What a hire actually costs you

Why the salary figure misleads

Almost every in-house versus offshore comparison we see starts by putting a UK salary next to an inclusive monthly rate. Those are not the same quantity, and the comparison is wrong before it begins.

A salary is what lands in somebody’s bank account. An employer cost is that plus secondary National Insurance, plus the pension contribution, plus whatever you paid to find the person, plus the kit they work on. An inclusive offshore rate already carries employment, payroll, insurance and benefits inside it. Compare the first against the third and the in-house option looks cheaper than it is.

What the calculator includes

• Employer National Insurance. Class 1 secondary contributions on earnings above the secondary threshold. The default rate and threshold are the published UK figures and are editable.
• Employer pension. The automatic enrolment minimum employer contribution, applied to qualifying earnings between the lower and upper limits rather than to the whole salary, which is how the statutory minimum actually works.
• Recruitment fee. Shown as a year-one cost, because that is when you pay it. Set it to zero if you hire direct.
• Equipment and software. Laptop amortised, licences, per-seat tooling.

What it deliberately leaves out

These are real costs. We have left them out because putting a fabricated number on them would make the total look precise when it is not.

• Management time. Every model needs somebody to direct the work. It is not free in any of them, which is why it is not a differentiator.
• Holiday and sick cover. Either the work waits or somebody else does it.
• Office space, where you have it.
• The cost of the vacancy. A role open for three months has a cost, and it usually dwarfs the fee.
• Attrition. If the hire leaves inside a year, the recruitment fee repeats and the ramp-up starts again.

Reading the result honestly

The number this produces is the employer cost of one role on your payroll for one year. It is not an argument for going offshore. Plenty of roles should be hired in-house, and we have written about when offshore is and is not the right answer without hedging.

What the number does is make the comparison fair. If you are weighing a requisition against an augmented seat, this is the figure that belongs on the in-house side of the page. For the structural breakdown of what sits inside an inclusive rate, see what offshore staffing actually costs.

Questions

Does this show your rates?

No. Everything above is calculated from figures you entered about your own hiring. Our rate card is issued on request against a specific role, because the honest answer depends on the discipline, the seniority and the hours of overlap you need. Asking for it is not a commitment to anything.

Where do the statutory defaults come from?

The employer National Insurance rate and secondary threshold, and the automatic enrolment minimum employer contribution and qualifying earnings band, are the figures published by GOV.UK for the current tax year. They are shown in the assumptions panel rather than buried in the arithmetic, and you can change any of them. Rates move, so check them against GOV.UK National Insurance rates and GOV.UK workplace pensions if precision matters to your decision.

Is this tax or financial advice?

No. It is an arithmetic tool using public statutory rates. For anything that turns on your specific circumstances, including employment status, IR35 or the treatment of a particular benefit, take advice from your accountant.