Back in 2014 Toptal’s VP of User Engagement Hyam Singer challenged the notion that in-house developers were always more cost effective than contractors, who on the surface charge higher hourly rates.
Hyam did this by unearthing all the hidden costs & overheads associated with employing in-house staff by providing a thorough, consistent and well-supported calculator for comparing the real costs of in-house staff to ‘external consultants’, in this case top-tier freelancers.
Under the calculator, Hyam clearly explained why the cost analyses being undertaken by Hiring Managers when comparing in-house staff to ‘external consultants’ were flawed. Rather than re-explaining his reasoning, I encourage you to check out his article ‘Don’t Be Fooled: Calculate the Real Cost of Employees and Consultants’.
In this article, we are undertaking the exact same exercise as Hyam Singer, but this time for:
Remote Full-Time Employed Contractors
(in Central or Eastern Europe)
In-House Employees in the UK
The geographies & outsourcing models are different, however, the principles of the comparison calculators are more or less the same.
|Geographical Focus||Outsourcing Model||Compared Against|
|Toptal Comparison Calculator||United States||Top-tier vetted freelancers||In-house employees in the US|
|YouTeam Comparison Calculator||United Kingdom, Western Europe & other geographies with comparable cost bases for IT Staff||Remote, Full-Time Employed Contractors in Central or Eastern Europe||In-house employees in the UK|
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To develop a true and accurate comparison we also need to take into account extra effort required for communicating and managing the remote resources. Our calculator takes this into account by multiplying the salary paid to the Remote Full-Time Employed Contractors in Central or Eastern Europe by 1.2.
YouTeam’s calculator allows comparing the cost of hiring a remote full-time contractor with an in-house employee.Click to tweet
Summary of the Results
Based on the methodologies outlined above (and in more detail underneath the calculator itself), these were the potential saving calculated:
|Level of expertise||Mid||Senior||Super-Senior|
|Years of experience||3-4||4-7||7+|
*The calculator can also be used for Northern & Western Europe, USA, Canada, Singapore, Australia & New Zealand