Outsourcing Tasks Versus Hiring Your First Employee

by Srikant Chellappa May 25,2024

The People Strategy Leaders Podcast

with Srikant Chellappa, CEO

There comes a point in every entrepreneur’s journey where they need to decide how to handle the increasing workload and responsibilities of their business. Should they continue to take on everything themselves, risking burnout and limitations on growth? Or should they invest in hiring their first employee to help ease the burden? 

For many small business owners, this is a significant decision that can have both positive and negative implications. In this blog post, we will explore the debate between outsourcing tasks versus hiring your first employee. We will dive into the pros and cons of each option and provide valuable insights for entrepreneurs facing this crossroads.

When to Outsource

Let’s understand the benefits of outsourcing and when it becomes a necessity.

  • Cost-effectiveness

The issue of cost-effectiveness can be a factor in determining which tasks are to be outsourced. Some tasks, like bookkeeping, graphic design, or IT support, may cost much less to outsource than to hire and retain an in-house team. Outsourcing service providers have economies of scale, which enable them to run profitable businesses with the provision of specialized machinery and expertise.

  • Scalability

Through outsourcing, businesses can match their workload fluctuations with the ability to scale up or down based on their strategic needs. During peak periods, businesses can utilize outsourcing to assemble a task force of workers or, conversely, scale down to meet seasonal demands without long-term commitments. This flexibility enables businesses to make use of resources to the fullest and save on the costs of hiring and retrenching employees.

  • Specialized Skills

Outsourcing is highly crucial when a business requires a service that is beyond its current scope. Fields like website development, software engineering, or law services in general require advanced technical knowledge, which can be time-consuming and expensive to deliver by an enterprise itself. 

By outsourcing these activities to professionals or agencies that are already experts in the field, businesses can access top-tier talent without bearing the costs of hiring and training personnel.

  • Short-term Projects

Short-term projects or time-jetted initiatives are suitable for outsourcing. Contrary to hiring and training temporary employees, which in most cases requires vast amounts of time and resources, outsourcing enables enterprises to acquire personnel for a particular project rapidly. This approach can be applied in situations where a company cannot utilize its strengths for the task or does not have the necessary skill set in-house.

Additionally, outsourcing allows businesses to tap into a global talent pool, benefiting from diverse perspectives and skills without geographical constraints. This can be particularly crucial for firms seeking to expand or explore new markets.

Therefore, it becomes mandatory to thoroughly examine and determine the business reliability of the partners to safeguard quality control, proper communication, and security protocols. 

Also Read: Know How to Implement 360-Degree Feedback in Your Startup

When to Hire an Employee

Here are some reasons why you may consider hiring an employee instead of outsourcing work.

  • Core Business Functions

Core business tasks central to a company’s operations and impacting its competitive position should be handled by in-house employees. For example, the complexity of product development, customer service, and decision-making processes requires a thorough understanding of the company’s vision, values, and procedures. Assigning these tasks to dedicated employees ensures quality assurance, goal alignment, and control.

  • Long-term Growth

Hiring an employee can be a long-term investment in the growth and development of a startup. When a company onboards a new employee, they have the opportunity to train and nurture that individual, fostering a deep understanding of the company’s processes, culture, and industry. Over time, this employee can grow alongside the organization, taking on additional responsibilities and potentially becoming a valuable asset and leader within the company.

  • Confidentiality

Confidentiality and data security are also crucial considerations when deciding whether to outsource or hire an employee. When dealing with sensitive information, such as customer data, financial records, or proprietary information, outsourcing these tasks to external parties carries an inherent risk. Maintaining strict control over confidential information is essential to protecting the company’s intellectual property and maintaining customer trust. By hiring an in-house employee, businesses can establish clear protocols and ensure that sensitive data is handled securely within the confines of the organization.

  • Company Culture

Building a strong company culture is another compelling reason to hire employees. A well-defined culture can foster a sense of unity, purpose, and shared values among team members, contributing to increased productivity, employee satisfaction, and overall success. Fostering a positive company culture is often more challenging when relying heavily on outsourced resources, as external contractors may not fully integrate into the organization’s ethos and values.

In-house employees, on the other hand, can become fully immersed in the company’s culture, actively shaping and contributing to it. They have the opportunity to develop a deep understanding of the organization’s mission, vision, and values, which can translate into a stronger sense of commitment and alignment with the company’s goals. Additionally, employees can serve as ambassadors for the workplace culture, helping to reinforce it and ensure consistency across all aspects of the business.

Employee Engagement Survey

Making the Decision

When deciding whether to outsource tasks or hire an employee, it’s essential to consider several key factors. 


  • Cost: Often more cost-effective, especially for specialized or temporary tasks.
  • Control: Limited control over the work process and quality assurance.
  • Expertise: Access to a wide range of specialized skills and knowledge.
  • Scalability: Flexible and easy to scale resources up or down based on workload.

Hiring an Employee:

  • Cost: Higher upfront costs, including salaries, benefits, and training expenses.
  • Control: Greater control and oversight over work processes and quality.
  • Expertise: Limited to the expertise of the hired employee, requiring additional training or hiring for specialized tasks.
  • Scalability: Limited scalability, requiring additional hiring or layoffs to adjust the workforce.

Here’s a decision-making framework to help determine the benefits of hiring vs. outsourcing:

  1. Evaluate core business functions: If the tasks are central to your core business functions, such as product development, customer service, or strategic decision-making, hiring an employee may be the better option for greater control and quality assurance.
  2. Consider confidentiality and security: If the tasks involve handling sensitive or confidential information, hiring an in-house employee may be the safer choice to ensure data security and protect intellectual property.
  3. Analyze cost and budget: Compare the cost of outsourcing versus hiring an employee, taking into account salaries, benefits, training expenses, and potential cost savings from outsourcing specialized or temporary tasks.
  4. Assess scalability needs: If the workload is likely to fluctuate significantly, outsourcing may provide greater scalability, allowing you to adjust resources as needed without the commitment of permanent employees.
  5. Consider company culture: If building a strong company culture is a priority, hiring an employee who can fully integrate into the organization and contribute to its values and ethos may be more advantageous.
Also Read: What is the True Cost of Recruiting and Onboarding Employees?

To Sum Up

Ultimately, the decision to outsource vs. hiring depends on your business needs, budget, and long-term goals. Outsourcing offers flexibility, cost-savings, and access to specialized skills but may lack consistent quality and cultural fit. Hiring an employee provides dedicated resources, enhanced control, and a stronger team culture, but it also entails higher costs and increased responsibilities.

Consider workload, the complexity of tasks, and the ability to manage staff. If you need temporary or specialized help, outsourcing may be the way to go. However, if you require full-time, core business support, hiring your first employee could be a better investment for sustainable growth.

Talent Management Software

Frequently Asked Questions

  • Are there any tools or resources to help manage outsourcing relationships?

Yes, various project management and collaboration tools can help streamline the process of managing outsourced tasks. Platforms like Trello, Asana, and Slack can facilitate communication and organization, while freelance management systems like Upwork and Freelancer can help track projects and payments efficiently.

  • Can you combine both outsourcing and hiring employees?

Absolutely, many businesses successfully blend both strategies. For example, you might hire full-time employees for core roles while outsourcing specialized tasks like IT support or legal services. This approach can optimize both operational flexibility and expertise.

  • What should I consider before deciding to hire my first employee?

Understand how to process payroll and withhold the correct amount for taxes. Familiarize yourself with employment laws, workplace regulations, and any industry-specific requirements. In addition, ensure you have the time and resources to manage an employee, including their training and development, effectively.

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Srikant Chellappa
CEO & Co-Founder of Engagedly

Srikant Chellappa is the Co-Founder and CEO at Engagedly and is a passionate entrepreneur and people leader. He is an author, producer/director of 6 feature films, a music album with his band Manchester Underground, and is the host of The People Strategy Leaders Podcast. He is currently working on his next book, Ikigai at the Workplace, which is slated for release in the fall of 2024.

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