Hiring or outsourcing – when responsibility comes at a cost

The simple calculation comes out in favour of employment. A mid-level design engineer in Austria costs, including non-wage labour costs, workplace and tool licences, roughly €100,000 a year, rounded. Of 2,080 paid annual hours, after holidays, public holidays and sick leave, about 1,350 net productive hours remain — the factor of around 0.65 is the standard figure in cost calculations for knowledge-intensive work, and in engineering design it turns out even lower according to operational data, because a considerable share of time goes into documentation, procurement and rework. Against an hourly rate of €130, as an engineering office would charge with warranty, 1,350 bought-in hours would cost €175,500 a year. On this calculation, employment is cheaper, and the question seems answered.

What this leaves out is that the two paths deliver different things. Under an employment contract, the employed design engineer owes their labour, not the success of the design. The engineering office owes, under a contract for work, a work — a concrete result — bears the economic risk until acceptance, and is liable for defects within the scope of statutory warranty. Responsibility is risk. Risk that can be handed off when buying in must be carried yourself when employing.

What lies behind the 1,350 hours

The calculation "2,080 minus holidays minus sick leave" is rather generous towards employment. In Austria, the average sick leave in 2024 was 15.1 days per employee — slightly down, but clearly above the roughly 12 days that some calculations assume. Only 2.9% of all sick leave cases last longer than six weeks, but when this happens, the absence is concentrated and the employer carries wage costs without output for those weeks. Training, meetings, set-up time and the administrative share that belongs to every engineer's working day are not yet deducted from the 1,350 hours. Studies on engineering productivity — such as the findings summarised by Siemens/Tech-Clarity in 2022 — put pure design and calculation work at less than a fifth of paid time; the rest is spent on documentation, queries to suppliers, and rework arising from production. So anyone assuming 1,350 hours is calculating with a design engineer who can work with above-average focus.

What makes buying in structurally different

A contract for work binds the contractor to a result. If this is not achieved, warranty applies; the client can have the work rectified, reduce the price, or withdraw from the contract. The design engineer's sick leave, holidays and parental leave are, in this arrangement, not the client's problem but the engineering office's — the office owes the performance; how it delivers this is its own concern. The hourly rate of €130 carries precisely this transfer of risk: it covers workplace, tools, training, cover for absences, and the engineering office's entrepreneurial risk.

With an employment contract, it is the other way round. The employer carries the operational risk: if there is no suitable project at the moment, the wage still runs. If the employee falls ill or is absent on parental leave, this too is borne by the employer. And if the design turns out defective, according to prevailing legal opinion it is the employer who is liable to the customer — the employee only in cases of gross negligence, and within clear limits. In cost calculations, the full-cost rate of an employee therefore reads smoothly; in reality, alongside it sits a range of probabilities that pull the curve upwards.

The premium that employment really carries

Four effects make employment more expensive in expected value than the full-cost rate suggests.

The vacancy. From advertising the post to the new hire starting, six months currently pass on average in Austria for design and development roles. During this time, the work is either postponed or bought in, and in practice buying in is the realistic case. If the search stretches to twelve months, the break-even shifts, for this reason alone, from month 13 to around month 19.

The onboarding phase. A new design engineer reaches roughly half productivity after six months in an established team, and full productivity after twelve. For a new product field — the very reason the position typically arises — this phase lengthens. During this time, the existing team must carry the burden of onboarding, which lowers its own productivity.

The mis-hire. Not every appointment works out as planned. A failure during the probationary period, a departure after a year, a longer illness — each of these events resets the clock, and the costs of the first six to twelve months are incurred a second time. Averaged across an entire workforce, this is a calculable frequency; for the one position in question, it is a probability-weighted loss.

Parental leave and other long-term absences. Spread across every position, the probability of a multi-year absence — parental leave following the birth of a child, prolonged illness, care for a relative — is not small. The one position is affected only with a certain probability, but when it happens, cover has to be bought in and then costs the full hourly rate.

In the chart, this is built in as a risk premium of 25% on ongoing employment. It is not an estimate for any specific case, but the expected value across many positions — the actual burden on a single position lies somewhere between 0% and well above 25%. With this premium, the break-even shifts from month 13 to around month 20. The extended vacancy search from the previous section is not included here, as both calculations stand independently; whoever is affected by both at once passes this point correspondingly later. Only someone who can see stable demand ahead for close to two years comes out structurally ahead with their own position.

When which answer holds

Buying in is structurally superior when demand fluctuates or its duration is unclear, when responsibility should demonstrably sit with the contractor, and when a rare competence is needed that a permanent position would not keep fully utilised. It scales month by month and ties up no block of fixed costs.

Employment is structurally superior when demand is stable and broad over several years, when internal proximity to production, sales and customers matters, and when knowledge should be built up over time that stays in the company. Under these conditions, it earns out its linear advantage once the break-even point has been passed.

The middle path — buying in first, then hiring — fits when demand is probably permanent, but the search is under time pressure. Buying in covers the first six to twelve months, during which recruitment and onboarding would be happening anyway, and delivers, as a side effect, proof that the competence is genuinely needed. Anyone who still has demand after a year knows for certain — and is in a stronger position when hiring, because they are not searching under pressure.

Your own figure

Insert your own figures: the full-cost rate for the position you want, the actual demand in hours per month, and the length of your most recent job searches. The risk premium depends on your industry, your workforce structure, and how much replacement risk you have actually carried in past years. Your own figure then lies somewhere between the curves, and over time it becomes visible when the decision tips. The one variable neither you nor we know in advance is the length of your next vacancy search — it is the real lever in this calculation.

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Sources

1. WIFO — Fehlzeitenreport 2024/2025 and WKO summary — 15.1 sick leave days on average in 2024 in Austria, 2.9% of cases longer than six weeks.
2. HAYS Skilled Workers Index Engineering — demand for engineering professionals over time; design and development remain among the consistently sought-after profiles across economic cycles.
3. Konstruktionspraxis / meviy — Engineers and productivity: where working time really goes; findings (including Siemens/Tech-Clarity 2022): pure design time under a fifth of paid time.
4. Austrian Federal Economic Chamber — non-wage labour costs — basis for the full-cost calculation of the employee.
5. Brandauer Rechtsanwälte — Employment contract, freelance service contract, contract for work; WKO — Contract for work under employment law — result vs. presence, transfer of risk and warranty under a contract for work.