# Calculating the True Cost of FTE in Outsourced CX

## Part 1: How FTE Raises Your True Hourly Rate

### How To Know if You are Paying Too Much?

One sure sign that you are overpaying for outsourcing? Paying for full-time equivalents (FTE). That is, paying for outsourced CX help in full-time blocks: 8 hours per day, 5 days per week.

We all know intuitively that 8 hours on the job doesn’t mean 8 hours working on your CX project.

A typical call center agent clocks 8 hours a day. That could include a paid 30-minute lunch and a couple of short paid breaks. This is a typical day. But in reality, the agent could also be occupied with other off-task activities: team meetings, office birthday celebrations, and an extra coffee break on a sleepy day.

For simplicity, let’s assume the agent isn’t on-task for 1 hour per day.

So you’re getting 7 hours of coverage, but paying for 8.

That means your true hourly rate is 14% higher than your quoted rate.

### Let’s Do the Math

Imagine that we’re calculating costs for 100 hours of coverage (1,000 CX tickets with an average handle time of 6 minutes). Let’s assume the quoted hourly rate is \$20.

How much will it cost to clear the queue?

If the agent were on-task for every paid hour, the answer would be easy: \$2,000 (\$20×100).

Remember, this agent is on-task for only 7 hours of the 8 hours on the clock.

If we divide the time-on-project by the paid hours, we get 87.5% utilization: the percentage of time spent actually working on the project.

Obviously, it will take more than 100 paid hours to handle this coverage at 87.5% utilization. How many hours will it take? To get the number, we divide the amount of coverage by the utilization rate. It will take 114.29 hours to clear the queue.

So to calculate the total bill to clear the queue, we have to multiply the hourly rate by 114.29 hours. That means the cost for 100 hours of coverage – the total cost of ownership (TCO) – is \$2,285.71.

And that means the true hourly rate for 100 hours of coverage is \$22.86.

Note that 87.5% is a conservative estimate of FTE utilization: the more paid time off-task, the higher your TCO and your true hourly rate.

### What’s the Alternative?

Outsourced CX that doesn’t bill or staff using FTE.

Who does that? We do.

Our hourly, on-demand model means we only bill for the time spent on-task. If you need 100 hours of coverage, we bill you for 100 hours of coverage. Your quoted hourly rate is always your true hourly rate because you’re never paying for FTEs and the off-task time that comes with them.

You get exactly what you pay for. (Actually, you get more — we deliver the highest quality services in the business.)

### Don’t Enjoy Math?

We can help calculate your TCO and true hourly rate and show you how much you can save by switching to an on-demand hourly model like ours.

Stay tuned for part 2.

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