Staffing costs form a significant part of a company's or team's budget. Understanding these costs can help you achieve savings. However, many businesses remain unsure about the exact breakdown of these expenses. From social security contributions and worker benefits to recruitment expenses – everything adds up.
In this article, we help you gain insight into these expenses, including how to calculate staffing costs in different working arrangements. Whether you’re curious about the average costs of recruiting a permanent staff member or want to know how much it costs to hire a flexible freelance professional. We break down how staff costs are structured and provide useful tips for optimising them.
Components of staffing costs
Staffing costs comprise various elements that, when combined, show what a worker – whether permanent, temporary, or freelance – actually costs you. A strong team consists of a core group of permanent workers, supplemented by a flexible workforce to adapt to changing business needs.
The composition of the workforce can vary, as can the associated costs. The cost structure differs depending on the type of worker. For example, the costs of salaried workers differ from those of temporary professionals and freelancers, as each type of employment relationship carries distinct expenses and obligations.
Staff costs for in-house employees
- Gross Salary: This amount accounts for approximately 76% of total staffing costs. It consists of net salary, income tax, national insurance contributions, and worker pension contributions.
- Mandatory Additional Worker Costs: These include holiday pay (usually 8% of gross annual salary in the Netherlands), social security contributions, pension contributions, and additional allowances—depending on the collective labour agreement (CAO). This accounts for about 23% of labour costs.
- Additional and Indirect Costs: Beyond the base salary and mandatory expenses, there are other costs to consider. These include a 13th-month bonus, training programmes, company outings, company car expenses, or travel reimbursements. Indirect costs such as HR department resources for recruitment, onboarding, and staff management also add up. These account for approximately 3% to 10% of total labour costs.
Adding all these costs together, total employment costs can amount to 20% to 40% above the gross salary on average. When you’re determining how to calculate the cost of people who are fully employed, keep in mind these layers of expenses.
Costs of agency workers
Traditional staffing agencies do not always clearly outline how rates are structured or the margin they charge, leading to increasing and unexpected costs.
In summary, the costs consist of two parts: the gross salary, including mandatory and additional costs, and the conversion factor. Here’s how these break down:
- Gross Salary: The wage a temporary worker earns before taxes and deductions.
- Mandatory and Additional Costs: These are extra costs on top of the gross salary, such as social security contributions, pension contributions, and holiday pay (8%). On average, these costs amount to 25% of the gross hourly wage.
Note: These costs vary based on legal requirements, collective labour agreements, industry standards, and specific business circumstances.
- Staffing Agency Conversion Factor: This is the fee the staffing agency charges per hour for the temporary professionals. It includes various worker-related costs, such as agency profit, administrative expenses, sickness and absence risk coverage, training, and operational costs.
The conversion factor at Dutch staffing agencies typically ranges between 2.3 and 2.9.
Example Calculation for a Temporary Worker
€15.50 + €3.87 (25%) x 2.3 (conversion factor) = €44.56 per hour
Costs of freelance flexible professionals
Freelancer costs are much more transparent compared to in-h employees or agency workers. The costs typically consist of only the freelancer’s hourly rate.
When hiring a freelancer, there are no mandatory additional employee costs, benefits, or indirect costs, as freelancers cover these expenses themselves. This is why their hourly rates are often higher than those of salaried employees or temporary workers.
If you use Temper, a platform for flexible work, you can quickly and easily hire freelance professionals in hospitality, retail, and logistics.
Freelancers through Temper are collectively insured for liability, accidents, and sickness. Costs are transparent and start at €18.90 per hour, consisting of:
- A base freelancer rate starting at €15 per hour
- A platform fee of €3.90 per hour
Example Calculation for a Freelancer
€19.00 + €3.90 = €22.90 per hour
Want to learn more? Read here about freelancer costs.
Reducing and optimising staffing costs
Reducing staffing costs doesn’t mean compromising on quality or working conditions. It’s about making smart choices and achieving the right balance between permanent and flexible workers. By strategically managing your workforce, you can work more efficiently and save costs.
The right balance between permanent and flexible workers
A core group of permanent workers provides stability, but it can lead to unnecessary costs during peak and low-demand periods. With an external flexible workforce, you can adjust staffing levels according to workload, helping you save costs.
Platforms like Temper allow you to quickly and easily bring in extra workers during peak periods. Since people via Temper work as independent contractors and actively choose flexibility, you only pay their hourly rate and the platform fee—nothing more.
Important: All freelancers working via Temper are collectively insured for liability, accidents, and sickness.
By strategically alternating between permanent and flexible professionals and working cost-consciously, you can lower staffing costs without sacrificing quality or continuity.
Conclusion
Staffing costs involve much more than just salaries. From social security contributions and worker benefits to recruitment and absenteeism—everything adds up. When combined, these costs are often much higher than initially expected.
By understanding how to calculate staffing costs across different forms of employment—full-time, temporary, agency or freelance—you can plan strategically and avoid unnecessary spending. A group of permanent workers can offer continuity, while a flexible workforce responds quickly to demand fluctuations without incurring long-term financial commitments.
By strategically combining permanent and flexible workers, you can optimise staff costs while maintaining continuity and quality within your team. With reliable, skilled freelancers, you ensure that the flexible workforce adds real value to your organisation.
The Temper platform connects companies with vetted freelancers, ensuring you find qualified professionals without additional costs.
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