Should I hire or outsource?

Beyond base salary, a full-time employee typically costs 25–40% more when you factor in employer payroll taxes (National Insurance in the UK, FICA in the US), employer pension or retirement contributions, health benefits, equipment (laptop, software licences), onboarding and training time, and management overhead. The 1.3× multiplier used here is a conservative baseline — for roles with expensive benefits or significant equipment needs, 1.4–1.5× is more accurate. It does not include recruitment fees, which typically add another 15–20% of first-year salary for agency hires.

For most knowledge work roles, hiring becomes cheaper than contracting when the hours needed exceed roughly 25–30 hours per week over a sustained period. Below that threshold, a contractor is often more cost-effective because you're only paying for time worked, with no idle time, benefits overhead, or bench cost during quiet periods. The crossover point also shifts depending on the contractor's rate premium over the equivalent FTE salary — senior specialists often charge 2–3× the FTE equivalent, which pushes the break-even point down to fewer hours.

Yes — often more important than the cost calculation. Full-time employees build institutional knowledge, are available for ad-hoc requests, can be managed more directly, and are more likely to identify and surface problems proactively. Contractors deliver defined scope but rarely go beyond it. For roles that involve customer relationships, product direction, sensitive data, or deep organisational context, the integration and accountability of employment often outweighs the cost difference. Leadership roles especially should almost always be hired, not outsourced.

The break-even month is when the cumulative cost of a full-time employee equals the cumulative cost of a contractor for the same work. If the FTE is cheaper per month (common for high-hours, long-duration roles), the break-even is month one — hire immediately. If the contractor is cheaper per month, there may never be a break-even, or it arrives only after several years once recruitment and onboarding costs are amortised. For most roles, the monthly cost comparison is the right number to focus on: if FTE costs more per month but you need the role for years, factor in the integration and retention benefits of employment.

Generally yes, if they've been working with you for more than 12 months at high hours. Beyond the cost calculation, a long-term exclusive contractor starts to look like an employee to tax authorities — which creates misclassification risk (see the Employee vs contractor guide). Converting also locks in the relationship, removes rate renegotiation risk, and typically increases engagement and output quality. The main reason not to convert is if the contractor actively prefers the arrangement and the hours genuinely don't warrant a full-time role.