In-house or agency: the costs that never make the spreadsheet

The comparison usually gets made on a napkin: a developer costs this much a year, an agency costs this much a month, multiply and compare. It is the wrong calculation, and it is wrong in a direction that flatters hiring.

What a salary is not

Gross salary is the visible portion. On top of it sit employer taxes and social contributions, pension, insurance, paid leave, equipment and software licences, and the desk they sit at if you have offices.

Depending on where you hire, that adds somewhere between a fifth and a third again before anyone has written code. Recruitment adds a one-off fee, commonly fifteen to twenty-five percent of first-year salary if you use an agency to find them.

The cost nobody books

A new hire is not productive on day one, and for a senior role in a complex domain, three months to full effectiveness is optimistic rather than pessimistic.

You pay full cost for that period and receive a fraction of the output. It is a real cost, it lands entirely in year one, and it never appears on the spreadsheet because no invoice arrives for it.

Where in-house genuinely wins

We build software for a living and we will still tell you plainly: over a long enough horizon, an in-house team is almost always cheaper per unit of output. It is also better when:

• The software is your core business rather than something supporting it.
• You need decisions in minutes, not through a ticket queue.
• The domain knowledge is hard-won and you cannot afford for it to walk out of the door.
• The workload is steady enough to keep a team genuinely busy.

Where an agency wins

• You need to start now rather than in four months, which is what hiring realistically takes.
• The work needs six skills you cannot justify hiring full-time — design, DevOps, mobile, backend, QA.
• The workload is uneven and you would be carrying a team through quiet quarters.
• You do not yet know what you are building. Hiring permanently against an unclear scope is how teams end up with the wrong people.

The honest framing

It is rarely either-or and it is rarely permanent. A common and sensible pattern is to start with an agency to get to market, hire in-house once the product's shape is settled, and keep external capacity for the spikes.

What matters is running the comparison on your own numbers rather than someone's marketing. Our in-house vs agency calculator makes every salary, overhead percentage and ramp-up assumption editable, and shows the month at which hiring overtakes renting.

If it tells you to hire, hire. A calculator that only ever agreed with the people who built it would not be worth using.

How much does an employee cost beyond salary?

Employer taxes, pension contributions, insurance, paid leave and equipment typically add somewhere between a fifth and a third on top of gross salary before anyone writes code. Recruitment adds a one-off fee, commonly fifteen to twenty-five percent of first-year salary. And a new hire is not productive on day one — three months to full effectiveness is optimistic for a senior role in a complex domain.

Is it cheaper to hire in-house or use an agency?

Over a long enough horizon, an in-house team is almost always cheaper per unit of output. An agency wins when you need to start now rather than in four months, when the work needs six skills you cannot justify hiring full-time, or when the workload is uneven enough that you would carry people through quiet quarters. It is rarely either-or and rarely permanent.