Employee vs. Contractor vs. Offshore
Compare the loaded cost, control, risk, and speed of hiring an employee, a US contractor, or an offshore hire for one role.
Example scenario—not a forecast or verified benchmark. Enable JavaScript to edit inputs, view charts, save locally and export your analysis.
Example inputs
- What kind of role is it?
- back_office
- Hours of work needed per week
- 40
- Employee: annual salary
- 58,000
- Employee: taxes, benefits, overhead on top of salary
- 30
- Employee: recruiting and onboarding cost
- 5,000
- Employee: weeks to hire and ramp
- 10
- US contractor: hourly rate
- 55
- US contractor: extra management overhead
- 5
- Offshore: all-in hourly rate to the worker
- 12
- Offshore: platform or agency fee
- 25
- Offshore: productivity vs. a local hire
- 80
- Offshore: weeks to hire and ramp
- 6
- Offshore: extra management overhead
- 15
Example results
For 40 hrs/week of work, offshore is cheapest at $41K/yr vs. $111K for US contractor; offshore is the best overall fit at 82/100.
- Best overall fit
- Offshore
- Annual cost spread (most vs. least expensive)
- $69,480
- Employee: loaded annual cost
- $80,400
- US contractor: annual cost
- $110,880
- Offshore: annual cost (productivity-adjusted)
- $41,400
- Contractor break-even hourly rate
- $41.88
What stands out
Offshore is cheapest at $41,400 a year
$69,480 less than US contractor ($110,880). Per hour of output: employee $41.88, contractor $57.75, offshore $21.56.
Offshore scores best overall (82/100)
The lowest-cost option also wins once control, risk, and speed are weighed.
Contractor beats employee below $41.88/hr
At 40 hrs/week, any US contractor rate under $41.88/hr (before management overhead) costs less than the loaded employee.
Next actions
- Pilot offshore for 60 days with written SOPs, 3-4 hours of time-zone overlap, and a weekly output scorecard before committing.
- Document the role's top 10 tasks before choosing; well-documented work lowers the risk of the cheaper offshore option.
- Consider a hybrid: keep judgment-heavy work in-house and move repeatable tasks to the lower-cost model.
Model assumptions & limitations
- 48 productive weeks per year; employee salary scales with hours relative to a 40-hour week.
- Control and risk scores are rule-of-thumb ratings (employee 90/85, offshore 65/65, contractor 50/55) and contractor time-to-start is assumed at 2 weeks.
- Overall score weights cost 45%, control 25% (scaled by role type), risk 15%, speed 15%.
- Not legal or tax advice. Worker classification rules vary by state and country.