What scaling a business costs: hire-led vs partner-led

Key takeaways

The cost of scaling a business depends on how capacity is bought. One £30,000 UK employee supplies about 1,740 worked hours for about £34,500 a year, before recruitment and equipment. The same hours from a managed offshore team cost an indicative £15,700–£31,300, with no year-one extras and the option to reduce them.

• About £34,500 a year: one £30,000 role at the loaded rate.
• £15,700–£31,300: the same 1,740 hours at £9–£18 per hour offshore.
• Hiring adds year-one costs: recruitment, equipment and training time.
• Onshore outsourcing at £20–£35 per hour can cost more than hiring.

What does scaling cost a small business?

Scaling costs a small business the price of the extra capacity plus the cost of getting it working. For most firms, people are the largest part. The total differs sharply depending on whether the capacity is employed, which is fixed and slow to change, or bought as a service, which is variable.

• How outsourcing helps small businesses scale without hiring
• In-house vs outsourcing: which model is more cost-effective?

What does the hire-led route cost?

A £30,000 salary costs about £34,500 a year once employer National Insurance at 15% above £5,000 and the 3% minimum pension contribution are added, or about £19.81 for each of the 1,740 hours worked after holiday. Eligible small employers can offset up to £10,500 of employer National Insurance through the Employment Allowance.

Year one costs more. Recruitment, a laptop and software, and the time colleagues spend training the newcomer all fall in the first months, before the person is fully productive.

• Loaded annual cost: about £34,500.
• Recruitment: advert costs or an agency fee.
• Equipment and licences.
• Training time from existing staff.
• Four to twelve weeks before capacity arrives.

• The true cost of an employee in the UK
• What it costs to recruit an employee in the UK
• Overhead cost per employee in the UK: what to add

What does the partner-led route cost?

As indicative market ranges, a managed offshore team costs UK businesses £9–£18 per hour and an onshore provider £20–£35 per hour, typically including supervision, cover and equipment. For 1,740 hours that is about £15,700–£31,300 offshore and £34,800–£60,900 onshore. These are market illustrations, not GBL prices.

The costs on your side are setup and oversight: documenting the process, a few weeks of closer review, and two to four hours a week from a relationship owner.

• BPO cost per hour in the UK

How do the two compare over a year?

Over a year, offshore managed capacity is usually cheaper per hour than a UK hire and onshore is similar or dearer. The larger difference is flexibility. If volume falls by a third, the managed hours can be reduced with notice. The salary cannot, short of redundancy.

• UK hire: about £19.81 per worked hour, fixed.
• Managed offshore: £9–£18 per hour, variable.
• Managed onshore: £20–£35 per hour, variable.

• Operating leverage: why fixed costs make growth risky
• Redundancy vs contract exit: the cost of scaling down

Which costs are easy to miss?

On the hiring side, the missed costs are management time, cover for absence and paid hours with no work to fill them. On the outsourcing side, they are the time to document and brief, rework if quality is poor, and any minimum commitment. Count both lists before deciding.

• Staff utilisation rate: the cost of paid idle time
• The outsourcing break-even point: when it pays

When does hiring cost less?

Hiring costs less when the role is full every week, the work needs an onshore person anyway, or the task takes so long to learn that turnover in an outside team would be expensive. It also costs less per hour than onshore providers in many cases. Price the specific role, not the general idea.

• When to outsource and when to hire
• When not to outsource

What does this look like in practice?

A pattern we see in UK growth plans: three new office roles are budgeted at salary, about £90,000. Costed properly they are about £103,000, plus recruitment. Two of the three turn out to be routine processing that could be bought for considerably less, leaving budget for the one role that needed to be senior.

Across our client work, back-office cost per task has fallen by 42% once the process was written down and run by a managed team.

• See client work
• BPO Solutions for UK businesses

Cost of scaling checklist

Cost each planned role with these steps.

• Convert the role into weekly hours by task.
• Calculate the loaded hourly cost of employing.
• Add year-one recruitment, equipment and training.
• Get a quote for the same written scope.
• Add your own oversight hours to the quote.
• Compare cost per hour and cost of reducing later.
• Decide role by role, not as a policy.

• Workforce planning for growth: roles to hire, roles to buy
• Work out your cost per task before you outsource

Next step

Send us the roles in your growth plan with salaries and what each would do. We will cost each both ways and say plainly where hiring is the better value.