As your business grows, there will come a time when you don’t have the in-house skills to get a job done. Do you consider an expensive new hire? Or do you spend the time and money training someone in-house? That’s a common reason many small companies opt to outsource. But if you have never outsourced before, what is the cost to outsource? And can your business afford it?
Read this short guide on outsourcing costs to help your future recruiting decisions.
What Is the Cost To Outsource?
Outsourcing is the process of buying-in skills from an external company. There are two aspects to outsourcing expenses: initial costs (or upfront costs) and long-term costs (or ongoing costs).
Upfront Costs Of Outsourcing
If you are using a third-party agency to provide outsourced staff on your behalf, there may be an upfront fee. Before signing an agreement for outsourcing, find out if there are any initial costs in the contract.
Sometimes there are hidden costs to outsourcing. Unless you opt to hire a business with established processes, you may need to spend time and money training that person on in-house systems and processes.
Long-Term Costs Of Outsourcing
Some outsourcing contracts will operate on a fixed-fee per-service basis. Others will be on a day or monthly rate.
Expect contractor rates to be higher than salary rates for the same skill-set, as you won’t be covering expenses such as recruitment, benefits, or pensions.
However, it’s worth noting that a salaried employee will typically cost a business up to 40% more than their pay when taking overheads and other costs into account.
Use this figure as a benchmark when considering if a potential outsourcing agreement is value-for-money in the long term.
In addition to outsourcing fees, you should also factor in any overhead costs. That is vital if you plan to hire the contractor on-site, especially if they need specialist equipment.
Unless you work with a professional outsourcing company, remember that outsourced staff may still need managing from day-to-day. There is a cost to this.
How To Save Money When Outsourcing
If you plan to outsource, you can make the process smoother and more cost-effective by following these tips:
- Seek outsourcing hires who have an established process in place to support your business, reducing the need for knowledge transfer
- Use outsourcing businesses that have a strong IT set up to ensure you get the most for your money
- Set aside training and handover time if you plan on bringing the work in-house in the future once your staff are up to speed
This planning will help you get the most out of the experience. And it will also help you get the best option for your budget.
Business Costs: Outsource or Hire?
Outsourcing is the ideal opportunity for a small or medium-sized business to pursue expansion plans without the long-term commitment of hiring staff.
If the cost to outsource is planned well, it can be a financially advantageous option compared to full-time recruitment.
Before making your hiring decisions, get some professional advice by contacting our team about our outsourcing solutions and why they might be the right fit for your business.