When leaders compare hiring costs, they usually compare salaries. But salary is typically only 60–70% of the true cost of an in-house employee. Add employer taxes, health insurance, equipment, software licenses, office space, recruitment fees, training time, and management overhead, and a $50,000 hire can easily cost $80,000 or more per year.
Then there's attrition. Every departure costs an estimated 50–200% of annual salary in lost productivity, re-recruitment, and retraining. In high-churn functions like customer support, this compounds fast.
Outsourcing changes the equation in three ways. First, labor arbitrage: skilled professionals in outsourcing hubs deliver equivalent quality at 40–75% lower total cost. Second, the provider absorbs overhead — facilities, IT, HR, payroll, and compliance are bundled into one predictable monthly rate. Third, retention becomes the provider's problem to solve, and mature BPOs invest heavily in culture and career pathing to keep attrition low.
The result: businesses commonly report total cost reductions in the region of 40–70% per role when the transition is well managed. The real questions are which functions to move first, and how to structure the partnership so quality holds.