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Calculate your Risk and Opportunities

Employee engagement is and will become an increasingly important concern for countries
and organisations seeking to boost labour productivity. The key question for employers
is no longer about what they pay their employees (traditional payroll) but about
what they get back in return for their investment in employees. This must be seen
in line with the already very high cost of employment.

- Up to 70% of the operating budget is spend on Human Capital (Salaries) meaning the HR department
is 70% of the problem … or holds 70% of the solution.
- Additional hidden cost of employment can be as much as 25% on top of the Salary
bill – meaning HR is the biggest waster … or holds another 25% of the solution.

In order to address this reality, the Human Capital Management process must be able to empirically analyse
both risk and opportunity. Data must be transformed from mere information to Business
Intelligence so that organisations can sustain their Competitive Advantage.

**Use our helpful calculators to get an idea of your risk and opportunities:**

## List of Assumptions

Productivity Hours Lost Per Employee Per Day
## More Info

Employee Productivity loss is measured according to the average number of hours
lost per employee per year / month / day and can be expressed in monetary value
as a % of the Total Direct Annual Employee cost to company. For the Calculation
in the Calculator productivity loss is considered to be 1 hour lost per
employee per day.

Number of Working Days Per Month
## More Info

The Number of Working days per month is calculated as 21.

Number of Working Hours Per Day
## More Info

The Number of Working hours per day is calculated as 8.

Number of Working Hours Per Month
## More Info

The Number of Working hours per month is calculated as 160 on average per month.

Employee Turnover Rate
## More Info

Employee Turnover Rate is calculated as the total number of current or new positions
that have to be filled per year as a Percentage of the total staff complement due to
sewerage and is calculated in this sheet as 10%.

Direct Recruitment Agent Commission
## More Info

The Direct Employee Turnover Cost is deemed as that of Recruitment/Agent Commission
and is calculated in the Calculator as (12% per appointment)*( Average Annual
Employee Cost To Company )* number of appointments per annum.

Indirect Employee Turnover Cost
## More Info

The Indirect Employee Turnover Cost is calculated at a very conservative 30% of the
Average Annual Employee Salary and includes hidden costs like decreased productivity,
exit costs, orientation/induction costs, training costs, quality alignment, customer
integration and tacit knowledge loss.

Skills Development Levy
## More Info

The Skills Development Levy is a compulsory levy in terms of South African Labour
Law and is calculated as 1% * Total Direct Annual Employee Cost to Company
in the Calculator.

Maximum Skills Development Claimback
## More Info

Up to 20% of this levy can be claimed back and this percentage can be increased through discretionary grants.

Actual Training Cost
## More Info

The Cost of Actual Training in the Calculator is calculated at 3% of the
total Salary bill.

Average Number of Days Absent Per Employee Per Annum
## More Info

The employee absenteeism rate is expressed in days and is calculate by considering
the total number of absenteeism days per year in the organisation divided by the number
of employees in the organisation. Despite research indicating average absenteeism
rates as high as 6-7 days per employee per year the calculation in the Calculator
was done using an absenteeism rate of only 4 days per employee per annum.

Temporary Staff Absenteeism Cost
## More Info

In most cases of absenteeism, temporary staff needs to be hired. For the calculation
in the Calculator it was considered that only in 10% of all absenteeism cases
temporary staff cost will be incurred.

## Important Human Capital Indicators

Total Direct Annual Employment Cost to Company
## More Info

The Total Direct Annual Employment Cost to Company is calculated as the sum of
all Annual Employees Cost to Company expenses.

Total Direct Monthly Employment Cost to Company
## More Info

The Direct Monthly Employment Cost To Company value is calculated as the Total
Direct Annual Employment Cost to Company divided by twelve months or the Average
Employee Cost to Company per Month multiplied by the number of employees in the
organisation.

Potential Indirect Annual Employment Cost
## More Info

The Indirect Annual Employment cost is the sum of all “shrinkage” that the
company incur in terms of Employment. This is the sum total of all salaries
paid for, but employees being sick, not being productive, wasted training,
excessive recruitment cost to name but a few. See details in the calculation
of the sub items below.

Average Employment Cost Per Hour
## More Info

The Average Employee Cost per Hour is calculated as the Average
Employee Cost to Company per Month divided by 160 working hours per month.

Number of New Appointments Per Annum
## More Info

Employee Turnover is calculated as the total number of current or
new positions that have to be filled per year as a Percentage of the total
staff complement due to sewerage and is calculated in this sheet as 10%.

Total Annual Absenteeism Hours
## More Info

The employee absenteeism figures are expressed in hours and is calculated by
considering the total number of absenteeism days per year in the
organisation divided by the number of employees in the organisation
multiplied by 8 hours per day.

Total Annual Productivity Hours Lost
## More Info

For the Calculation in the Calculator productivity loss is considered
to be a very conservative 1 hour lost per employee per day.
The employee productivity loss figures are expressed in hours and is calculated by
considering the total number of production hours lost per employee per day multiplied by
the total number of employees in the organisation times working days per year.

## Potential Indirect Annual Employment Cost / Loss to Company

Total Employment Turnover / Recruitment Cost
Direct Employment Turnover Cost (Recruitment Agents)
## More Info

The Direct Employee Turnover Cost is deemed as that of Recruitment/Agent
Commission and is calculated in the Calculator as 12% per appointment times
Average Annual Employee Cost To Company times number of appointments per annum.

Indirect Turnover Cost @ 30 % of annual salary per appointment
## More Info

The Indirect Employee Turnover Cost is calculated at a very conservative 30% of the
Average Annual Employee Salary and includes hidden costs like decreased productivity,
exit costs, orientation/induction costs, training costs, quality alignment, customer
integration and tacit knowledge loss.

Total Skills Development Cost
Skills Levy @ 1% (Legal Compliance)
## More Info

The Skills Development Levy is a compulsory levy in terms of South African
Labour Law and is calculated as (1% * Total Direct Annual Employee Cost to
Company) in the Calculator.

Cost of Actual Training (% of total Salary bill)
## More Info

The Cost of Actual Training in the Calculator is calculated at 3% of
the total Salary bill.

Total Absenteeism
Loss in productivity @ 4 days / employee / annum
Cost of temporary / agency staff ( 10% of actual staff cost)
## More Info

In most cases of absenteeism, temporary staff needs to be hired. For
the calculation in the Calculator it was considered that only in
10% of all absenteeism cases temporary staff cost will be incurred.

Total Organisational Productivity / Inefficiencies Loss
Productivity loss @ 1 hour / employee / day
## More Info

For the Calculation in the Calculator productivity loss is considered
to be a very conservative 1 hour lost per employee per day.
The employee productivity loss figures are calculated by
considering the total number of production hours lost per employee per day multiplied by
the total number of employees in the organisation times the average employee cost per hour.

Loss in Opportunity Revenue (Total Lost * Time average billable rate per hour)
?
## More Info

The Loss in Opportunity Revenue to a company far exceeds the potential shrinkage
loss of employment. If a Service company with 100 employees lose 1 hour of
productivity per day per employee it equates to 2 100 hours of lost billable
opportunity per month. If the average bill out rate is R500 per hour, the
Loss in opportunity revenue will be in the region of R1 050 000 per month or
R 121 600 000 per annum. What is your current Loss in Opportunity Revenue?

Total Indirect Annual Employment Cost / Loss to Company
## More Info

The Indirect Annual Employment cost is the sum of all “shrinkage” that the
company incur in terms of Employment. This is the sum total of all salaries
paid for, but employees being sick, not being productive, wasted training,
excessive recruitment cost to name but a few. See details in the calculation
of the sub items.

Total Indirect Monthly Cost / loss to Company per employee
Total Indirect Monthly Cost / loss to Company per employee as percentage
## Potential Annual Saving Using S|CUBED

Saving on Recruitment Cost
20%
Saving on Indirect Turnover Cost of New Employees
20%
Total Skills Levy Claim back
20%
Saving on Cost of Actual Training
10%
Saving on Direct Absenteeism Cost
10%
Saving on Temporary Staff Cost
10%
Saving on Organisational Productivity Loss
10%
Saving in lost Opportunity Revenue
?
Total Saving per annum
Total Saving per Employee per Month