Nearshore staff augmentation costs vs UK permanent hires

In today's global economy, businesses are constantly searching for ways to optimise their operations while remaining competitive in the market. Staff augmentation has emerged as a popular solution, enabling companies to quickly and efficiently fill skill gaps, increase productivity and reduce costs. However, when it comes to choosing between nearshore staff augmentation and UK permanent hires, many factors come into play, such as how does it weigh up against the traditional permanent recruitment model. In this newsletter, we will explore the pros and cons of each option, with a particular focus on cost, to help you make an informed decision for your business.

What is nearshore staff augmentation?

Nearshore staff augmentation is a business model where a company hires individuals or teams of skilled professionals, located in a nearby country, to supplement or augment their existing in-house team. This model is used primarily by companies that need additional talent or expertise but do not want to invest in recruiting, training, and managing employees on their own.

The term "nearshore" refers to outsourcing work to a team located in a nearby country, typically within a similar or overlapping time zone. This can provide several advantages over traditional offshore outsourcing, such as better communication, innovation, cultural and language similarity, and often working the same hours, all of which can lead to more effective collaboration and better project outcomes.

The staff augmentation model allows companies to quickly scale their team up or down as needed, without the long-term commitment and overhead costs associated with hiring full-time employees. Companies can access a wide range of skills and experience making it much easier to hire skills like software development, devops engineering, solution architecture, data science and more, based on their specific needs.

Overall, nearshore staff augmentation is a flexible, cost-effective, and efficient way for companies to access the talent they need to grow and succeed in today's competitive business environment.

What is the true cost of a permanent hire in the UK?

Often, when we think about hiring someone permanently into the team we tend to think of it being cheaper than flexible day rate hires because we tend to just think of the permanent salary alone, without taking into consideration many other factors.

Here is an example overview of the associated costs of 1x permanent hire for a Senior Software Engineer currently working with a modern tech stack:

Salary: ￡65,000

20% Recruitment Fee: ￡13,000

3% Workplace Pension: ￡1,950

Office/Coworking Desk: ￡2,000+ per year

Employers Liability Insurance: ￡65+ per year

13.8% National Insurance: ￡8,970

Equipment: ￡1000+

TOTAL: ￡91,985

+ Training Costs

+ Staff Entertainment

= ?????

That is the 1st year cost of your permanent hire. Now you need to consider that your new hire will most likely have a 3 month notice period and it could take you 3 months to find those technical skills in the first place. What does that delay cost you? Now what happens if there is a change in situation with your product, skills required, the economy etc. which means you are paying a yearly recurring cost without the need for those skills permanently. Something to think about...

How does that UK cost compare to nearshore staff augmentation?

One of the main benefits of nearshore staff augmentation is the sheer amount of talent there is available. A much larger technology talent pool means there is a larger availability of very good engineers with niche skillsets. Typically if you're hiring in the UK you may just find someone with the essential skills in the job specification whereas when you hire nearshore you find people with the essential and desirable skills faster.

For a Senior Software Engineer with 7+ years' experience in a modern tech stack and the ability to mentor your in-house team to help with up/cross-skilling you can expect to pay in the region of ￡350-￡400 a day. Here are 3 separate calculations for that range:

￡350 per day x 20 working days per month x 11 months (20 days holidays per year) = ￡77,000

￡375 per day x 20 working days per month x 11 months (20 days holidays per year) = ￡82,500

￡400 per day x 20 working days per month x 11 months (20 days holidays per year) = ￡88,000

That is a minimum saving of ￡3,985 and a maximum saving of ￡14,985 per person, per year without taking into consideration permanent costs of training and staff entertainment so the savings are likely to be even greater when you introduce nearshore staff augmentation. Plus, you get the flexibility to scale up, scale down or change technical abilities when you want so actually the savings are much greater, just harder to calculate without knowing your personal situation.

Nearshore is for me, where do I start?

Finding the right partner can be a challenge. As someone who offers resourcing & capability consulting services in my day job I have an eco-system of trusted nearshore staff augmentation partners so I can help you to understand what is available, which locations might be suitable for your business and guide you through the process. Please comment or send me a message directly if you would like to chat.