Hire vs Outsource Calculator (In-House Employee or Agency?)
Enter the salary and true add-on costs of an in-house hire — benefits, employer payroll taxes, overhead, and recruiting spread over expected tenure — then the hours you actually need each month and what an agency or freelancer charges. The calculator returns the fully loaded monthly cost of each path, a clear verdict on which is cheaper, and the break-even hours line: the monthly workload above which hiring beats outsourcing. This is a cost comparison, not tax, legal, or HR advice — worker-classification rules and your specific tax situation deserve a professional's eyes before you act.
Verdict
Outsource
Outsourcing saves $26,488.33/yr at 80 h/mo.
In-house employee
$8,807.36/mo
$50.81/h effective · $105,688.33/yr loaded
Outsourced
$6,600.00/mo
incl. 10% management overhead
Break-even workload
106.8 h/mo
Above this many hours per month, hiring in-house is cheaper; below it, outsourcing wins.
Monthly cost vs hours needed
Side-by-side breakdown
| Line | Amount |
|---|---|
| Salary + benefits + employer taxes | $96,355.00/yr |
| Overhead | $8,000.00/yr |
| Recruiting ÷ 3 yr tenure | $1,333.33/yr |
| Fully loaded employee | $105,688.33/yr |
| Outsourced (80 h × $75.00 × 1.10) | $79,200.00/yr |
| Cheaper option saves | $26,488.33/yr |
Compare scenarios
Run the same calculation with two or three input sets side by side. Differences are highlighted; every number comes from the same tested formula as the calculator above.
| Input | Scenario A | Scenario B |
|---|---|---|
| Annual Salary | ||
| Benefits Rate | ||
| Employer Tax Rate | ||
| Overhead Annual | ||
| Recruiting Cost | ||
| Expected Tenure Years | ||
| Hours Needed Per Month | ||
| Agency Hourly Rate | ||
| Management Overhead Pct |
How it works
The employee side starts from annual salary and loads it with everything the payslip hides: a benefits rate you set (health insurance, retirement match, the cash value of PTO — there is no universal number, so the default is just an editable convention), employer payroll taxes (the 7.65% default is the employer share of Social Security and Medicare — FICA — per IRS Topic 751; federal unemployment tax, roughly 0.6% of the first $7,000 of wages after the state credit, can be folded into overhead), annual overhead for equipment, software, and space, and the one-time recruiting cost amortized over expected tenure. The result is loadedAnnual = salary × (1 + benefits + taxes) + overhead + recruiting ÷ tenure.
The outsourcing side is simpler but not free of hidden cost: monthly hours × the agency or freelancer hourly rate × (1 + management overhead). The management overhead percentage captures coordination cost — briefing, reviewing, and managing an external party takes real internal time that a naive rate comparison ignores. The monthly difference between the two loaded costs gives the verdict, and the annual savings figure shows what the cheaper path saves per year.
The break-even hours line is the decision boundary: fully loaded employee monthly cost ÷ loaded agency rate. Below that many hours per month, outsourcing is cheaper because you only pay for hours you use; above it, the employee's fixed monthly cost is spread over enough hours to win. The effective employee hourly rate shown alongside (loaded annual cost ÷ 2,080 paid hours) is what an in-house hour really costs — usually far above the raw salary divided by hours.
Frequently asked questions
What belongs in the overhead number — and what goes in the benefits rate instead?+
Overhead is the annual cost of things the role consumes that are not compensation: a laptop and equipment refresh, software seats, insurance attributable to the role, and a share of office space if the hire changes what you pay for it. Keep it marginal — do not allocate general company costs the role does not change. Benefits belong in the benefits rate instead, expressed as a percentage of salary: employer-paid health insurance premiums, retirement plan match, and the cash value of paid time off are the big three. There is no universal benefits percentage — the default here is an adjustable convention, so replace it with your own plan costs for a real answer.
Why amortize the recruiting cost over tenure instead of expensing it in year one?+
Because a one-time cost distorts a recurring-cost comparison. The hire-vs-outsource question is about steady-state monthly cost, and dumping the full recruiter fee, job-ad spend, and interviewing time into the first year would make hiring look artificially expensive in year one and artificially cheap afterward. Spreading it over the years you realistically expect the person to stay compares like with like. The tenure input doubles as a risk dial: slide it down to 1 year to stress-test a risky hire — if outsourcing wins when the recruiting cost must pay for itself in twelve months, the hire only makes sense if you are confident the person stays.
Is 2,080 hours a fair divisor for the effective hourly rate?+
It is the honest paid-hours divisor, not a productive-hours one. 2,080 is 40 hours × 52 weeks — the standard full-time workweek framing used under the Fair Labor Standards Act. But nobody produces for all 2,080: paid time off, holidays, meetings, and ramp-up time all come out of it, so the true cost per productive hour is higher than the effective rate shown. This calculator states that openly rather than guessing a productivity factor for you — if you want a productive-hours view, mentally deduct your PTO and meeting load and the effective rate rises accordingly. The comparison verdict is unaffected, because it is built on monthly cost, not on the hourly figure.