Fractional vs Full-Time: Cost Comparison Guide

# Fractional vs Full-Time: Cost Comparison Guide

When expanding your leadership team, one of the most critical decisions you'll make is whether to hire full-time or fractional talent. Whilst the upfront costs might seem straightforward, the true total cost of employment—and the value delivered—is far more nuanced than it appears.

This comprehensive guide breaks down the real costs of both options, helping you make an informed decision for your UK business.

## The True Cost of a Full-Time Executive

Let's examine a realistic scenario: hiring a full-time Chief Financial Officer (CFO) in London with a £120,000 base salary.

### Direct Salary Costs

**Base Salary:** £120,000/year
- Monthly: £10,000
- Note: Mid-range for an experienced CFO in London

### Employer National Insurance Contributions

**Rate:** 13.8% on earnings above £9,100
**Calculation:** (£120,000 - £9,100) × 13.8% = **£15,304/year**

This is a hard cost that many businesses forget to factor into their hiring budgets.

### Pension Contributions

**Minimum Auto-Enrolment:** 3% of qualifying earnings
**Competitive Offering:** 5-10% of salary

**Calculation at 5%:** £120,000 × 5% = **£6,000/year**

Top talent expects competitive pension contributions, often 8-10% for senior roles.

### Benefits Package

**Health Insurance:**
- **Individual:** £1,000-£2,000/year
- **Family:** £3,000-£5,000/year

**Other Common Benefits:**
- Life insurance: £500-£1,000/year
- Income protection: £800-£1,500/year
- Dental/optical: £300-£600/year
- Gym membership: £500-£1,000/year
- Professional development: £2,000-£5,000/year

**Total Benefits:** **£5,000-£15,000/year**

### Recruitment Costs

**Agency Fees:** 15-30% of first-year salary
- **For £120,000 role:** £18,000-£36,000 (one-time)

**Alternative Recruitment Costs:**
- Internal recruiter time: £5,000-£10,000
- Job board listings: £500-£2,000
- Interview expenses: £500-£2,000
- Assessment tools: £500-£1,500

**Average Recruitment Cost:** **£20,000-£40,000** (one-time, but amortise over expected tenure)

### Office and Equipment Costs

**Desk Space (London):**
- **Co-working:** £400-£600/month = £4,800-£7,200/year
- **Dedicated office:** £500-£800/month = £6,000-£9,600/year

**Equipment:**
- Laptop: £1,500-£2,500
- Monitor(s): £300-£800
- Phone: £500-£1,000
- Software licences: £1,000-£3,000/year
- Desk setup: £500-£1,500

**Total Office/Equipment Year 1:** **£10,000-£18,000**
**Ongoing:** **£5,000-£10,000/year**

### Training and Development

**Industry Conferences:** £2,000-£5,000/year
**Professional Certifications:** £1,000-£3,000/year
**Training Courses:** £1,000-£3,000/year

**Total Development:** **£4,000-£11,000/year**

### Hidden Costs

**Management Time:**
- Onboarding: 40-60 hours
- Regular 1-on-1s: 2 hours/week = 100 hours/year
- Performance reviews: 10-20 hours/year
- **Value at £100/hour:** £15,000-£18,000/year

**Productivity Ramp-Up:**
- Months 1-3: ~40% productive = £30,000 lost value
- Months 4-6: ~70% productive = £9,000 lost value
- **Total Ramp-Up Cost:** £39,000

**Redundancy Risk:**
If the hire doesn't work out within 2 years:
- Statutory redundancy: £1,000-£5,000
- Notice period (3 months): £30,000
- Lost productivity: £20,000-£40,000
- Replacement recruitment: £20,000-£40,000
- **Potential Cost of Bad Hire:** £71,000-£120,000

### Total Cost Summary: Full-Time CFO

**Year 1:**
- Salary: £120,000
- NI: £15,304
- Pension: £6,000
- Benefits: £10,000
- Recruitment: £30,000
- Office/Equipment: £14,000
- Training: £7,500
- Management time: £17,000
- Ramp-up cost: £39,000
**Total: £258,804**

**Year 2+:**
- Salary: £120,000
- NI: £15,304
- Pension: £6,000
- Benefits: £10,000
- Office/Equipment: £7,500
- Training: £7,500
- Management time: £17,000
**Total: £183,304/year**

## The True Cost of a Fractional Executive

Now let's compare a fractional CFO working 2 days per week at £1,500/day.

### Direct Costs

**Day Rate:** £1,500
**Days Per Week:** 2
**Weeks Per Year:** 48 (assuming 4 weeks holiday)
**Annual Cost:** £1,500 × 2 × 48 = **£144,000/year**

### What's Included

The £144,000 covers:
- Their time and expertise
- All their business overheads
- Their own equipment and software
- Their professional insurance
- Their continued professional development
- Their business administration

### What You Don't Pay

**£0** - Employer National Insurance
**£0** - Pension contributions
**£0** - Benefits package
**£0** - Recruitment fees (typically find and start within 2-4 weeks)
**£0** - Office space
**£0** - Equipment
**£0** - Training and development
**£0** - Management overhead (highly self-directed)
**£0** - Redundancy risk

### Additional Costs to Consider

**Onboarding Time:**
- Fractional executives hit the ground running
- Typical onboarding: 4-8 hours of your time
- **Cost at £100/hour:** £400-£800 (one-time)

**Software/Tools:**
If they need access to specific tools you don't already have:
- **Estimate:** £500-£2,000/year

### Total Cost Summary: Fractional CFO (2 Days/Week)

**Year 1:** £144,000 + £1,000 onboarding + £1,000 tools = **£146,000**
**Year 2+:** **£144,000/year**

## Side-by-Side Comparison

| Cost Category | Full-Time | Fractional (2 days/week) |
|--------------|-----------|--------------------------|
| **Salary/Fees** | £120,000 | £144,000 |
| **NI Contributions** | £15,304 | £0 |
| **Pension** | £6,000 | £0 |
| **Benefits** | £10,000 | £0 |
| **Recruitment** | £30,000 | £0 |
| **Office/Equipment** | £14,000 | £1,000 |
| **Training** | £7,500 | £0 |
| **Management Time** | £17,000 | £1,000 |
| **Ramp-Up Cost** | £39,000 | £0 |
| **YEAR 1 TOTAL** | **£258,804** | **£146,000** |
| **YEAR 2+ TOTAL** | **£183,304** | **£144,000** |

**First Year Savings with Fractional:** £112,804 (44%)
**Ongoing Annual Savings:** £39,304 (21%)

## Value Delivery Comparison

The cost comparison only tells part of the story. Let's examine value delivery.

### Full-Time Executive (5 days/week)

**Productive Time:**
- Actual work weeks: ~46/year (accounting for holidays)
- Days per week: 5
- Total days: 230/year

**Effective Productive Days:**
After accounting for:
- Meetings (20% = 46 days)
- Administrative work (10% = 23 days)
- Internal projects (10% = 23 days)

**Strategic work time:** ~138 days/year (~60%)

### Fractional Executive (2 days/week)

**Productive Time:**
- Work weeks: ~48/year
- Days per week: 2
- Total days: 96/year

**Effective Productive Days:**
Fractional executives are laser-focused:
- Minimal internal meetings
- No administrative burden
- Pure strategic work

**Strategic work time:** ~90 days/year (~94%)

### Value Analysis

**Full-Time:**
- Total cost Year 1: £258,804
- Strategic days: 138
- **Cost per strategic day: £1,876**

**Fractional:**
- Total cost Year 1: £146,000
- Strategic days: 90
- **Cost per strategic day: £1,622**

**Plus,** the fractional executive brings:
- Cross-industry experience from working with multiple clients
- Fresh perspectives not influenced by internal politics
- Network effects and connections
- Proven frameworks and best practices
- No ramp-up time to full productivity

## When Full-Time Makes Sense

Despite the cost advantages of fractional, there are scenarios where full-time is the right choice:

### 1. High-Volume Operational Needs
If the role requires 4-5 days of hands-on operational work weekly:
- Large team management (10+ direct reports)
- Daily firefighting
- High meeting load
- Significant administrative burden

### 2. Company Culture Priority
When cultural integration is critical:
- You're building a specific company culture
- Face-time matters for your team
- You need someone at every company event
- Physical presence is valued

### 3. Very Early Stage Startups
Pre-seed or seed stage companies might need:
- Someone wearing multiple hats
- Extremely hands-on execution
- Flexible availability for urgent issues
- Equity-focused compensation

### 4. Highly Specialised, Continuous Work
Roles requiring:
- Deep, continuous focus on one complex problem
- Proprietary systems or processes
- Security/confidentiality constraints
- Highly technical, full-time attention

### 5. Long-Term Strategic Build
When you're committed to:
- 5+ year relationship
- Building institutional knowledge
- Developing a successor
- Creating IP that stays with company

## When Fractional Makes Sense

Fractional executives excel in these scenarios:

### 1. Strategic Guidance Without Full-Time Need
Your business needs:
- High-level strategy and direction
- Periodic check-ins and course corrections
- Expert oversight without daily management
- Quality over quantity of time

### 2. Specific Project or Transformation
You have:
- A fundraise to prepare for (6-12 months)
- A system to implement (3-9 months)
- A department to build (6-18 months)
- A specific challenge to solve

### 3. Scale-Up Phase
Your company is:
- Growing rapidly but budget-conscious
- Not ready for full-time C-suite
- Needing expertise beyond current team
- Proving out the role before hiring full-time

### 4. Cost-Efficiency Priority
When you need to:
- Maximise budget efficiency
- Reduce fixed costs
- Maintain flexibility
- Prove ROI before expanding

### 5. Multiple Perspectives Valued
You want:
- Cross-industry insights
- Fresh external perspective
- Network effects and connections
- Best practices from other companies

## Hybrid Approaches

Some businesses successfully combine both:

### Model 1: Fractional to Full-Time
Start with fractional CFO, then:
- Assess fit and value
- Prove the ROI
- Build the department
- Convert to full-time when ready

**Benefits:**
- Reduced hiring risk
- Proven value before commitment
- Clear scope and expectations
- Smooth transition

### Model 2: Fractional + Junior Team
Pair a fractional executive with full-time junior staff:
- Fractional CFO (2 days/week): £144,000/year
- Financial Controller (full-time): £50,000/year
- **Total:** £194,000/year

This provides:
- Senior strategy and oversight
- Daily operational capability
- Cost less than single full-time CFO
- Better coverage and capability

### Model 3: Full-Time + Fractional Specialists
Keep core functions full-time, add fractional for specialties:
- Full-time COO: £150,000/year
- Fractional CMO (2 days/week): £140,000/year
- Fractional CTO (1 day/week): £70,000/year
- **Total:** £360,000/year

Versus three full-time executives at ~£450,000-£550,000/year.

## Decision Framework

Use this framework to decide what's right for your business:

### Step 1: Define Your Needs

**Time Required:**
- [ ] Daily hands-on work needed → Consider full-time
- [ ] 1-3 days/week of strategic work → Consider fractional
- [ ] Somewhere in between → Consider hybrid

**Nature of Work:**
- [ ] Highly operational and administrative → Full-time
- [ ] Strategic and advisory → Fractional
- [ ] Mix of both → Hybrid or fractional + support

**Duration:**
- [ ] Indefinite, long-term need → Full-time
- [ ] 6-18 month project → Fractional
- [ ] Ongoing but flexible → Fractional with option to convert

### Step 2: Assess Your Budget

**Can you afford £180,000-£260,000/year all-in?**
- [ ] Yes → Full-time is feasible
- [ ] No → Fractional is better fit
- [ ] Stretch → Consider fractional to start

**Do you need to minimise fixed costs?**
- [ ] Yes → Fractional provides flexibility
- [ ] No → Full-time provides stability

### Step 3: Evaluate Your Stage

**Company Stage:**
- Pre-seed/Seed → Fractional or very junior full-time
- Series A/Growth → Fractional with option to convert
- Series B+ → Full-time with fractional specialists
- Established → Full-time for core, fractional for specialists

**Revenue:**
- <£1M → Fractional
- £1-5M → Fractional or senior manager full-time
- £5-20M → Fractional executive or full-time director
- £20M+ → Full-time executive

### Step 4: Consider the Role

**Best for Fractional:**
- CFO (especially for SMEs)
- CMO
- Strategy roles
- Transformation leads
- Specialised advisors (CTO, CPO)

**Best for Full-Time:**
- COO (operational intensive)
- Head of Sales (high people management)
- CTO (for tech companies)
- Roles with large teams (10+ reports)

### Step 5: Calculate ROI

**Expected Value Creation:**
If the role should generate/save £500,000/year in value:
- Full-time cost (£260,000) = 52% of value
- Fractional cost (£146,000) = 29% of value

Even if fractional delivers 75% of full-time value (£375,000):
- Full-time ROI: 92%
- Fractional ROI: 157%

**Do the maths for your specific situation.**

## Common Misconceptions

### "Fractional is just a cheaper version of full-time"
**Reality:** Fractional executives often bring more experience and cross-industry insights than full-time hires at similar costs. You're paying for strategic time, not seat time.

### "We'll lose them to other clients"
**Reality:** Professional fractional executives maintain clear boundaries and commitments. Many prefer the variety of fractional work and stay with clients for years.

### "Fractional means lower quality"
**Reality:** Many fractional executives are former C-suite leaders from notable companies who choose fractional for lifestyle or variety, not because they can't get full-time roles.

### "Full-time employees are more committed"
**Reality:** Commitment isn't about hours, it's about results. Fractional professionals stake their reputation on delivering outstanding outcomes.

### "We can't afford fractional rates"
**Reality:** When you account for all the hidden costs of full-time employment, fractional is often more affordable—and delivers faster ROI.

## Real-World Examples

### Case Study 1: Tech Startup (Series A)

**Scenario:** £3M ARR SaaS company needs financial leadership

**Option A: Full-Time CFO**
- Salary: £110,000
- Total Year 1 cost: £220,000
- Strategic output: ~120 days

**Option B: Fractional CFO (2 days/week)**
- Cost: £130,000/year (£1,350/day)
- Strategic output: ~90 days
- Chose Option B

**Results After 12 Months:**
- Prepared successful Series B (£8M raise)
- Implemented financial systems
- Built finance team of 2
- Built and maintained model for 18 months in just 10% of founders time
- **ROI: Immeasurable** (fundraise success)

**Decision:** Extended fractional arrangement, hired Financial Controller for day-to-day.

### Case Study 2: E-commerce Brand

**Scenario:** £8M revenue DTC brand needs marketing leadership

**Option A: Full-Time CMO**
- Total cost: £190,000/year
- Considered but budget tight

**Option B: Fractional CMO (3 days/week)**
- Cost: £172,000/year (£1,500/day × 3 days × 48 weeks)
- Chose Option B

**Results After 18 Months:**
- Revenue grew to £15M
- Reduced CAC by 32%
- Built marketing team of 5
- **ROI: 585%** (£7M revenue increase / £172k cost)

**Decision:** Converted to full-time after proving value and business could support cost.

### Case Study 3: Professional Services Firm

**Scenario:** £12M revenue consultancy needs operational excellence

**Option A: Full-Time COO**
- Total cost: £210,000/year

**Option B: Fractional COO (2 days/week)**
- Cost: £140,000/year
- Chose Option B

**Results After 24 Months:**
- Improved project delivery by 40%
- Increased billable utilisation from 62% to 78%
- Standardised all operational processes
- **ROI: 410%** (£4.8M additional revenue / £280k 2-year cost)

**Decision:** Maintained fractional arrangement, no plan to hire full-time.

## Making Your Decision

### Questions to Ask Yourself

1. **Do we need someone 5 days a week, every week?**
- If no → Fractional might be more efficient

2. **Can we clearly define success metrics?**
- If yes → Fractional can deliver against them
- If no → May need full-time to figure things out

3. **Is our budget constrained?**
- If yes → Fractional provides better ROI
- If no → Full-time provides more coverage

4. **Do we value fresh perspectives?**
- If yes → Fractional brings diverse experience
- If no → Full-time builds deep institutional knowledge

5. **How quickly do we need impact?**
- Immediately → Fractional (no ramp-up)
- Can wait 3-6 months → Full-time acceptable

6. **What's our risk tolerance?**
- Low → Fractional (easier to change)
- High → Full-time (bigger bet)

### Try Before You Buy

Many companies start fractional with option to convert:

**3-Month Trial:**
- Fractional engagement
- Clear success metrics
- Decision point at 90 days
- Option to convert to full-time

This approach:
- Minimises hiring risk
- Proves value before commitment
- Allows budget planning
- Builds relationship before full commitment

## Conclusion

The fractional vs full-time decision isn't about which is "better"—it's about which is right for your specific situation.

**Choose Fractional When:**
- You need strategic expertise 1-3 days/week
- Budget efficiency is important
- You want to minimise hiring risk
- You value diverse experience and fresh perspectives
- You need immediate impact

**Choose Full-Time When:**
- You need 4-5 days of hands-on work weekly
- Company culture integration is critical
- You're building for long-term (5+ years)
- The role requires deep institutional knowledge
- You have the budget and tolerance for the full cost

**Consider Hybrid When:**
- You need both strategic oversight and operational execution
- You want to optimise cost and coverage
- You're growing and needs are evolving
- You want the best of both worlds

Remember: A fractional executive 2 days/week typically costs 40-50% less than full-time in Year 1, and 20-30% less in subsequent years, whilst often delivering 70-80% of the value—creating exceptional ROI.

## Get Started with Fractional Hiring

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- **Browse verified profiles** of experienced fractional executives
- **Post your requirements** and receive qualified applications
- **Compare candidates** and check references
- **Start within 2-4 weeks** with minimal hiring risk

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