Outsource or hire? A decision guide for UK SMEs

Key takeaways

Outsource or hire? Outsource when the work is repeatable, documented, needs cover beyond one person, or fluctuates. Hire when the work is your competitive edge, needs judgement on every case, or requires someone physically present. For many UK SMEs the answer is both: hire the leader, outsource the volume.

• A UK employee on the National Living Wage costs about £16.27 per worked hour before overheads.
• Managed offshore BPO typically costs £9–£18 per hour including cover and management.
• Hiring takes weeks to months; a managed seat can start within about two weeks.
• Hire for judgement, relationships and presence; outsource for process, volume and cover.
• If volume swings by season, outsourcing avoids hiring and redundancy cycles.

How do you decide whether to outsource or hire?

Decide by the nature of the work, not the cost alone. Outsourcing through business process outsourcing (BPO) suits work that follows a written procedure and can be measured. Hiring suits work that depends on judgement, relationships or physical presence, and work you want to build long-term capability in.

Five questions settle most cases: Is the work repeatable? Can it be documented? Does it need cover beyond one person's hours? Does the volume fluctuate? Is it a source of competitive advantage? Mostly yes to the first four and no to the last points towards outsourcing.

• What is BPO and how can it help UK businesses?

What does a UK hire really cost?

A UK hire costs far more than the salary. Using official 2026/27 rates, a full-time employee on the National Living Wage of £12.71 earns about £24,785 a year. Employer National Insurance at 15% above £5,000 adds about £2,968, and the 3% minimum pension contribution adds about £556, for a total of about £28,309.

After 28 days of statutory holiday, that person works roughly 1,740 hours, so the cost is about £16.27 per worked hour. Then add recruitment fees or advertising, equipment, software licences, desk space, training, sick pay and your time managing them. Eligible small employers can offset up to £10,500 of employer National Insurance through the Employment Allowance.

• The true cost of an employee in the UK

How do outsourcing and hiring compare?

The comparison below assumes a repeatable support or admin role. For a skilled, judgement-heavy role, the balance shifts towards hiring.

• Cost: hire from about £16.27 per worked hour plus overheads; managed offshore BPO roughly £9–£18 all-in.
• Speed to start: hire typically 4–12 weeks including notice; managed seat about 2 weeks.
• Cover: hire needs holiday and sickness cover arranged by you; BPO includes cover.
• Flexibility: hire is a fixed commitment; BPO often scales monthly.
• Control: hire gives direct day-to-day control; BPO gives control through process and scorecard.
• Capability: hire builds knowledge inside the business; BPO builds it in documented procedures.

• BPO cost per hour in the UK
• Virtual assistant versus managed BPO team

When should you hire instead?

Hire when the role is central to what makes customers choose you, when every case needs experienced judgement, when someone must be on site, or when you are building a team leader who will own a function for years. Hire also when the volume is small and steady enough for a part-time employee.

Hiring is also right when the work is still being invented. A new service with changing rules needs someone close to the owner, not a procedure that will be out of date by next month.

When should you outsource instead?

Outsource when the work is high-volume and procedural, when you need cover beyond one person's hours, when demand is seasonal, when recruitment keeps failing, or when you need capacity in weeks rather than months. It is also the safer route when you are not sure the volume will last.

• Which tasks a small business should outsource
• Seasonal and peak customer service cover

Can you combine both?

Yes, and it is often the best answer. A common model is one in-house lead who owns the function, knows the customers and makes decisions, supported by an outsourced team that handles volume, extended hours and cover. The lead sets standards and handles escalations; the team does the repeatable work.

This keeps knowledge and accountability inside the business while giving you cost and flexibility on the volume.

• How to manage an offshore team well

What are the risks on each side?

Hiring risks a bad fit, a long notice period, and a process that lives in one person's head. Outsourcing risks a rushed handover, communication gaps and data protection obligations. Both are manageable. The difference is that outsourcing forces you to document the process, which reduces key-person risk either way.

• The disadvantages of BPO and how to manage them

What does this look like in practice?

A pattern we see in growing trades and service businesses: the owner advertises for an office administrator three times in a year, each hire leaves within months, and the admin falls back on the owner each time. Keeping one experienced in-house coordinator and outsourcing the phones, booking and data entry around them usually breaks the cycle.

• See client work
• BPO Solutions for UK businesses

Checklist: outsource or hire?

Answer these for the role you are considering.

• Write down the tasks and weekly hours in the role.
• Mark which tasks follow a procedure and which need judgement.
• Calculate the fully loaded cost of a hire at the salary you would pay.
• Note the hours of cover needed, including holidays.
• Estimate how much the volume swings through the year.
• Decide who would manage the person or the provider.
• Choose hire, outsource or a lead-plus-team hybrid.

Next step

Before you post the job advert, send us the role. We will tell you honestly whether to hire, outsource or combine them, and what each would cost. 30 minutes, no pitch.