Rankings by Category: Cost Efficiency – Total Workforce Index™


Cost Efficiency Overview

Cost efficiency is the relative comparison of various wages, benefits, taxes and operating metrics to suggest potential cost efficiency. Cost is a factor many organizations focus on when evaluating the hiring of additional skills. Workforce cost efficiency provides insight into the total cost of labor beyond compensation and is inclusive of statutory burdens and other costs.

In line with shifting offshore/nearshore trends in the market, the APAC region no longer has a stronghold on the most cost-efficient global labor markets. In fact, when total labor costs are considered, rather than simply considering wages there are some Latin American and European markets that become unexpectedly more cost effective. In particular, overtime premiums and statutory burdens dramatically shift cost comparisons across these markets, when these costs are added to worker’s wages to equal the actual cost of the engagement of workers in a particular market.

Because the focus is exclusively on cost efficiency, these markets may not support the aggressive hiring of a comprehensive set of job skills, but instead each can be leveraged for certain types of skills. It is also worth noting that these lower-cost markets tend to have less defined labor regulations related to workforce categories, statutory burdens and compensation. In the coming year, a number of regulatory changes can be expected that may impact some of these cost considerations.

For example, while being one of the more cost-efficient global markets, Morocco has contract labor restrictions such as fixed terms for permanent tasks and twelve-month tenure limitations. However, overtime benefits are minimal with only a 25% premium and no additional night or holiday work premiums, maintaining the cost benefits of local hiring opportunities.

On the other hand, Thailand has more relaxed regulatory measures regarding work visas for foreign workers. These more relaxed measures have allowed a 14% increase in skilled workers in the workforce in this market. This increase has been positive for local employers as Thailand has not invested in updating educational systems which is credited with general workforce efficiency but also a widening skills gap. A standard retirement age and severance policies that could affect employer policies in the future are currently being discussed by government representatives.

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Total Workforce Index™