Highlight for busy users: 

  • The most significant differences between In-house recruitment and IT staff augmentation can be noticed at the recruitment level. The first model consumes a lot of time and resources (even 25-30% of employee base salary). The second model is hustle-free, considerably more efficient and provides candidates ready to work almost right away (cost of recruitment even 60% lower). 
  • If you hire internally, you are fully responsible for HR and payroll related formalities and engaged in long-term relationship with a developer. In staff augmentation model, provider takes care of all formalities, and you receive a single invoice at the end of the month, while retaining full control over developer’s work and no long-term commitments.
  • Before you make a choice, you should consider your business needs as there is no universally better hiring model, as each model serves different business objectives.
In-house recruitment vs. IT staff augmentation. When do external IT team make sense?

Many people react to the words „body leasing” or „staff augmentation” with confusion. Okay, all this outsourcing and other flexible staffing models are a nice buzzwords, but isn’t it better to just hire a specialist internally and not mess around too much?

Sure. In certain cases, in-house hiring can actually be the right way to go. However, often it is way more efficient to work with professional partner, who can supply you with high quality specialists, only for specific period of time. When is it right to hire in-house, and when is it right to use staff augmentation? Keep on reading to find out.

A few words about in-house recruitment

In theory, in-house recruiting is nothing unusual. In theory, it’s a simple process aimed at finding the best possible employee. The HR department, in cooperation with the department where the vacancy occurs, draws up a detailed description containing the requirements, duties and benefits envisaged for the position. Sometimes the HR department is supported by an external recruitment agency which, in return for a hefty remuneration, helps to recruit candidates for interviews. Employees hired this way enter a long-term relationship with the company either based on B2B or an employment contract.

In-house recruitment vs. IT staff augmentation. Model of internal hiring

In practice, however, it is not so simple.. and cheap. The economic situation on the given market is always a factor that needs to be taken into account. And as you probably already know, the demand for IT talents is enormous, which makes traditional forms of recruitment more difficult to proceed with. And it is not easy to find developers for hire

How much time does it take to hire IT professional?

The biggest obstacle to employment is time-to-hire. This indicator refers to the amount of time that passes between when a job candidate is initially contacted by a company and when they accept the employment offer.

In the United States, the job interview process takes an average of 22.9 days overall. By contrast, jobseekers in France, Germany, the United Kingdom and Australia report significantly longer job interview processes. French jobseekers report the longest interview durations at 31.9 days, followed by Germany at 28.8 days, the United Kingdom at 28.6 days, and Australia at 27.9 days. In the tech industry itself, these indicators look even worse. 

Time-to-hire is a significant diffrence when it comes to in-house recruitment
Source: Why Is Hiring Taking Longer? New Insights from Glassdoor Data

What is the real cost of the recruitment process?

When hiring employees internally, you have to reckon with high costs. Recruiting a new employee is usually an expense of 20-25% of their base salary. However, the final price always depends on how much cost is incurred internally and how much externally. For example:

  • If you use job boards or job listings on LinkedIn, the daily cost of a promoted post is at least $10
  • If you use an external headhunter or recruiter, the average cost is 20-25% of a new employee’s first year salary. However, it can range from 15% to 40% or more, depending on the position to be filled.
  • Applicant tracking systems, on the other hand, have different prices, but the lowest typical price range is around $200/month.

Sounds bad? And these are just the costs associated with sourcing candidates for interviews. And then there are the assessments, interviews, onboarding. You have to pay your HR department and accept a drop in productivity during recruitment. To illustrate this, an example breakdown of the cost of hiring a developer looks like this:

costs of hiring a developer
Source: Glassdoor

All those aspects make in-house recruiting in IT quite a challenge. Both the cost and the risk are substantial. Hence, alternative forms of employment are worth considering.

… and a few more words about staff augmentation

One such alternative form of an IT employment is staff augmentation. In this considerably more flexible and project-focused model, developers are hired only for a specific period of time for a fixed price agreed on with a provider, such as DEVMATCH. 

Read related article: IT staff augmentation vs. software outsourcing. What is the difference?

Although the provider is the formal employer, you retain full control over both the composition of your IT team and it’s pipeline. Moreover, your are also involved in a hiring process, which is however significantly shorter compared to in-house hiring. Staff augmentation agencies provide you with a list of professionals available immediately and willing to work in a flexible model. Then, interviews take place, during which you select the most suitable and interesting candidates. Once you’ve decided, you sign a simple contract and can already enjoy your high-quality specialist!

As a result, there are no salary, paid-leave or other benefit obligations on your side. You simply pay the provider a fixed amount of money for making best developers available to your organization for a specifc period of time (usually from 6 months upwards). 

Hiring with staff augmentation model

What is a REAL problem to solve?

To wisely choose a model for yourself, you need to think deeply about what your actual business needs are. We have prepared for you a list of several questions that will help you identify your real needs:

  • What are the core competencies of the business? 
  • Is the IT competency the core of the business or is it a means to achieve other operational and strategic goals?
  • Can you afford rates above market average (a tool to attract TOP employees)?
  • Are your current staffing needs long-term, or is it about additional capacity for the current team?
  • Do you have the budget, time and capacity needed for in-house recruitment?
  • Are you going to invest in newly acquired employees so that they want to stay with the company for the long term?

In general, if IT competency is one of the most important elements of your business model, and you’re able to meet the demands of the IT labor market (while keeping benefits high) and aren’t afraid of the arduous hiring process, then it may make sense to hire someone in-house. 

However, if you are afraid to spend millions on maintaining an extensive IT department, and your actual need is to quickly power an in-house team, then it is worth considering a flexible model of staff augmentation. 

Other differences between in-house recruitment and IT staff augmentation

It’s obvious that these two simple tips are not an exhaustive list. „In-house recruitment or IT staff augmentation?” is never a straightforward question, because there are numerous factors to consider.

We have listed all the differences for you in the table below. You will find the differences not only between in-house recruitment and staff augmentation, but also a comparison with the software outsourcing model, which is another alternative to in-house hiring. 

Let’s recap. In-house recruitment vs. IT staff augmentation?

Before you decide on in-house recruitment or staff augmentation, you should answer some important questions. These will help you identify whether you need a large, in-house team of well-paid IT specialists, or whether you can afford a more flexible cooperation model that will save you time and money and decrease your financial risk profile. Last but not least, staff augmentation fits in current trend of renting rather than owning, which is perfectly in line with agile software development methodology. 

If you would like to dive into details of staff augmentation process or hire developers for a project, contact us. We will be happy to help you find the right match!

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