Outsourcing Customer Service vs. In-House: A Cost Comparison
When it comes to providing exceptional customer service, businesses often grapple with a big question: Should you handle it in-house or work with an outsourced call center? The choice impacts not just service quality but also your bottom line. Let’s break down the costs of each option and see why outsourcing customer service might be the smarter financial move for most companies.
Here’s what we’ll cover today –
The Cost of Hiring Customer Service Reps in the U.S.
Hiring in-house customer service representatives in the U.S. comes with several expenses beyond just salary. Here’s a breakdown:
Average Salary
- Entry-level customer service reps earn around $36,000 per year ($3,000/month).
- Experienced reps (or reps in higher cost-of-living locations like New York and California) can make $60,000 or more annually ($5,000/month).
Benefits
- Healthcare benefits: $7,500/year per employee (on average).
- Retirement contributions: $1,500/year per employee.
Taxes and Miscellaneous Costs
- Payroll taxes: Approximately 7.65% of salary ($4,590 for a $60,000 salary).
- Training and onboarding: $1,500 per employee (one-time cost).
Total Annual Cost for One Rep
For an entry-level rep:
- Salary: $36,000
- Healthcare: $7,500
- Payroll taxes: $2,754
- Miscellaneous: $1,500 (training, software, etc.)
- Total: $47,754/year
For an experienced rep:
- Salary: $60,000
- Healthcare: $7,500
- Payroll taxes: $4,590
- Miscellaneous: $1,500 (training, software, etc.)
- Total: $73,590/year
Now, multiply that by team size, and the costs quickly escalate. For example:
- 5-person team (entry-level): $238,770/year
- 10-person team (entry-level): $477,540/year
- 20-person team (entry-level): $955,080/year
- 5-person team (experienced): $367,950/year
- 10-person team (experienced): $735,900/year
- 20-person team (experienced): $1,471,800/year
The Cost of Outsourcing Customer Service
Outsourcing customer service to offshore locations like the Philippines, the Caribbean, or Latin America offers significant savings. Companies like Ataraxis operate outsourced call centers and provide experienced, full-time reps starting at $11/hour, which translates to $1,760/month or $21,120/year per rep. This cost typically includes:
- Salary
- Benefits
- Account Management
- Workspace and equipment
Here’s the cost breakdown by team size:
Monthly Cost
- 1 rep: $1,760
- 5 reps: $8,800
- 10 reps: $17,600
- 20 reps: $35,200
Annual Cost
- 1 rep: $21,120
- 5 reps: $105,600
- 10 reps: $211,200
- 20 reps: $422,400
Comparing Cost Savings
Monthly Savings
- 1 rep: $2,239 ($3,999 in-house – $1,760 outsourced)
- 5 reps: $11,195
- 10 reps: $22,390
- 20 reps: $44,780
Annual Savings
- 1 rep: $26,868 ($47,754 in-house – $21,120 outsourced)
- 5 reps: $134,340
- 10 reps: $268,680
- 20 reps: $537,360
For experienced reps:
- 1 rep: $52,470 ($73,590 in-house – $21,120 outsourced)
- 5 reps: $262,350
- 10 reps: $524,700
- 20 reps: $1,049,400
Why Outsourcing Customer Service Makes Sense
Financial Benefits
Outsourcing customer service provides immediate and long-term savings. For a 10-person team, companies can save $268,680 per year with entry-level reps or $524,700 per year with experienced reps. These savings from working with an outsourced call center can be reinvested into other areas like marketing, product development, or business operations.
Scalability
Need to ramp up for the holiday season or a new product launch? Outsourcing makes it easy to scale your team without the headaches of hiring, training, or finding office space. Ataraxis can staff an entire 10-person customer service team in under 2 weeks!
Global Talent
Outsourced call center teams often bring experience and multilingual capabilities, enhancing your ability to serve diverse customers.
24/7 Support and Flexibility
One of the standout advantages of outsourcing is the ability to provide round-the-clock support. Offshore teams can operate across different time zones, ensuring your customers always have someone to assist them. This 24/7 availability enhances customer satisfaction and builds trust in your brand.
Reduced Overhead Costs
When you outsource customer service, there’s no need to invest in office space, equipment, or utilities. Outsourced call centers handle these expenses, allowing you to focus solely on delivering exceptional service.
Is Outsourcing Customer Service Right for Your Business?
Outsourcing customer service is a game-changer for many businesses, especially startups and small-to-medium companies aiming to keep overhead low. By partnering with outsourced call center providers like Ataraxis in cost-effective regions, companies can deliver excellent customer service without breaking the bank.
Whether you need a one-person team or a 20-person operation, working with an outsourced call center can provide significant savings while maintaining quality. For most American companies, it’s not just a cost-saving measure, it’s a strategic advantage.
Ready to get started? Contact the Ataraxis team today for a free consultation!
If you enjoyed reading this article, you may want check these out as well:
Call Center Outsourcing: The Brutal Truth About Saving Your Business Thousands (Without Killing Customer Satisfaction)
20 Questions to Ask Before Outsourcing Customer Service