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Contracting Security vs. In-House Cost

What Does It Cost?

In most cases, the cost of an outsourced security program is comparable to an institution’s in-house budget. However, the additional protection provided, combined with the elimination of other hidden costs actually serves to reduce a college or university’s long-term expense. Additional costs can include overtime wages, uniforms, recruiting and background checking expenses, training, administration personnel for payroll services and depreciation of equipment.

The pro forma below will help you analyze the actual costs of your security program and compare it to your institution’s current or proposed budget.

In-House Payroll Taxes & Fringe Benefits:

Payroll taxes and fringe benefits have skyrocketed to a national average of 48%. This includes FICA, FUTA SUTA, Workers Compensation, Liability Insurance, Medical Benefits, Vacations, Personal Days, Sick Days, Holidays, Bereavement Pay, Overtime Pay, etc. These costs for a wage of $11.00 will be in excess of $4.00 per hour per employee. Let’s look at an example of estimated costs for one person.

This estimate for in-house payroll taxes and fringe benefits equals approximately $8720 per employee per year or $4.19 per hour.

Recruiting, Testing, Screening, and Onboarding:

The cost to recruit, test, screen and hire a new employee is staggering. First consider the management time involved in hiring a new employee. How many different individuals are involved in the hiring process? What departments are affected? How many interviews take place to hire one new in-house officer? What in-house testing takes place? How much management time is taken in the testing process to administer and evaluate test results? What about the cost of outside psychologists? How much time does management spend on conducting background and reference checks? Below is an example the costs associated with hiring a new officer.

HR Time

• Create Job Specifications
• Prepare classified ad
• Review resumes from 50 ad responses
• Telephone screen 10 candidates
• Schedule, prepare for and conduct 5 interviews
• Conduct assessment testing for 3 candidates
• Reference check for 3 candidates

Estimated hiring cost per employee = $3,735 per employee or .11 per hour per every new employee hired per year ($3,850 / 35,360 hours per year). If you have 7 vacancies the cost per hour to the department should be estimated at .77 per hour over 1 year.

Ongoing Training:

The cost of ongoing or developmental training also needs to be considered when evaluating the cost of maintaining an in house security program.

The estimated cost of training per employee = $1000 per year, or .48 per hour. This does not take into account the cost to replace an employee who is attending training.

Uniforms / Equipment:

The cost of uniforms and equipment is another significant expense to consider when evaluating the cost of an in house program.

The estimated cost to furnish multiple uniforms and provide the necessary equipment is $500 per employee or .24 per hour.

* Wage estimates include wage, payroll taxes benefits and overhead.

Liability Risk:

As our society becomes more and more litigious, the risk of liability from personnel-related issues is mind boggling. These areas of risk include Workers Compensation, unemployment, discrimination, sexual harassment and general liability just to name a few. One major lawsuit can be crippling. Due to this ever-increasing expense and risk of greater hidden cost, organizations are choosing to protect themselves by outsourcing functions like security at a record pace. AlliedBarton maintains ample insurance to absorb almost all liability claims related to the contracted security staff.

Furthermore, as it stands now, when you have a vacancy the post or position is left unattended. With AlliedBarton, you can be assured of knowing that vacancies and call-offs will be filled at all times greatly reducing your exposure to potential liability. What is the value of deferring your liability exposure and better protecting your students, staff and visitors? What is the dollar value of knowing that all of your positions are filled at all times? These are difficult questions to answer, but suffice it to say that it is substantial.

Other Cost Considerations:

Here is a list of additional cost consideration that were not mentioned previously.

• Scheduling
• Payroll Processing
• Administration
• Special Events Coverage
• Supervision
• Office Space
• Overtime
• Tuition Reimbursement
• Paid Break Time
• Supervisory Training
• Discipline

Total additional costs are estimated at $10,000 or .27 per hour.

While this exercise is conservative it provides an example of many costs that are not considered when estimating your true costs of maintaining an in house security team.

Here is a recap of potential costs to consider.

Using this model you can see that an $11 wage is burdened by nearly $6 per hour if direct and indirect costs are considered. This comparison is actually a low-end estimate of the indirect costs since many factors lurk within the institutional budget centers that are outside of Public Safety.

In-House Cost Comparison

Below, is a worksheet to assist in evaluating your costs.

Uniformed Security Officers

COST OF MAINTAINING YOUR OWN SECURITY FORCE:

DIRECT LABOR:

Average Hourly Pay Rate of All Security Officers Including Supervisors:

ADDITIONAL LABOR COST: (Estimate on Per Year Basis)

TAXES, INSURANCE AND RELATED EXPENSES: (Estimated on Per Year Basis)

When you evaluate all of the costs associated with operating a proprietary program it is clear to see the financial advantages of using a quality contract service. We would be pleased to work with you to identify your true cost of operating an in-house security program.