Hire vs Subcontract Cost Calculator

How the hire vs subcontract cost calculator works

Hiring cost is all committed paid hours times loaded employer hourly cost, plus the one-time period cost. Productive-hour capacity is paid hours times productive percentage. Required hours above that capacity make the hiring comparison infeasible; the cost alone does not solve that shortfall.

Subcontract cost is required productive hours times the entered rate plus its fixed period cost. Hiring saving is subcontract cost minus hiring cost only when hiring capacity covers the need. Fixed commitments remain even at zero required hours. The continuous cost-line intersection must also fall within hiring capacity to be useful.

Use consistent scope and a defensible fully loaded employer rate. The intersection is a cost-line comparison, not an exact cent-rounded switch threshold. Worker classification, employment law, overtime, availability, quality and operational scheduling are not determined by this calculator.

Worked example

Hiring 1,200 paid hours at $35 plus $5,000 costs $47,000. At 85% productive time it provides 1,020 productive hours, covering the 1,000 required. Subcontracting costs $500 plus 1,000 × $50, or $50,500. Hiring saves $3,500 within capacity. A $55 subcontract rate makes that saving $8,500.

Sources and assumptions

The source material explains the underlying calculation or pricing structure. Entered prices, costs, schedules and scenario choices are your assumptions; this tool does not obtain supplier quotes or predict actual results.

• OpenStax: relevant fixed and variable outsourcing costs