hiring in house vs outsourcing

The True Costs of Hiring In-House vs Outsourcing

When hiring a new employee, one of the first things every business owner needs to think about is their budget. 

Offering a fair and competitive salary is very important if you want to get a skilled worker. However, the salary is only a part of the expenses that you take on when you hire a new addition to your team.

In fact, Glassdoor’s study claims that the average company in the United States spends about $4,000 to hire a new worker, and it takes 52 days on average to fill a position. When you take into account employment taxes, benefits, and bonuses, the annual expenses for each employee are about 1.4x higher than their base salary.

As you can tell, hiring your own employee means you need to be prepared to handle additional costs.

That’s why we’ve prepared some figures to show you exactly how much it will cost to hire a new team member + we’ve found one major way you can minimize your expenses. Read on.

Costs of Hiring In-House

We’ve already established that hiring a new employee costs way more than just their annual salary. But what kind of costs are we talking about?

When it comes to the hiring process itself, you need to consider:

  • Advertising for the position
  • Reviewing resumes, interviewing and performing background checks
  • Test tasks

Once your new employee is hired, there are additional costs:

  • Training the new worker
  • Providing office space and paying extra utilities
  • Providing computer hardware and software
  • Commuting or travel expenses
  • Benefits (life insurance, medical and dental insurance…)

Whether you’re working on your own or with the help of an HR team, in-house hiring is not only expensive – it takes time.

You will need to go through the entire recruitment process, do background checks and interview potential candidates. It can take up to 2 months to find the right candidate, and it takes about 6 months for an employee to reach their breakeven point (BEP). 

In other words, your new employee needs to stay with your company for six months to actually earn back the money you are actually spending to have them in your company.

If you don’t hire the right person right away, you may have to go through the entire hiring process more than once – which means that you will have to spend even more money.

the hiring process

What’s the solution?

It is obvious that you can’t just hire a new employee without spending a significant sum.

On the other hand, if you want to expand your business, you can’t avoid hiring new employees.

Delegating tasks is the only way to have a successful business – and the reason majority of startups fail within their first year is because business-owners avoid delegating and try to do everything by themselves. To avoid this mistake, you need to start building your team as soon as possible.

So the question is – how do you avoid all these additional hiring expenses?

Well, there is one simple solution, and that’s outsourcing. If you choose to outsource instead of hiring in-house, you can save money on rent, utilities, travel expenses, benefits, and many other unforeseen costs.

Outsourcing also means that you get to choose from a wide range of remote workers, and according to some studies, businesses could save an average of $11,000 per year for every part-time remote worker. You can only imagine how much you would save if you decided to build an entire remote team.

This can come in especially handy if you’re just starting out

Outsourcing to freelancers who would get paid on a project-basis means that you’ll be able to pay them only when you have clients bringing in revenue. Your talent pool is also wider – you can hire experienced professionals who would accept a lower salary for a chance to work remotely, or techy-savvy college students who are happy to work part-time and gain some work experience for less money.

remote work

The Hiring Process

It takes a lot of experience to hire the right worker right away – which means that you may have to spend even more money before you find the right person for the position. Moreover, a high turnover will result in lower productivity of your entire team. 

That’s why you need to constantly improve your hiring process and make sure you find someone who will stay with your company for a long time.

A good hiring process starts with choosing the right advertising platform, and we can guarantee that you will find excellent remote workers right here at JobRack. We have thousands of Developers, Designers, Project Managers, Virtual Assistants, and many other high-quality remote workers you can hire for a lower cost than you may think. Click here to find out more.