Staff Augmentation in the UK: Achieve an Average of 38% Salary Savings with Nearshore Contractors and Employees

Staff Augmentation Model Briefly Explained

The staff augmentation model involves temporarily adding IT specialists to your in-house team, usually a few at a time. Unlike outsourcing, where an external company handles entire projects, staff augmentation allows you to extend your in-house team with either employees or contractors, but maintain control over the work and integration while filling skill gaps.

We explain the outstaffing model in detail in this article. Feel free to gain insights.

Market Analysis of Employee Salaries and Contractor Rates in the UK

Let's first help you decide whether to extend your team with employees or contractors and differentiate between these categories. Many outstaffing vendors fail to do so, leading to confusion and inefficiency.

Once your needs are adequately assessed, we will show you how to get practical benefits - cost savings, first and foremost, without forgetting other advantages of staff augmentation.

Employee cost comparison: UK vs. Eastern & Central Europe

Extending your team with an employee rather than a contractor makes sense for:

• Long-term projects - planned for more than one year.
• Sequential short-term projectswhen you need a particular expertise for one year or more.
• Well-established workflows and processeswith thoroughly kept documentation, tasks described in project management systems, and active use of logging and reporting.
• Projects with fully remote or hybrid teams and having experience managing specialists in multiple locations, such as different cities within the UK.

Let's compare the situation in the UK with hiring in Eastern and Central Europe.

Gross and net salaries, including tax implications in the UK

Disclaimer: Comparison data is based on aggregated data from Indeed.com, Glassdoor.com, and Payscale.com in 2024. Figures can vary depending on specific technology, experience, industry, or niche.

The average salary of a software engineer with over three years of experience, which corresponds to a mid-level position, in the UK is around £44,000 annually.

This figure is the gross salary and represents a net salary of £33,551, with £10,449 going to taxes. In this case, the breakdown is:

Income Tax = £6,284

National Insurance Contribution (NIC) = £4,164, which are employee NICs, called “primary contributions.”

But there's a catch: there are also employer NICs called “secondary contributions” that amount to £6,622 above the gross salary in our case. Therefore, the total cost of hiring a mid-level engineer, including gross salary and employer tax, is £50,622.

Additional things to consider when hiring in the UK include

• Pension contributions: 1% to 6% matched (sometimes two-for-one matching)
• Flexible work hours: Includes shorter Fridays or a 35-hour workweek
• Educational allowances: Between £50 to £200 per month
• Technical equipment: PCs, ergonomic chairs, software licenses, and other peripherals
• Office or coworking space expenses: Rent, membership fees, utilities, and maintenance

A convenient way to find out the exact salary after tax is by placing figures in this calculator. Feel free to use it.

So what's your total:

• While local hiring has some comfortable perks, it comes at a high cost.
• It's getting even higher as wages continue to rise faster than prices in 2024, fueled by the economic climate.

In this context, hiring from Eastern and Central Europe for staff augmentation in the UK can:

• Significantly reduce employment costs.
• Provide extensive tech expertise, high-quality work, and efficiency.

We bet you want to see the exact savings numbers.

Team extension with employees in Eastern & Central Europe: cost saving in numbers

Poland, Ukraine, and Romania are the most popular destinations for software development outstaffing in Central and Eastern Europe, followed by Bulgaria, Moldova, and Hungary with the following average annual salary rates:

Now let's compare the same positions in the UK.

The most important part here is the savings percentage.

Working with employees in the UK vs. Eastern & Central Europe: Your interest

Impressive, isn't it? With savings ranging from 24% to over 52%, extending your team in Eastern and Central Europe offers significant financial benefits. Plus, it helps sustain your product development plans, even in turbulent times.

For transparency, here's a quick breakdown of our calculations:

Big savings are the most significant benefit for UK companies opting for team extension. But there are more advantages to explore. Let's review the entire list.

Benefits of augmented employees

Staff augmentation presents some compelling advantages if you're a UK company looking to access affordable talent and stay flexible:

Cost savings

• Eliminated expenses related to office space, hardware, recruitment, and turnover.
• Lower development rates in nearshore locations.

Fast access to talent:

• In a market with layoffs and a shortage of skilled tech workers, staff augmentation is rapid access to a wide range of specialists.
• Experienced vendors can swiftly supply professionals with the required skills. At Giraffe software, it usually takes us up to two weeks.

Upskilling

• Collaborating with external experts enables in-house teams to learn and grow.
• Knowledge exchange helps improve the internal team's capabilities, preparing them for future challenges and innovations even when the augmented employees are no longer available.

Niche expertise

• Access to a global talent pool (Giraffe Software works with a pool of 30K experts) allows companies to find specialists with specific expertise that may be scarce locally.
• Countries with strong educational institutions and robust IT industries (like Central & Eastern Europe) offer a wealth of skilled professionals ready to contribute to UK tech projects.

Agile hiring and dismissal

• If a specialist does not meet expectations, they can be promptly replaced without long waits or penalties.
• This flexibility ensures that projects remain on track and can adapt to changing requirements.

You can learn more about the advantages of IT staff augmentation vs. in-house recruitment in this article.

Contractors rates comparison: UK vs. Eastern & Central Europe

While staff augmentation in the UK offers many benefits, hiring contractors from Eastern and Central Europe is often a better fit for:

• Short-term projects lasting up to 6 months or part-time needs requiring specialized skills for specific phases.
• Immediate project starts, as contractors can often begin work immediately, which is crucial for time-sensitive projects.
• Companies experienced with remote work having established infrastructure and processes for remote onboarding.

When you opt for contractor augmentation, the next question is how much you can save by looking for them nearshore.

Team extension with contractors in Eastern & Central Europe: cost saving in numbers

Let's begin by examining the hourly and daily rates of contractors from Eastern & Central Europe.

Let's check the same positions in the UK.

Comparing the rates in the UK to those in Eastern & Central Europe, we find significant savings:

We're using the same formula as before:

These calculations show impressive savings achieved through staff augmentation in the UK when working with contractors from Eastern & Central Europe.

Benefits of augmented contractors

Augmenting your staff with contractors presents the following advantages for UK companies seeking affordable talent and flexibility:

• Lower development rates: Nearshore locations offer IT budget savings in the range of 46%-53%.
• Fast access to talent: Experienced vendors like Giraffe Software can quickly supply professionals, typically within several days to two weeks.
• No recruitment fees: Avoid the costs of in-house recruiters or recruitment agencies.
• No recruitment or HR assistance needed: Your vendor takes full responsibility for recruitment and HR tasks.
• Agile hiring and dismissal: If a specialist does not meet expectations, your vendor can promptly replace them without long waits or penalties.
• No accounting burden: Payroll calculations are handled by your outstaffing vendor.

However, augmenting your team with contractors also presents challenges. Compared to managing augmented employees, you must exercise caution, particularly in security matters. Robust communication processes and reporting monitoring are essential.

Contractors typically operate with a higher level of independence compared to employees. Therefore, we have gathered several important tips for effective management:

• Contractors should have at least four years of experience; avoid settling for less.
• Avoid junior contractors or those with poor English communication skills to ensure immediate, strong support.
• Manage project tasks using systems like Jira, Asana, or Redmine, with time logging and reporting to track progress effectively.

And, of course, partnering with a proven staff augmentation agency is crucial.

Choosing the Right Staff Augmentation Partner

There are plenty of providers on the market today: you just need to choose the right one. That means a reliable partner who will bring your solution to market quickly and effectively, all while minimizing stress.

Red flags to watch for when choosing an outstaffing partner

Watch out for these classic signs of a subpar vendor when considering staff augmentation.

Offering contractors instead of employees

Ensure the vendor aligns their offering with your project's duration and requirements. Contractors are suitable for short-term or part-time needs, while employees are more appropriate for longer-term projects.

Inconsistent pricing

Watch out for vendors suggesting contractor rates for employee roles, especially for long-term projects, as this could lead to inflated costs.

Take the example where a vendor multiplies the mid-level rate of £24 by 160 working hours a month, resulting in a monthly salary of £3,840 and a yearly salary exceeding £46,000. This calculation significantly exceeds the typical salary range for a mid-level augmented employee (£23,000-37,000).

Offering junior-level contractors

While this may seem cost-effective, it can result in communication issues and subpar results. Prioritize contractors with strong English skills and appropriate experience to ensure project success.

Offering unqualified contractors

Some vendors may present contractors who do not meet expected qualifications, risking project outcomes. Ensure thorough vendor assessment to avoid deploying candidates with suboptimal expertise.

Signs of a great outstaffing partner

Consider the following criteria to ensure that a vendor offers the desired results.

Cost efficiency

Cost efficiency is the driving force behind your decision to partner with a tech company, so ensure your vendor offers truly competitive rates.

At Giraffe Software, we deliver substantial cost savings of 35% to 45% by leveraging our expertise in the UK technology market and outstaffing opportunities in Central and Eastern Europe. With a curated network of experts and refined processes, we ensure swift and seamless onboarding for our clients.

Feedback

Positive feedback from past clients is crucial. Review the vendor's portfolio and seek feedback on their services. Monitor their online presence, check comments on review websites like Clutch or GoodFirms, and consider their community involvement.

Portfolio and technology stack

Choose companies experienced in the technologies relevant to your project. Outstaffing lets you build a diverse team without in-house expertise. However, be cautious of vendors claiming to handle all technologies.

You can check out Giraffe's portfolio here.

Partnership and trust

While augmenting your team with employees or contractors is a temporary measure, a good outstaffing engagement can also be something to repeat. Ask yourself: would you be likely to cooperate with your vendor in a year, two years, or even five? Building business relationships is crucial but resource-consuming, so spend your time wisely.

Our Expertise

Giraffe Software is a tech powerhouse, boasting a team of 70+ in-house experts and a pool of 30K pre-vetted talents. In every custom case, we ensure our clients achieve real IT budget savings of at least 35%-45%. We also guarantee well-established processes for reporting, HR, and retention.

Discover how our staff augmentation services can benefit you by exploring our excellent reputation on Clutch and Upwork. With over 7 years of experience, we've cultivated a stable team of skilled engineers and established a vast partner network. Having assisted over 60 clients from the EU and US, we've successfully completed over 120 projects.

One such project was for REM Waste, a UK-based waste management company. Giraffe Software undertook the task after previous contractors failed to deliver results even at the MVP stage. We helped the client to deliver an all-in-one CRM platform, fueling their digital transformation and achieving significant budget savings.

Our efficient team and competitive rates, compared to the British market, resulted in a remarkable 38% reduction in budget costs for our client:

• Within just 3 days, we assembled a team of 4 experts (including a PM, frontend developer, backend developer, and QA) for the MVP stage.
• In 2 weeks, our team compiled a comprehensive list of user stories and critical bugs for immediate resolution.
• Within 4 months, our team of 8 engineers launched an MVP for the client's CRM platform.
• We expanded the team from 4 to 8 members for the post-MVP phase.
• Post-MVP functionalities were continuously delivered over the next 15 months.

Here's what our client had to say: “The outstanding team at Giraffe Software delivered exceptional performance, adeptly handling this demanding project.”