Every growing nonprofit faces the question: should we hire someone to do this work or outsource to a consultant/contractor? The answer looks obvious until you actually decide. Hiring builds organizational capacity but costs more and creates ongoing liability. Outsourcing reduces fixed costs but means less control and less institutional knowledge. The decision depends on: is this ongoing work or temporary? What's the required expertise level? What's your budget constraint?
Too many nonprofits default to outsourcing because it feels cheaper. Then they discover that expensive contractors actually cost more than employees, knowledge walks out the door, and they never build internal capacity. Other organizations hire too early, spending salary budget on work that might be better outsourced. This article provides a framework for deciding, not a one-size-fits-all answer.
When to Hire Full-Time Staff
Hire full-time when the work is: (1) Ongoing and permanent. This job will exist in year 3. (2) Core to mission. This function is essential to your organizational purpose. (3) Requires full-time attention. The work doesn't fit in 20 hours/week; it needs 40+ hours to do well. (4) Requires deep knowledge. Doing it well requires understanding your organization's specifics, building relationships, or developing expertise over time.
Examples: hiring a program director (ongoing, core, full-time, requires deep knowledge). Hiring an administrative coordinator (ongoing, core supporting function, full-time). Hiring a development director (ongoing, core if fundraising is central, full-time).
Cost of full-time: salary plus benefits plus payroll taxes plus onboarding costs. A $50K salary actually costs the organization $65-75K after benefits and taxes. This is significant. But if the work is permanent and essential, this investment makes sense.
When to Use Contractors or Consultants
Outsource when the work is: (1) Temporary or project-based. You need someone for 3 months, not 3 years. (2) Specialized expertise. You need someone with deep expertise in something very specific that you don't need ongoing. (3) No ongoing relationship-building required. The work doesn't depend on deep organizational knowledge. (4) Rare or irregular. You need this work once every 6 months.
Examples: hiring a grant writer for a specific grant period (temporary, specialized, high expertise). Hiring an accountant to do your year-end audit (temporary, specialized, no ongoing relationship needed beyond audit). Hiring a consultant to help you develop a 5-year plan (temporary, specialized, project-based).
Cost of contractors: typically 1.5-2x the hourly rate of an equivalent employee. So a contractor billed at $75/hour costs $150/hour in project costs (because they're not working every hour billed, they have overhead, taxes). But there are no benefits, no payroll liability, and limited ongoing commitment.
Decision Framework
Is this work ongoing (3+ years)? If yes, lean toward hiring. If no, consider contractors.
Is this core to your mission? If yes, probably hire (so knowledge stays internal). If it's support work, contractors are fine.
Does it require deep organizational knowledge? If yes, hire (takes time for contractor to learn and then they leave). If it's self-contained, contractors work.
Can you afford the full cost? If yes, hire. If no, you can't afford to hire (not really—the decision is whether to do this work at all). If budget is tight, do the work with contractors until you can afford staff.
Is the work full-time (40+ hours/week)? If yes, hire. If it's 20 hours/week, consider a part-time hire or contractor.
If your answers point both directions, think about hybrid: hire part-time for the core function, use contractors for specialized/temporary work.
Hidden Costs of Outsourcing
Contractors seem cheaper until you factor in: time spent managing them (your time), onboarding them to your organization (your time plus their ramp-up period), lack of continuity when they leave, inability to delegate easily (you can't assign routine work to a contractor; they work on billable projects), loss of institutional knowledge.
A "cheap" contractor who costs $50/hour but requires 5 hours/week of management time actually costs you $50+($50 value of your time) per billable hour. If you'd hire an employee for $25/hour internally managed, the employee is cheaper.
Also: most work expands. A temporary contractor project often becomes ongoing. You end up paying contractor rates for work that should be staff salary. This is expensive long-term.
Strategic Thinking: Build vs. Buy
Some organizations strategically decide "we don't hire grant writers; we contractor it." This makes sense if: grant writing is not core to your mission (you want someone who's excellent at it, but it's not core), you don't have enough volume to support a full-time person, you want flexibility (scale up/down), or your funding is irregular (hard to justify permanent salary with variable revenue).
Other organizations decide "we absolutely hire for this role" because they want continuity, deep knowledge, and someone vested in organizational success (not just completing projects).
Both strategies work. The key is being intentional. "We contractor grant writing because that's our strategy" is different from "We contractor grant writing because we can't afford staff" (which often means you're understaffed and should address it).
Hybrid: Part-Time Hire + Contractor Support
A middle path: hire someone part-time for core work, use contractors for specialized overflow. Example: hire a part-time development director (30 hours/week) to manage major donors and grant strategy. When you have a large grant opportunity, contract out detailed grant writing. This gives you: consistent leadership (the part-timer), flexibility (contractor for spike work), and lower fixed costs (part-time salary vs. full-time).
This often makes sense for nonprofits $500K-$2M. You have enough work to justify someone in-house, but not enough to justify multiple full-time people in some roles.
If You Contract: Do It Well
Bad contractor relationships: vague scopes, unclear deliverables, no documentation, poor communication, treating contractors like employees but without employment obligations. Good contractor relationships: clear written agreements, defined scope and deliverables, documented processes, regular communication, professional payment.
Contract should include: Scope of work (what you're paying for), deliverables (what they produce), timeline, payment terms (usually net 30 or net 60), intellectual property (who owns the work), confidentiality, and termination clause (how either party can end it).
Communication: Regular check-ins, clear expectations about responsiveness, documented decisions. Lack of communication is where most contractor relationships break down.
Documentation: Contractors should document their work. When they leave, you need to understand what they did. A contractor who "just knows how things work in their head" is a risk.
Transitions: When to Change Your Model
Your organization grows. Work that was project-based becomes ongoing. It's time to hire. Conversely, work that was permanent becomes irregular. Maybe it's time to switch to contractors.
The transition from contractor to hire usually means: the contractor continues while you hire an employee, there's a handoff period (2-4 weeks), the new employee learns from the contractor, then the contractor finishes their engagement. This prevents knowledge loss.
The transition from hire to contractor might happen if: someone leaves, you can't justify replacing them permanently (work has changed), so you contract the function until you figure out the right model.