Outsourcing cost breakdown

People want to know how much outsourcing costs. They ask for just one simple price. Surely, that isn’t too much to ask?

Unfortunately, the answer is simple.

To make things more complex, people often see someone’s salary as the total cost. Yet, as with any employment, the salary is just one component of the total.

I would love there to be a Netflix of employment, but alas, employing people is complex – and so the cost structure tends to reflect this.

Let’s look at the main factors

Role:

For a start, salaries can vary tremendously. Do you want an entry-level admin or a senior Web3 dev? A junior sales associate or a veteran VP of sales

The govt. and benefits:

On top of the salary, you’ll incur typical government taxes, insurance, healthcare, and employer contributions – as is the case with any country

Location:

Salaries tend to be much higher in major cities. They are much lower in the countryside, but selection is limited.

Facilities:

Then there is the office, facilities, and hardware. These days, it’s a lot more acceptable to work from home – but it’s not necessarily the best approach for everyone. Call me old, but I still believe in offices.

Recruitment and onboarding:

Recruitment can be painfully expensive in Western countries. Luckily, it is significantly cheaper in outsourcing destinations. You can also try and recruit yourself using various portals. But someone does have to do it.

Some outsourcing firms will offer free recruitment – but you get what you pay for

Long list!

As you can see, there are a few factors to consider. Wait, there’s more..

Service fee:

Then there is the service fee. This is the money that goes to the outsourcing firm to make all of this happen – seamlessly and reliably. Yes, these guys also have to make some money. They are the glue that sticks it all together. These fees are sometimes a percentage of the salary costs (markup), and sometimes they are a flat fee.

You also have the option to get very light support from the outsourcing firm, or alternatively, they can offer maximum support to the point where they can run the department for you.

Build your own:

The above considerations are a guide only. There are no hard rules. It’s a bit like making a sandwich.

People may get frustrated when they see all of these sandwich layers add up, but if you think about it – these costs are identical to employing people anywhere in the world. This is especially the case with traditional employment, where the costs of hiring someone can easily add another 50% – sometimes 100% – on top of their salary.

Perspective:

The costs do add up, however, despite paying ‘all of these extra costs,’ you will still save about 60%-70% compared to the comparative employment costs in your own country.

Not bad.

Read more thought leadership articles here:

• Global employment is at a tipping point
• Who would you hire if you had an unlimited budget?