Base salary is roughly two-thirds of the real number. Once you add loading, recruiting and ramp, the comparison against contract staffing changes shape entirely.
Hiring decisions get made on base salary because base salary is the number everyone knows. It is also the number that hides the most.
This is the arithmetic we walk clients through when they ask whether to hire or augment. None of it is exotic — it is just rarely written down in one place.
What a permanent hire actually costs
Take a senior engineer at a $150,000 base. Employer payroll taxes, benefits, equipment, software licences and allocated overhead typically bring the loaded cost to somewhere around 1.25–1.3× base — call it $190,000 a year.
Then there is acquisition. An agency placement commonly runs 20% of first-year salary, so $30,000. Filling the role internally is not free either; it consumes engineering interview hours that would otherwise be delivery hours.
And there is ramp. A senior engineer joining an unfamiliar codebase is rarely at full productivity before six to eight weeks. That is roughly $25,000 of loaded salary spent getting to the starting line.
Where the comparison actually turns
Contract rates look expensive per hour precisely because they are not hiding anything — no benefits line, no recruiting fee amortised silently across the year.
The crossover in most markets sits somewhere around 18 months. Below that, the one-time costs of a permanent hire dominate and contract usually wins on pure cost. Above it, the permanent hire amortises those costs and pulls ahead.
Duration is the variable that decides it, and it is the one most often assumed rather than examined.
The number that beats both
The cost of the role sitting empty is almost always larger than the difference between the two options, and it is almost never on the spreadsheet.
If an unfilled position is delaying a revenue-affecting release, three months of vacancy can cost more than a year of the more expensive staffing option. When a role has been open for two quarters, the honest comparison is not in-house versus contract — it is filled versus not filled.
What the arithmetic does not capture
Knowledge retention is real. A permanent hire accumulates context that stays; a contractor's context leaves with them unless you deliberately build handover into the engagement.
So is the cost of a bad hire, which is asymmetric — a poor permanent hire is expensive and slow to unwind, while a poor contractor is a phone call.
Our own recommendation is boring: contract for defined-scope work and uncertain runway, permanent for capability you will keep building on, and contract-to-hire when both sides genuinely need to evaluate fit. The spreadsheet informs the decision; it should not make it.
