Outsourcing vs hiring: What’s best for a growing UK company?

Staffing is one of the biggest operational costs for growing startups. Whether hiring your first employee or scaling a team, choosing between outsourcing and hiring is a serious decision.

According to the Office for National Statistics, 77% of UK businesses reported rising employment costs in 2025. That’s one reason small business owners are turning to outsourcing as a hiring alternative. In fact, recent YouGov research found that 70% of UK companies have already outsourced some part of their business.

Outsourcing provides entrepreneurs with flexible access to industry expertise without long-term costs. In contrast, in-house teams foster loyalty and offer greater control.

In this article, we outline the key benefits and drawbacks of each option and provide a helpful checklist to assist you in making a decision.

When to outsource vs hire employees: Key factors to consider

First, what do people mean when they talk about ‘outsourcing’? Simply put, outsourcing is a business practice by which companies hire external businesses, contractors, or freelancers to manage a particular project, service, or business function.

Commonly outsourced projects include web development and content creation, where founders need fast results but can’t justify a full-time hire.

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By contrast, hiring in-house employees means recruiting staff who work directly for your business. That employment could be full-time, part-time, or a contractor for a short-term, fixed period. Those workers are then on your payroll, and you’re responsible for their salaries, benefits, training, and compliance with UK employment law.

Both staffing approaches have pros and cons. Choosing whether to outsource or hire employees will depend on your business goals, resources, and industry.

Here are the five primary considerations:

1. Cost

Cost is the most significant factor when hiring an in-house employee or outsourcing.

When you employ someone, you aren’t just responsible for their salary. You’ll also need to consider costs like National Insurance Contributions, pension contributions, and relevant benefits.

For example, a full-time marketing hire might cost £35,000–£55,000 per year plus benefits. Outsourcing that function could cost £500–£2,000/month, depending on the scope of work and hours.

That being said, outsourcing isn’t always cheaper. Talented, in-demand freelancers may charge premium rates for high-quality, short-term results, rivalling long-term salary costs.

2. Expertise

Next, there’s the level of expertise your startup needs. Think about whether the skill you need is short-term or ongoing.

For example, maybe you need to bring in a senior-level web developer to rebuild your ecommerce platform, but you’re happy to maintain it in-house afterwards. Hiring a brilliant freelance developer rather than permanent employees might make sense in that case.

Meanwhile, recruiting full-time staff probably makes more sense if you need a finance expert to manage daily accounts in the long term.

3. Flexibility

Outsourcing is often more flexible when it comes to managing fluctuations in workload. However, outsourced experts typically prefer to adhere closely to a brief or contractual agreement, which means you may be unable to reassign different types of tasks to them.

When considering whether to outsource a task, it’s important to estimate the workload and how frequently the project’s scope, timing, or deliverables might change.

On the other hand, when hiring employees, it’s good to consider the various factors at play, like notice periods and HR processes – especially when scaling down. Being aware of these can help you navigate changes more smoothly.

4. Control

When you bring an in-house team on board, keeping track of everything and collaborating effectively is much easier. This gives you more say in how things run and helps everyone stay connected and on the same page every day.

Outsourcing parts of your business places those elements in the hands of third parties. Those providers might be trustworthy experts in their field. But in exchange for added efficiency, you may lose touchpoints for feedback and collaboration.

That’s why many founders prefer to hire outside help for tasks like design and copywriting, while keeping the more strategic and brand-sensitive work within their own team.

5. Risk

Finally, it’s essential to consider the risks associated with outsourcing for your business. When collaborating with external providers, you may need to share sensitive data or intellectual property, which can pose security risks.

Additionally, if you decide to hire in-house, you will have to comply with various legal requirements, including employee registration and benefits compliance, such as providing holiday and sick pay. If you fail to meet those requirements, you could face penalties.

A side-by-side comparison of outsourcing vs hiring

Deciding whether to outsource or hire employees can be challenging. To assist you, here’s a side-by-side comparison highlighting the key considerations where each approach excels.

Feature	Hiring in-house	Outsourcing
Cost	Higher long-term costs that include salary, National Insurance, pensions, training, and benefits	Lower expenses and pay-as-you-go approach that avoids full-time employee costs
Expertise	Staff may require training, but long-term skills are retained internally	Gain access to experts who may otherwise be too expensive to hire full-time
Flexibility	Scaling up or down is slower and costlier, but employees can be reassigned	Highly flexible approach where you can scale or pause services based on workload or project requirements
Control	You maintain complete oversight and direct management of business operations	You delegate control of systems, workflows, and timelines to a third-party
Risk	You assume responsibility for payroll, pensions, benefits, and health and safety	Outsourced party manages its compliance, but data security is a potential risk

Pros and cons of hiring in-house

Hiring in-house employees provides greater control over business operations. It also helps create a strong company culture and keeps valuable knowledge and skills within the organisation.

However, hiring employees to work in-house also comes with added responsibilities. These include providing training and benefits to your team members, and meeting statutory requirements like offering minimum wage, holiday pay, and workplace pensions.

Here’s how the pros and cons stack up:

Pro: More control and oversight

A key benefit of hiring in-house is that you can closely manage workflows within your company. You can set team priorities and maintain quality standards without relying on third parties or somebody else’s timeline.

You’ll also benefit from an enhanced company culture. Employees will become fully immersed in your company’s mission, values, and ways of working. This can lead to greater brand consistency and a strong ethos that shows in your team’s output.

Pro: Retention and engagement

Having long-term staff is like having a solid foundation for your company’s culture. With them on your team, everyone tends to feel a greater sense of commitment to the company’s goals and projects. This boosts productivity and also helps keep turnover low.

The skills and knowledge developed by your team through training and experience remain within your business. Employee knowledge also accumulates over time, adding significant value. You retain your experts in-house and can rely on them whenever needed.

Pro: Stronger collaboration

Recruiting employees to build an in-house team creates a better sense of collaboration. When team members work closely together, they can chat in real time, share ideas, and tackle issues more quickly.

Con: Higher employment costs

As mentioned, employment costs include more than the advertised salary when recruiting new team members. By law in the UK, employers are required to provide:

• Statutory minimum level of paid holidays
• Statutory minimum length of rest breaks
• Statutory Sick Pay (SSP)
• Maternity, paternity and adoption pay and leave

You must also register with HM Revenue and Customs (‘HMRC’) and assume responsibilities for your employee payroll, tax and National Insurance Contributions.

Con: More legal responsibilities

Hiring employees also means you must comply with UK employment laws. This includes responsibilities around:

• Contracts and payroll – Provide a written contract or statement of employment, and adhere to requirements on minimum wage, annual leave, and sick pay
• Health and safety – Get employer’s liability insurance, ensure employees stick to maximum hour limits, and provide a safe and secure working environment
• Equality and inclusion – Prevent workplace discrimination, and make reasonable adjustments to accommodate disabled employees

This list isn’t exhaustive, as some industries have specific regulatory requirements. But it gives you an idea of the extra considerations and compliance obligations you’ll be facing by hiring an in-house team.

Con: Less flexibility

Hiring in-house typically means less flexibility to scale up or down, and managing sudden changes in business demand can be more challenging. For example, if you experience a surge in sales, scaling up your in-house support team can be lengthy, requiring time to recruit and train new employees.

On the other hand, when business slows down, downsizing can be equally challenging. Reducing staff affects workplace culture and can disrupt the lives and wellbeing of your employees. In contrast, external logistics companies offer the flexibility to ramp up or down quickly without the long-term commitments and impacts on your team.

Pros and cons of outsourcing for small UK businesses

Outsourcing can be a smart option when your company needs specialised skills without a long-term commitment. It helps you save on extra employment costs and avoids complicated regulatory requirements. Just remember that while outsourcing can be convenient, it may also mean giving up some control over quality and decision-making.

Here’s a quick breakdown of the pros and cons of outsourcing:

Pro: Cost efficiency

Outsourcing can provide significant cost benefits. By opting for this approach, you generally only need to pay the agreed-upon delivery cost, making it a cost-effective solution for short-term projects like IT development, one-off marketing campaigns, or seasonal sales support.

This streamlined approach allows you to manage budgets more effectively without worrying about the extra costs associated with staffing.

Pro: Access to specialist skills

Hiring the best and brightest to work for you full-time can be expensive. Experts are only going to come to your business for higher-end salaries, and not all startups can afford these.

That’s why outsourcing essential skills for short to mid-term projects is particularly beneficial for small businesses in their growth phase. It lets early-stage companies test and scale quickly without prematurely investing in long-term talent.

Bringing in third-party experts is a great way to tap into their skills whenever needed, and you only pay for what you get.

Pro: Scalability and flexibility

Outsourcing allows you to adjust your services easily based on needs without requiring long-standing commitments. This approach is helpful if you run a business that experiences seasonal fluctuations, has major projects, or faces rapid market changes.

By outsourcing those needs, you’ll also free up your own time from non-core tasks, so you and the employees you keep on the payroll can focus on high-growth opportunities.

Con: Less control

Outsourcing will result in reduced oversight of daily processes, and you’ll be reliant on the timelines, workloads, and priorities set by external parties.

For instance, if you’ve hired an event planner for your upcoming brand launch, which may be the most significant event of the year for your business, keep in mind that they’re likely juggling multiple other events. As a result, your event may not receive their full attention.

Con: Security risks

When you hire a third-party company or freelancer, you may need to share sensitive data or give access to your internal systems. While this can be beneficial for your business, it also poses risks.

Sharing information externally can lead to data breaches and compliance issues with data security laws, which may harm your reputation and cause legal problems. If you go down this route, remember to take precautionary measures.

Con: Variable quality

It’s key to be aware that not all contractors provide consistent or high-quality results. Outsourcing involves transferring elements of quality control to others.

Keep in mind that if your outsourcing partner is unreliable or fails to deliver, it could negatively impact your brand image or business operations.

How to decide: hiring vs outsourcing checklist

Not sure whether to outsource or hire in-house to meet your business requirements? Here’s a quick-reference guide to help you weigh up your options:

What to evaluate	Questions to ask yourself	Recommendation
Scope of work	Is the work core to your business and ongoing?	Hire in-house
	Is the work project-based, temporary, or specialised?	Outsource
Cost	Can you afford full-time salaries, NIC, pensions, and benefits?	Hire in-house
	Is cost reduction a priority?	Outsource
Expertise	Are the required skills needed daily and ongoing?	Hire in-house
	Are the required skills needed on a short-term basis?	Outsource
Control	Do you need direct oversight of daily operations?	Hire in-house
	Are you comfortable with outputs being managed independently?	Outsource
Flexibility	Do you need staff levels to scale up or down frequently?	Outsource
	Do you need a stable, predictable headcount?	Hire in-house
Compliance and risk	Are you comfortable managing employer requirements and training obligations?	Hire in-house
	Do you want someone else to manage regulatory compliance and processes?	Outsource
Long-term strategy	Is the business function strategic to your competitive advantage?	Hire in-house
	Is it a business function better managed externally?	Outsource

Ready to learn more about hiring employees?

The decision to outsource vs hire an in-house team isn’t always easy. You must consider various factors, including cost, flexibility, risk, and handing control of business functions to somebody else.

Your company’s legal structure plays a crucial role in deciding whether to hire employees or outsource certain functions. It impacts payroll management, onboarding procedures, and employer responsibilities, all of which influence your decisions on whether to hire in-house staff or outsource certain functions.

Whichever route you choose, by formalising your foundations – like registering your business – you’ll create a solid framework that can help you attract and grow your talent more effectively from the very start.