Expert Opinion: What do subcontractors really cost? A practical way to work it out

Caroline Brown from Stockport’s Grassroots Recruitment breaks down the cost of hiring subcontractors against permanent employees, and how to decide which is right, and when, for your business.

Over the past 18 years, I’ve helped engineering and technical businesses recruit both subcontractors and permanent staff, often at the same time. One question comes up again and again:

“Are subcontractors actually costing us more – or are they still the right option?”

It’s a fair question. And one I’ve been asked even more regularly over the past 6 months (including with two separate clients last week).

Subcontractors play a really important role in many businesses, especially where demand fluctuates, contracts land quickly, or specialist skills are needed at short notice. For some recruiters, they’ll simply say that subcontractors are ‘bad’ and that permanent hiring is always the answer. But the reality is, most businesses need a mix of both.

What I try to help my clients get clearer on the real cost (beyond the day rate) so decisions are made with open eyes rather than gut feel to help you achieve the benefits that are most important to your business at the time. Whether it’s maximising margins, capitalising on niche skills or maintaining consistency for your clients.

Here’s a summary of the key things I cover off in these situations:

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Why subcontractors are often the default

In practice, subcontractors are often the quickest and least risky option in the moment. I usually see them brought in when:

• A new contract is won and mobilisation timelines are tight
• An engineer resigns with little notice
• Workload spikes unexpectedly
• Internal recruitment is already stretched

In those situations, waiting several weeks (or months) for a permanent hire simply isn’t realistic. Subcontractors give flexibility, speed and reassurance that work can still be delivered. In some sectors, subcontractors are more readily available (at the right rate!), and you can even bring a team onboard who are used to working together.

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Calculating the Costs

Most people start by comparing subcontractor day or hourly rate with the equivalent pro rata permanent salary. On paper, the difference can look stark. For example:

• A subcontractor at £300 per day might cost around £70,000 over a full year
• A permanent engineer on £45,000 plus on-costs (PAYE, NIC etc.) might be closer to £55,000–£58,000

At first glance, the subcontractor looks more expensive – but also more flexible. No long-term commitment, no notice periods, no benefits to manage.

What often gets missed is the indirect costs. These don’t show up neatly on a spreadsheet, but they do show up in margins, delivery pressure and management time. From what I see working with clients, these can include:

• Supervision and management time – subcontractors often need more oversight, especially early on
• Inconsistent productivity – not all day rates deliver the same output
• Rework or snagging – particularly where quality standards or processes differ
• Lack of long-term ownership – subcontractors are there to do the job, not necessarily improve how it’s done
• Admin and compliance time – contracts, extensions, renewals, right-to-work checks, insurance

I see lots of situations where a subcontractor looked cost-effective on paper, but once delays, rework or extra management time were factored in, the overall cost crept up. This isn’t always the case and none of this is about blame – but it can be the reality of short-term resource so it’s important to bear in mind.

A more practical way to consider the costs is, instead of asking “What’s the day rate?”, think about:

• “What does this role actually cost us over six or twelve months?”
• “How much management time does this require?”
• “What happens if we need continuity, not just cover?”

Some clients I work with literally sit down and map this out – including estimated supervision hours, typical rework or snag rates, impact on delivery times or customer satisfaction.

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When subcontractors still make complete sense

It’s important to say this clearly: subcontractors are absolutely the right solution in many scenarios. They tend to work best when:

• Demand is genuinely short term
• Specialist or niche skills are needed
• Coverage is required in hard-to-reach locations
• Projects are time-bound rather than ongoing

Problems tend to arise when short-term fixes quietly become long-term dependency – without anyone stopping to reassess the cost.

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Summary

For most engineering and technical businesses, this isn’t about choosing subcontractors or permanent staff – it’s about understanding the trade-offs and using each option intentionally.

As mentioned, I’ve had this conversation twice just this week with two very different clients.

• One was a Fire & Security business in Doncaster that had just won a large national contract and needed engineers on site within 2 weeks. With heavy installation work needed for the first 6 months and a longer-term maintenance phase to follow, the right answer wasn’t one or the other – it was a mix of short-term subcontracting to mobilise quickly, followed by permanent hires once installation targets were achieved. As a new client for us, helping them understand all the hidden costs and providing access to reference-checked, experienced subcontractors to start immediately was a key benefit.
• The second was a long-standing Access Controls client in Nottingham with a stable permanent team (c.20 engineers), but increasing reliance on subcontractors for further-afield or fast-turnaround jobs. Over time, this was cutting into margins and creating quality issues. We’re now helping them recruit 3 permanent, regionally based engineers to cover the North, South and Scotland, to reduce repeat visits, improve consistency and significantly cut subcontractor spend.

Very different situations – but in both cases, understanding the real cost, timescales and availability made the decision clearer.

In my experience, the businesses that do this well aren’t necessarily spending less on people, they’re just clearer on what they’re spending for. And taking the time to work that out usually makes future decisions far more straightforward.