Consultants aren't as expensive as you think

Is your leadership team wondering why consultants cost so much and pressuring you to hire a full-time employee instead?

The No. 1 hesitation we hear about hiring consultants is the preference for full-time employees. We understand the reservation. At first glance, the hourly rates for consultants appear steep compared to the annual salaries of in-house staff.

However, hiring full-time employees isn't the bargain that it appears.  

That’s because the real cost of hiring goes far beyond the paycheck. There's a laundry list of additional expenses associated with hiring a full-time employee, like:  

• Bonuses (sign-on bonuses and/or annual)
• Social Security
• Medicare
• Health, dental and vision insurance
• Disability and life insurance
• Unemployment insurance
• Retirement contributions
• Hardware
• Training and education
• Supporting costs (like management, HR support and career growth)
• Recruitment fees

That $180,000 salary? It can easily become a $300,000 investment.

The actual cost of an employee averages from 25% to 40% more than their agreed salary, according to the U.S. Small Business Administration.

If your boss balks at consultancy rates, use our list above to calculate the complete price tag of that FTE and show a more holistic view of your investment.

Remember, too, that when you hire a consulting agency, the agency does all of the behind-the-scenes work – and takes on all the risk – of managing a FTE for you.

In the days of tech layoffs and tight budgets, consultants are a far less risky commitment – with the bonus that a consultant with a specialized skill set who onboards quickly might be exactly what you need to drive business results faster.

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When to hire a FTE vs. consultant

At Test Double, we have a unique perspective on this because we help our clients with both options — software consulting and recruiting for full-time technical roles.

So we know there are absolutely times where a full-time employee is the sound business choice. To figure out if that's the right solution, ask questions like:

• Do we have a guaranteed revenue stream to support those hires long-term?
• Is there a proven long-term sustained need for role or for software maintenance or support?
• How quickly will the skills required for this role evolve?
• How critical is flexibility in scaling the team up or down based on project demands?

If there isn't a clear and proven long-term need (yet), don’t solve what could be temporary problems with permanent solutions.

Take a page from the playbook of retailers during Black Friday: Employ temporary staff to handle peak loads or specialized tasks. This approach avoids the long-term commitments and the potential for painful layoffs.

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The hidden benefits of hiring a consultant

While the cost of hiring a full-time employee might seem straightforward, the advantages of bringing on a consultant can yield unseen benefits that maximize your investment and your chances of project success.

Onboard & delivery quickly

It may seem daunting to bring in any new person to your team or your complex systems, but seasoned professionals like ours excel at adapting to different environments and industries.

By nature of the work, consultants onboard a lot and have seen it all before – and that experience makes them faster and more efficient at onboarding than your average employee. They can slash onboarding time from months to mere days. As a result, consultants swiftly integrate into your team and drive results.

As the engineering manager at our client Clever said: Test Double consultants “delivered features quickly from week one.”

Flexibility & scalability

Consultants offer a level of scalability that full-time employees cannot match.

FTE roles are more likely fixed, while consultants can be scaled up or down on project budgets or demands, without the long-term commitments and overhead costs associated with hiring permanent staff.

This agility enables companies to respond more effectively to market fluctuations and changing business needs, maximizing efficiency and profitability.

At Test Double, we offer open-ended contracts and weekly pricing to allow our clients this flexibility. (Read more about that in "Fair contracts build trust: How Test Double does it differently.") 

Breadth of experience

Consultants bring in a wealth of best practices and diverse insights gained from navigating different landscapes.

This exposure to a wider variety of tools, industries, legacy systems, and compliance requirements can all be leveraged to enrich and accelerate the success of your projects.

At Test Double, our consultants are exceptionally skilled in leveraging modern software development practices to achieve results and simultaneously mentoring our clients how to do the same.

Access to specialized skills

Consultants often bring a depth of expertise and specialized skills that may not be available in-house. This translates to higher quality software, less technical debt and innovative solutions that drive better results.

When facing specialized needs, consider the efficiency of hiring a consultant who already possesses the required expertise versus the time and cost of training a full-time employee.

A great example of this: We’re often called in specifically to help with Rails upgrades, including by some of the largest Rails codebases on the planet.

Gusto needed to upgrade from a legacy version of Rails, but their in-house team was consistently busy. They knew they needed to do it, but couldn't pull their experts away from delivering critical features and shipping new products.

Ruby on Rails expertise is a sweet spot for Test Double. So Gusto brought in Test Double consultants who rolled out the upgrades on time and under budget —  and with zero downtime.

Effective performance management

Managing performance can be tough for any supervisor. In many cases, underperforming employees may go unnoticed or unaddressed, leading to productivity losses and potential impacts on team morale. If the performance is addressed, then that means providing additional support, diverting time and energy away from high performers.

With consultants, if performance issues arise, consultants can be swiftly replaced or reassigned, minimizing disruptions and ensuring continued progress towards project goals.

Prevent organizational bloat

Overstaffed organizations tend to create features that aren’t requested, needed, or valuable, because there’s an incentive to find work or invent new products or features.

That costs a business twice: paying people to build things it doesn’t need and paying higher maintenance costs on the existing things it really did need.

That’s because, as is often forgotten: as complexity goes up, maintenance costs increase in super-linear proportion. Whether complexity is essential or incidental, it adds to the carrying cost of software.

Minimize OpEx costs

Hiring consultants can be a strategic move for businesses looking to shift expenses from operational expenditures (OpEx) to capital expenditures (CapEx).

By leveraging consultancy services, companies may be able to allocate costs differently. This adjustment not only enhances financial flexibility but also opens up new investment opportunities while providing access to specialized skills temporarily.

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The risks of overstaffing on FTEs

More than 260,000 people were laid off in tech in 2023, from small companies to giants like Amazon, Google, Meta, Microsoft, IBM. Another 109,000 were laid off in the first half of this year.

And a lot of that was due to overstaffing on FTEs for the current demand:

• eBay ramped up hiring during the COVID-19 pandemic — then laid off 1,000 employees in January 2024, citing overstaffing among the reasons: “Our overall headcount and expenses have outpaced the growth of our business.
• Google slashed 12,000 jobs last year — “removing layers to simplify execution and drive velocity in some areas,” CEO Sundar Pichai wrote in a staff memo.  

Layoffs, severance packages and voluntary buyouts aren’t cheap either. There’s the hit to your brand reputation, the decreased employee morale and the resulting fear that permeates the workplace –and also actual hard costs:

• Microsoft laid off 10,000 employees and took a $1.2 billion impairment as a result of its restructuring and layoffs, according to CNBC.‍
• Salesforce laid off more than 7,000 workers and anticipated a $1 billion to $1.4 billion impairment, according to an 8-K filing.

(In the context of corporate finance and accounting, "impairment" refers to a reduction in the value of an asset. It signifies that the asset is no longer worth as much as it was initially recorded, resulting in financial losses for the company.)

None of that had to happen. We’ve said it before, and we’ll say it again: Never staff to the peak.

Hire as many full-timers as you need for long-term operational maintenance, plus some amount of additional capacity to both pursue new opportunities for innovation and to ensure there’s sufficient slack in the system to prevent short-staffed, short-sighted decision-making.

If you have needs beyond that, contract temporary help.

This staffing ideology helps you ensure agility, efficiency, and long-term sustainability in their staffing practices.

And, unless you have a guaranteed revenue stream to support those long-term hires, it creates far fewer risks of having to layoff your employees down the road.

How we can help

Over more than a decade, we’ve built an expertise as software development and product management consultants. That’s why companies like GitHub, Gusto and ZenDesk have trusted Test Double consultants to embed in their teams.

We also know there are times where a full-time employee makes the most business sense. We can also help with technical recruiting, too, to make sure your hiring is efficient, effective and well-aligned.

Thinking about hiring a consultant or FTE? Contact us now for a free personalized business consultation on which staffing ideology makes most sense for you right now.