Offshore vs Onshore Hiring in 2021: The Ultimate Cost Comparison 

December 18, 2020
Offshore vs Onshore Hiring in 2021 The Ultimate Cost Comparison 

Both offshore and onshore employees can be equally talented when it comes to executing business, then what is the difference that sets them apart. The basic difference is the amount of time taken, the quality of work produced and the cost incurred in project execution.

Outsourcing projects to experts is the norm in most businesses which aim at excellence and long term cost-cutting. Today more and more businesses want to focus on their core business functions and they are presented with a choice between onshore vs offshore employees to execute their projects.

Here in this blog, we help you draw a comparison between onshore and offshore employment, their pros and cons and how things will look like in 2021 when it comes to businesses that hire a virtual employee.

Onshore Company vs Offshore company

Offshore companies are entities that are located offshore and offer various professional services at considerably low pricing. Many businesses prefer outsourcing their projects to offshore companies given their distinct expertise in the domain and the cost-effective pricing models they follow. Companies may find it difficult to sublet work to domestic professionals due to a multitude of reasons. These businesses find it convenient to hire offshore employee who can outsource their work. As they hire virtual employee from an offshore company, there are chances they find skilled, knowledgeable workforce from all across the globe, especially developing countries like India, Philippines and Mexico etc for optimized output. Given the internet penetration, we have today, continuous communication with an offshore employee contributes to the success of the model. Hiring offshore employees means leveraging talent from multiple geographic areas and ensures that you are working with the best available resources, globally. However, there are instances when a business will have to deal with different time zones and resultant delays in communication. Even cultural differences and the language barrier may become difficult to adapt too. In a rare circumstance, when there is a conflict, its resolution may become a little expensive in a foreign court. 

On the other hand, an onshore company is based in the home country where a business is located. Outsourcing projects to nearshore companies or the companies located within the geographical limits of a country is possible but often incurs the heavy expenditure. The expenses increase in terms of labour cost. Since onshore companies are within the proximity of the business, the project monitoring process becomes easier than how it is when you hire virtual employee. Onshore employees are easy to communicate within the absence of a language barrier and also work sans any timezone limitations.

Furthermore, working with an onshore employee means being governed by the same rules and regulations and ensuring compliance. It is common for domestic workers to command a high rate as compared to offshore companies’ same services. Hiring domestically also means limited to just one geographic region when searching for talent.

Offshore Hiring Costs Vs. Onshore Hiring Costs

If you look at it, offshore hiring costs are always less than onshore hiring costs, if you are business based in any of the developed countries. Businesses based in European nations, as well as the US, find it lucrative to hire offshore employee to execute their projects. For example, businesses that hire virtual employee for software development pay anywhere starting from USD 30 per hour but those that choose to do onshore software development pay starting from USD 130 per hour. An experienced onshore developer in the US/UK/Europe costs upwards of $100,000/annum. This includes salary and other benefits. However, a similarly skilled resource from India would cost around $20,000. On average, hiring offshore brings the cost down by one-fifth when compared to the cost of hiring in-house teams. Thus, it makes business sense to hire a team of developers working offshore at the expense of a single developer who works in-house.

For a business looking to slash down the costs, it may seem too good to be true; however, it’s important to ensure that the offshore employee does what it promises at the given pricing. Businesses must assess the proposal and see if they are really getting what they seek out of it. They must also steer clear of any unnecessary challenges and hidden fees involved. 

In the End

Both offshore and onshore hiring are intelligent ways to execute business, but both present their own unique challenges too. There is no absolute fixed answer for questions like ‘which would cost more, offshore or onshore employees?’ The cost of both offshore and onshore employees depend on the scope of the project they are working on, the goals they are trying to achieve, and the kind of support a business expects from the employee. As globalization becomes the buzz word across nations, both offshore and onshore employment can work adjacent to each other to support business growth.

In the end, it depends on the business what choice they want to make. Businesses need first to access their own ability to manage offshore teams before they dive right into it, lured by its cost-effectiveness. Hire offshore employee only if your business is ready to overcome obstacles if you wish to stick to your budget and timeline. Hire virtual employee or an onshore employee, both kinds of recruits can be your partner through long term growth if you manage them well. In 2021, the virtual work ecosystem will make it feasible for businesses to opt for.