Hire someone, buy software or outsource?
Three ways to get the same work done: hire someone, outsource it, or buy software. See what each costs a year after tax relief, over 1 and 3 years.
Your answer
Enter the hours, your profit, the pay, the outsourcing rate and the software cost to compare all three.
About this calculator
For business owners with work that needs doing every week (admin, bookkeeping, customer service, marketing, a trade) who are deciding whether to take someone on, pay someone else, or let software do some of it.
What happens to your answers
We don’t keep them. Your answers go to our server to do the sums and aren’t stored or logged. If you copy a link to your answers, they’re in the link itself, so only share it with people you trust.
How it’s worked out
Hiring: pay, employer's National Insurance (15% on pay over £5,000, less any Employment Allowance you have to use) and your workplace pension, plus one-off recruitment and equipment costs and the work not done while they learn. Outsourcing: the rate for the hours an employee would actually work (52 weeks less 5.6 weeks' holiday), or the monthly fee. Software: the subscription and set-up, with the rest of the work priced as hiring or outsourcing.
If you're not VAT registered and the supplier charges VAT, we add the 20% as a cost. Every option is a business cost, so we take off the tax relief: the tax on 12 months of your profit less the tax once the cost comes off, or the rate you enter.
Year 1 carries the one-off costs; years 2 and 3 only the running cost. We rank the options on the 3-year average a year.
Worked example
Over 3 years, hiring is cheapest at about £13,351 a year after tax relief, £139 a year less than software.
2026/27 · limited company · 20 hours a week · VAT registered · relief on £8,000 profit a month · software does 50%, the rest outsourced
| A. Hire someone for 20 hours a week | |
|---|---|
| Their pay for 20 hours a week at £14.00 an hour × 52 weeks | £14,560 |
| Employer's National Insurance: 15% on pay over £5,000 | + £1,434 |
| Workplace pension: 3% of £8,320 qualifying earnings (pay between £6,240 and £50,270) | + £250 |
| What they cost a year, before tax relief | £16,244 |
| One-offs in year 1: recruitment £2,000, equipment £1,000 (equipment gets 100% relief in year 1 through the Annual Investment Allowance) | £3,000 |
| Learning time: 3 months at 50% of full output, so £16,244 × 3/12 × 50% of the work isn't done (already paid as wages, so no more tax relief) | £2,030 |
| Tax relief in year 1 on £19,244: the Corporation Tax on £96,000 of profit less the tax once it comes off | − £5,100 |
| Year 1 after tax relief | £16,175 |
| Years 2 and 3: £16,244 a year less £4,305 relief | £11,939 |
| 3 years after tax relief: £40,053, a year on average (one-offs spread) | £13,351 |
| B. Outsource the 20 hours a week | |
| Their fees: £30.00 an hour × 20 hours × 46.4 weeks (52 less the 5.6 weeks an employee has off) | £27,840 |
| Tax relief in year 1 on £27,840: the Corporation Tax on £96,000 of profit less the tax once it comes off | − £7,378 |
| Year 1 after tax relief | £20,462 |
| Years 2 and 3: £27,840 a year less £7,378 relief | £20,462 |
| 3 years after tax relief: £61,387, a year on average (one-offs spread) | £20,462 |
| C. Software that does 50% of the work (10 hours a week) | |
| Subscription: £300 a month × 12 (a running cost, taken off profits as you pay) | £3,600 |
| Set-up fee in year 1 (a running cost, relieved in year 1) | £2,500 |
| The other 10 hours, outsourced: £30.00 an hour × 10 hours × 46.4 weeks (52 less the 5.6 weeks an employee has off) | £13,920 |
| Tax relief in year 1 on £20,020: the Corporation Tax on £96,000 of profit less the tax once it comes off | − £5,305 |
| Year 1 after tax relief | £14,715 |
| Years 2 and 3: £17,520 a year less £4,643 relief | £12,877 |
| 3 years after tax relief: £40,469, a year on average (one-offs spread) | £13,490 |
| Beyond the cost | |
| Control: an employee works how and when you say and learns your business; an agency or freelancer decides how to do the work; software does only what it's set up to do. | |
| Scale: outsourcing and software are quicker to turn up or down; staff take months to find and train, and notice to let go. | |
| Resilience: one employee is one person off sick, on holiday or leaving; an agency can cover absence; software needs someone to look after it and a plan for when it breaks. |
Worked out using HMRC's published rates for the 2026/27 tax year (6 April 2026 to 5 April 2027), on a yearly basis.
Questions people ask
Is a freelancer cheaper than an employee?
Their hourly rate is usually higher, but you don't pay employer's National Insurance, pension, holiday or recruitment. This calculator puts both on the same hours so you can see which is cheaper for your work.
What's IR35 got to do with outsourcing?
If one person works for you through their own company, in the same way as staff, the off-payroll working rules (IR35) may apply. Then they pay tax broadly like an employee, and a medium or large business must decide their status and may owe employer's National Insurance. Our contractor calculator gives a first view.
Is software a running cost or a capital cost?
Subscriptions and most cloud software are running costs, taken off profits as you pay. Software you buy outright to keep can be a capital cost, but the Annual Investment Allowance usually gives 100% relief in the same year.
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