When to Hire an Agency Instead of Another Employee

This decision is usually made on the wrong number. Someone compares a monthly salary against a monthly retainer, the salary is lower, and the discussion ends. The salary is not the cost of an employee, and the retainer is not buying the same thing.

Here is the comparison done properly, using the Croatian employment cost structure. Rates and the personal allowance change, and income tax rates are set at municipal level, so treat the figures as a worked example and check current numbers for your city before you rely on them.

What an employee actually costs

Croatian payroll has two layers above net pay. Pension contributions (20%, split across both pillars) and income tax come out of gross. Health insurance (16.5%) is paid by the employer on top of gross. So the number that matters to you is not gross — it is gross plus 16.5%.

For a mid-level hire on roughly €1,500 net per month:

That is the part on the invoice from your accountant. It is not the whole cost.

First-year total for a €1,500-net hire lands around €44,000–50,000. Steady state, once ramp-up and recruitment drop out, is roughly €37,000–41,000 a year.

Two of those lines get underestimated consistently. Management time is real cost — if the owner spends two hours a week directing and reviewing, that is roughly 100 hours a year of the most constrained resource in the company. And ramp-up is not optional; see why onboarding takes three months.

What a retainer actually costs

A retained engagement at €5,000 a month is €60,000 a year. No ramp-up, no recruitment, no management overhead beyond your own review time, and it stops when you stop it.

On raw euros, one employee is cheaper. That is the honest answer and anyone telling you otherwise is selling.

The comparison that actually matters

The reason the raw comparison misleads is that it treats the two as interchangeable, and they are not. A €1,500-net hire is one person with one skill set at a mid level. An integrated retainer is senior coverage across several disciplines at once.

So ask the real question: what would it cost to hire the capability, not the headcount?

If the work spans strategy, brand, web, paid acquisition and automation, replicating that in-house is not one hire. It is three or four, most of them senior:

You would also be managing four people, and you would be their only client, which means paying for capacity you cannot fully use in every discipline every month.

That is the actual choice: one mid-level generalist, four specialists, or senior coverage across all of it on a retainer. Compared on capability rather than headcount, the retainer sits between the two.

When to hire instead — and this is often

Hiring is the better decision more often than agencies admit. Hire when:

• The work is continuous and high-volume. Daily execution — publishing, fulfilment, support, sales calls — is cheaper in-house and does not benefit from senior judgment on every unit.
• The knowledge needs to compound internally. If the value is in accumulated understanding of your customers and your operations, that should live with you.
• You can write the job description. If you can specify the role precisely, you know what you need well enough to hire it. If you cannot, you are not ready to hire — you are still diagnosing.
• You can manage it. An employee without direction is a cost with no output. Be honest about whether you have management capacity available.
• The requirement is permanent. Anything you will still be doing at the same volume in three years is a hire.

When a retainer is the better decision

• The work needs several specialisms at once, none of them full-time
• You need it working within weeks, not after a hiring cycle plus a ramp
• You do not yet know exactly what needs building — this is diagnostic work, and it is the wrong thing to hire for
• The work is project-shaped: build it, hand it over, maintain lightly
• You have no management capacity, so an employee would drift
• You need to be able to stop. A retainer ends with notice; a role ends with a redundancy process

The sequence that avoids the mistake

The expensive error in both directions is committing before diagnosis. Hiring a marketing manager to fix a problem that turns out to be operational wastes a year and a salary. Retaining an agency to run ads when the actual constraint is that your delivery cannot absorb more clients wastes budget just as efficiently.

Diagnose first, then decide. Once you know what the constraint is, this decision usually answers itself — and frequently the answer is a retainer to build the system and a hire to run it afterwards.

Related reading: You Can't Hire Your Way Out of a Process Problem and How to Choose a Digital Agency That Actually Delivers.