HR–The $5 Billion Question

A recent Government Accountability Office report on Department of Defense (DOD) efforts to reduce overhead costs highlights the difficulty in achieving savings in administrative services. DOD was tasked by Congress to reduce overhead costs by $10 billion per year.

Human Resources Costs

HR is one of those overhead services that can consume a surprising amount of money. In DOD or any agency, the cost of operating HR offices is a significant line item.

How significant? Let’s take a look at only those jobs that are in the two primary HR job series (GS-201 for HR Specialists and GS-203 for HR Clerks and Assistants).

At the end of March (the most recent available data) the federal government had 29,830 GS-201s, with an average salary of $90,648. There were 10,168 GS-203s, with an average salary of $46,135. Without fringe benefits, the GS-201s cost $2.7 billion per year and GS-203s cost $469 million. Add 30 percent for fringe benefits (health and life insurance, retirement, etc.) and those costs go up to $3.5 billion and $610 million (a total of $4.1 billion).

We know that not every person in HR is a GS-201 or GS-203, so the actual cost for HR office labor is actually more than $4.1 billion. A reasonable estimate of non-HR series labor costs in HR is about 10 percent, so if we add another $400 million to cover those folks, we have total HR labor costs of about $4.5 billion per year.

These numbers do not include other costs of running HR, such as technology, contracts, office space, and other overhead costs. Most people use 80 percent as the amount of a typical budget that is direct labor, and 20 percent for those other costs. If we add that into our HR cost calculation, … [For the rest of this article, click here.]

Do you agree with the points made in this article? Why or why not? Do you agree with its conclusion?

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