The challenges inherent to calculating the total costs of running an internal contact center are numerous. Both direct costs and indirect costs can be difficult to identify, isolate and quantify, which can lead to an understatement of true contact center operations costs. In this article, we will build an illustrative model to identify each of the various elements that comprise the accurate calculation of call center operations costs. The true cost of operating an internal contact center is typically more than double the hourly wage being paid to your Contact Center Representative.
#1 Contact Center Representative (CCR) Wages
The largest element of contact center cost is the cost of compensating Contact Center Representatives (CCR’s). An average wage for a CCR of $15.00 per hour.
#2 Benefits
Additional employee-related costs include benefits that an employer pays such as health care, dental care, life and disability insurances. These “benefit” costs are usually expressed as a percentage of the hourly or weekly wage, and typically run between 20 to 30% of the hourly wage. These benefits may include:
- Health Care
- Vision Care
- Dental Care
- Dependent Care Spending Account
- Healthcare Spending Account
- Short-term Disability Insurance
- Long-term Disability Insurance
- 401K
- Employee Assistance Program
- Tuition Reimbursement
- Workers’ Compensation Insurance
Calculation: RDI uses a conservative approach and factors the lowest average benefits cost at 23% of the base wage.
This incremental benefits cost is estimated to be $3.45.
#3 Supervision
A direct cost of the contact center is the cost of contact center representative (CCR) supervision. The ratio of supervisors to CCR varies widely but usually falls within the 1:15 range. We made the conservative assumption that a typical company pays its supervisors an average of 25% more than its CCRs (plus benefits).
Calculation: Supervisor paid 25% more than rep = $23.06 per hour/15 reps per team=$1.54.
The incremental cost of supervision is $1.54
#4 Shrinkage Costs
Shrinkage is a contact center term reflecting the difference between payroll hours and hours that a CCR is logged in available to work. This represents the difference between the 40 hour payroll week less the time that is used for breaks, training, and paid time off (sick pay, holiday pay, and paid vacation days). Shrinkage represents the time the CCR is not logged into the company’s systems and available to do work.
Industry shrinkage numbers can range from 15 to 40%. Obviously, these numbers can vary widely as unscheduled events and fluctuating call volumes impact activities. We have estimated a middle of the road shrinkage factor of 20%. This means that full-time employees are available for customer interaction 32 hours (40 FT hours X 80%) each week. This translates to 1,664 hours per year any CCR is available to work out of total paid hours of 2,080 hours.
The incremental cost of shrinkage is calculated to be $4.00
#5 Utilization
Utilization is the difference between available-to-work time and actual time spent working. Utilization is primarily driven by:
- service levels
- average handle time
- hours of operation and
- contact volumes
Outsource companies like RDI have the advantage of workforce management staff and software, forecasting expertise, real-time support staff, and related infrastructure to drive productivity, resulting in 10% or greater utilization than with in-house centers.
Calculation: The basic rule with utilization is, the higher the service level objective the lower the utilization. Industry-standard benchmarks for utilization are typically 65-80%. Of the 1,664 annual hours that an agent is available to work, the agent will actually be on calls/processing a transaction 1,165 hours if achieving a 70% utilization.
The incremental cost of internal utilization vs outsourced utilization is calculated at 10% or $2.00 more per hour for an in-house center (Assumes 10% more hours required at a fully loaded cost of $19.99 per hour).
#6 Training/QA
A direct cost of operating the contact center is initial CCR training and ongoing CCR development. Contact center industry support costs for Training, Quality Assurance, and Coaching vary widely.
Based on RDI’s understanding of industry average training requirements, frequency, and complexity, we use a conservative figure of one person/full-time equivalent, to support all Training/QA needs for up to 100 agents.
Calculation: Assumes one FTE per 100 CCR’s for Training/QA. Training/QA earn 25% more than CCR = $23.06 per hour/100 CCR’s.
The incremental cost of CCR training is estimated to be $.23 per hour.
#7 Attrition Costs
A major advantage of outsourcing either part or all of contact center activity is to eliminate or reduce attrition expenses, which is one of the largest cost variables in the contact center equation.
Attrition rates are defined as the average number of terminations (voluntary and involuntary) divided by the average number of employees over a period of time, which is usually 12 months. Attrition rates vary widely among call centers. Annual attrition rates can be as low as 20% and as high as 100% +, even when measured after the first 120 days of employment. High attrition rates result from a number of functions having to do with the nature of the position, which is usually entry or near-entry level. These include the wage paid, training, company culture, work schedule, and working environment.
There are many studies showing the true costs of attrition are higher than just the employee wages. For higher-level managerial positions, turnover costs are estimated to be as much as four times the annual salary, including re-hire and re-training plus lost productivity. Lower paid positions are generally less costly.
Calculation: 25% additional cost burden due to 25% attrition with a base cost of $23.06. $23.06 *25%=$5.00
The incremental attrition cost in this scenario is $5.00 /hour.
#8 Facilities
Facilities: Facility cost consists of direct space used by the agents, Triple Net Charges (NNN) (Insurance, Tax, “common space” space that is shared in the facility), and utilities costs.
Calculation: At a cost of $17 per square foot for base rent, NNN $10, utility $5 =$32 per square foot per employee* 72 square feet per employee=$2,304 annual cost for Facilities per person / 2,080 payroll hours per year=$1.11 per hour cost per person/work station.
Incremental Facilities cost in this scenario is calculated at $1.11 per hour.
#9 Overhead Costs
Costs associated with overhead include Equipment and indirect Management Costs.
Management Support: Every position or function in the company is supported by allocated fixed costs that come back to the contact center. These costs include: Human Resources, Executive Management, Finance, Payroll, Workforce Management, Legal, IT, and more.
Calculation: Equipment: Assumes 1,000 employees and $1MM in annual costs (licenses, telecommunication usage costs, hardware and software purchases)=$1,000 per employee/2,080 hours per employee= $.48 per payroll hour incremental cost due to Equipment..Management Cost:estimated $2MM in Management Support for 1,000 employees. =$2,000 per employee/2,080 payroll hours=$.96 per hour of incremental cost.
The incremental “Overhead” cost in this scenario is calculated at $1.44 per hour.
What Does It Really Cost To Operate Your Contact Center?
When we incorporate all of the factors listed above, the real hourly cost of operating an average corporate contact center (using the above estimates) comes out to be over 2x the wage rate paid to the company’s CCR’s (based on a wage of $10.00 per hour).
| Cost Item | Incremental Cost | % Increase | Cumulative Per Hour | Notes |
| CCR Wage/Hour | $15.00 | |||
| Benefits | $3.45 | 23% | $18.45 | See Document for cost drivers |
| Supervision | $1.54 | 10% | $19.99 | Supervisor paid 25% more than rep = $23.06 per hour/15 reps per team=$1.54 |
| Shrinkage | $4.00 | 27% | $23.99 | Assumes fully loaded cost of $19.99 per hour * 20% =$4.00 |
| Utilization | $2.00 | 13% | $25.98 | 10% of $19.99 (fully loaded agent rate) |
| Training/QA | $0.23 | 2% | $26.21 | Assumes one FTE per 100 CCR’s for Training/QA. Training/QA earn 25% more than CCR = $23.06 per hour/100 CCR’s |
| Attrition | $5.00 | 33% | $31.21 | 25% additional cost burden due to 25% attrition with a base cost of $23.06. $23.06 *25%=$5.00 |
| Facilities | $1.11 | 7% | $32.32 | At a cost of $17 per square foot for base rent, NNN $10, utility $5 =$32 per square foot per employee* 72 square feet per employee=$2,304 annual cost for Facilities per person / 2,080 payroll hours per year=$1.11 per hour cost per person/work station. |
| Overhead (Equipment and Management) | $1.44 | 10% | $33.76 | Equipment: Assumes 1,000 employees and $1MM in annual costs (licenses, telecommunication usage costs, hardware and software purchases)=$1,000 per employee/2,080 hours per employee= $.48 per payroll hour incremental cost due to Equipment..Management Cost:estimated $2MM in Management Support for 1,000 employees. =$2,000 per employee/2,080 payroll hours=$.96 per hour of incremental cost. |
| Total | $33.76 | 225% |
Hard Costs
The above costs represent “hard costs” and these numbers do not express the qualitative impact to your business resulting from sub optimizing your contact center and related customer experience.
Stay Focused on Your Core Competencies & Partner with RDI Connect
One of the most important reasons to outsource contact center support is to enable your business to stay focused on and maximize the effectiveness of your core competencies. Partner with RDI Connect and take advantage of our core competency: providing world-class service to your most important asset—your customers.
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