Salary is about 60% of the real cost
Almost everyone compares a salary to a retainer. That comparison is wrong by tens of thousands a year, and it is wrong in a consistent direction.
Your numbers
Before any employer costs.
Covering the same scope the agency would.
Employer taxes, benefits, insurance. Typically 25–40%.
Seats an agency usually brings with them.
Of salary. Set to 0 if you hire direct.
Recruitment cost is spread across this.
Direction, review and 1:1s per person.
Hiring, notice period and learning your product.
Agency costs less per year
$150,520
Fully loaded: $303,360 in-house vs $152,840 agency.
True cost per hire
$151,680
$121,600 burdened salary, plus tooling, recruitment and management.
In-house per month
$25,280
The number to compare a retainer against.
Break-even retainer
$24,543
Above this, hiring is cheaper. Below it, the agency is.
Cost of the ramp
$50,560
4 months at roughly half output, paid at full cost. One-off.
At 2 hires, the agency is $150,520 cheaper a year — and you avoid $50,560 of ramp cost before anything ships. That gap closes as scope grows: run the numbers again at the headcount you’d actually need in a year, because fixed salary beats scaling scope eventually.
Calculated in your browser — nothing is sent anywhere, and nothing is stored.
The maths, so it isn't a black box.
It burdens the salary first
Employer taxes, benefits and insurance typically add 25–40% on top of base pay before anyone has done any work. A $95,000 hire costs well over $120,000 before you have bought them a single software seat.
Then adds the costs that never get counted
Software licences an agency would bring with them, recruitment fees, and the manager hours spent on direction, review and 1:1s. Management time is the largest of the three at most companies and the one nobody puts in the spreadsheet.
Recruitment is amortised, not front-loaded
Charging a full placement fee to year one overstates the cost of hiring. We spread it across expected tenure instead — a deliberate choice that makes the in-house side look better, because we would rather the honest number told you to hire than have you distrust the tool.
Ramp is priced separately as a one-off
A new hire produces little for the first few months while costing full freight. We show that as a distinct one-time figure rather than burying it in the annual comparison, because it is a real cash cost but it does not recur.
And it solves for the break-even retainer
The most useful output is the retainer level at which the two options cost the same. Above it, hiring is cheaper; below it, the agency is. That single number settles most of these debates faster than any argument about quality.
Questions about this calculation
It is built to be rigged against us, which you can verify: recruitment is amortised across tenure rather than charged to year one, we model management overhead on the agency side too, and we do not include severance risk, backfill cost or the productivity loss when a specialist leaves — all of which are real costs of employment. Set recruitment to zero and tenure high, and it will still tell you to hire when hiring is genuinely cheaper.
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