specialised Expertise: Consultants often possess deep expertise in specific HR areas, such as talent acquisition, compliance, HR policy, or employment relations. You can tap into this specialised knowledge precisely when you need it, without having to hire a full-time employee with that specific skill set.
• Reduced Overhead: You don't need to provide consultants with office space, equipment, or contribute to their CPF or benefits. This significantly reduces your overhead costs.
• Scalability and Flexibility: Consultancy services can easily scale up or down based on your business needs. Whether you require support for a specific project or ongoing strategic advice, you can adjust the level of engagement accordingly.
• Objective and Fresh Perspective: External consultants bring an unbiased viewpoint and fresh perspectives to your HR challenges, potentially identifying solutions that might be overlooked by an internal team.
• Faster Implementation: Consultants are often brought in to address specific issues and deliver results quickly, without the onboarding and ramp-up time associated with a new full-time employee.

Making the Smart Choice for Your Business

While a full-time HR employee can be a valuable asset for larger organisations with consistent and significant HR needs, smaller and medium-sized businesses in Singapore should carefully consider the true cost implications. Engaging HR consultants can provide access to specialised expertise, greater flexibility, and significant cost savings by eliminating the hidden expenses associated with a full-time hire.

As a small business that understands the needs and constraints of fellow small businesses, Prescient HR is ideally suited to support you.

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