The Dollar-Per-Hour Math

Comparing a Fractional Contractor to a Full-Time Hire

 

“Wages and salaries cost … accounted for 69.0 percent of total costs, while benefits … accounted for the remaining 31.0 percent.”

from the Bureau of Labor Statistics

 

“You should really write this down.”

That's what a self-declared skeptic of the fractional executive model said after we discussed his reservations: "I looked into contracting a fractional executive, but when I calculated the dollar-per-hour cost, I could not justify it and went with a full-time hire.”

So, I decided to write this down.

 

The starting point to compare these two options, fractional contractor vs. full-time hire, is, of course, the question of how much of a particular skillset the business requires. Leading a team of two or three Sales Executives does not require a full-time VP of Sales. Building out a Customer Success playbook and hiring an initial team of two to four CS Reps does not require a full-time Head of CS, especially when the Executive comes with the experience of having performed the same role before.

When companies choose to take the full-time hire option, they often end up with a player / coach, or an Executive wearing multiple hats. Either one comes with the downsides of doing a job one is not really good at and being forced to prioritize between distinctively different roles.

As I wrote in an earlier article, fractionalizing work at the executive level allows for a different growth model that leads to faster growth:

  • The right skills are in place just when you need them, not when you can afford them.

  • There is no loss in productivity due to multitasking or suboptimal talent.

  • At any time, the skills can be right-sized for the needs of the business.

 

But back to the dollar-per-hour math using a VP of Sales as an example; if you choose the full-time hire, here are the points to consider (and feel free to insert your own numbers):

 

Annual OTE: $300k

= Dollars-per-hour                                              $144 / hour

+ 15 paid vacation days

+ 8 paid sick leave days

+ 8 paid holidays

= Dollars-per-hour                                              $164 / hour

+ 15% Other Employer Cost/Benefits

= Dollars-per-hour                                              $188 / hour 

+ 5% Productivity Loss (Training)

+ 10% Productivity Loss (Internal Meetings)

+ 10% Productivity Loss (Multitasking)

+ 5% Productivity Loss (Water Cooler Stuff)

= Dollars-per-hour                                              $244 / hour

+ 20% Recruiting Fee on OTE

+ 10% Productivity Loss (Time it takes to hire)

= Dollars-per-hour                                              $293 / hour

 

Now consider the Fractional Executive as a contractor: they do not attend any internal training or meetings, they are focused on the one job they came to do, and they do not spend time around the water cooler. And in addition, their engagement is right-sized to the business needs in terms of talent and time, and they are immediately available.

 

 

Contact us, and we can help you do the dollar-per-hour math.

Sales, Organization, Interim and Fractional, Best PracticeHenning SchwinumVendux LLCdollar per hour, employee cost, benefits, productivity, recruiting