Part 2 - Agent Efficiency

What is agent efficiency? For the sake of this posting it is the difference between agent productive time and agent paid time. Different companies use different definitions and different terms to describe the same thing. It can sometimes be referred to as utilization, or production quotient. Agent productive time is the time an agent is logged into a call queque ready to take a call or is actually handling a call.


Many times when trying to determine the full cost of a production hour, efficiency is one of the most important facts NOT taken into consideration. Many insourcers attempt to equate a paid agent hour in their site to a billable production hour for an outsourcer. This can be a very costly miscalculation.


As demonstrated in my earlier post, we came to the conclusion that a fully loaded agent wages can be really running you close to $19.30 versus just the $12.00 hourly wage you are paying them. When an agent is paid 40 hours a week they are not actually on the phone ready to take calls that entire time. In general their 40 hours could be broken out as follows:


40.00 Hours Paid Time
7.50 Paid Breaks (2 paid 15 minute breaks each day)
2.50 Hours breakage (15 minutes lost time per day)
1.00 Hour coaching time each week
1.00 Hour team meeting each week
1.50 Hours of earned paid time off (assumes close to 2 weeks paid time off each year)
0.75 Hours of earned sick time (assumes 1 week paid sick time each year)
25.75 Average production hours per week

25.75 / 40.00 = 64.375% Efficiency

So now how does this translate to cost? For every production hour produced you have to pay an agent on average 1.55 hours (1 hour / 64.375%). If an agent is costing you $19.30 an hour and it takes 1.55 paid hours to produce 1 production hour each production hour is really costing you $19.30 x 1.55 = $29.98.


When you pay an outsourcer you generally ONLY pay for the production time, all unproductive time is on the outsourcer's dime. Wow, outsourcing may be a better deal after all.


Stay tuned, we still have not paid for supervisors or other overhead expense.

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Part 1 - What are you really paying your agents?

As an outsourcer, when discussing the possibility of transitioning work that is currently insourced to an outsourced model there are consistent arguments / challenges that you will always hear. One of the most common is around cost. "Why would we pay an outsourcer $26/hour when our current agents only cost us $12/hour?" In this scenario it appears as if the outsourced solution is 116% more expensive.

In this posting and in subsequent postings I will provide the building blocks to understanding that the $26/hour can actual result in significant savings against the $12 an hour you are paying your current agents.

Step 1 - What are you really paying your agents?

Lets first start with what is included in the $12/hour. The $12/hour in this example is the hourly rate being paid to the agent before taxes and benefits. Keep in mind that in many in-sourced environments the agents are actually making much more than this and in many cases could be making upward of $15-18/hour.

The first thing we have to do is add on the cost of benefits. For a full time agent working 40 hours per week, the average employer funded benefit cost can run $300-400 per month. Spreading that over the hours worked translates into roughly a $2.25-2.50 per hour for medical benefits.

In most customer care operations there will be a bonus or pay for performance program that will be additional pay for the front line management that could range anywhere from $1-$5 per hour. For this example we will contend that the average bonus is $2 per hour.

Taxes will add another 10-15% to your wage rate. If you are company that has encountered a significant layout this % could be much higher and be closer to 20%. For this example we will be conservative and say that taxes run around 12% which for a $12/hour plus bonus of $2 is equal to an additional $2.80.

Current Tally:

$12,00 base wage rate
$ 2.50 benefits
$ 2.00 bonus
$ 2.80 for taxes
$19.30 total agent wage

Stayed tuned for my next update and I will share with you why this $19.30 an hour could be costing your internal organization closer to $30-35 an hour.