When the board wants to offshore engineering, the saving is real but smaller than its number: hidden costs take part of it back, and the redundancy bill depends on your team's tenure. Don't refuse, and don't sign the headline. Bring a costed net from your own tenures, and a staged option: pilot one bounded module for 8-12 weeks, offshore the work you can specify, keep the senior core, and price nearshore on the same lines.
Is the board's request unreasonable?
No. Offshoring is mainstream. Jellyfish's roster data shows the share of engineers working outside their company's country rising from 39.9% to 49.7% between 2019 and 2024, across 174 companies. A later Jellyfish survey found 45% of 645 respondents expecting that share to grow. Your board has peers doing this, so answer with numbers, not principle.
What does the saving look like line by line?
The number a board usually sees comes from vendors. AQUANEST, an offshore services vendor, says a senior engineer in Taiwan, Vietnam or the Philippines costs 40-55% less than a US equivalent, and headlines 60%. We'd concede the point: the offshore rate gap is real. The headline fails because it's one line of a cost sheet.
| Line | What the headline leaves out | Size |
|---|---|---|
| Rate gap | The line a vendor headline is built on | 40-55% vs US pay (headline 60%) |
| Redundancy | Pay and notice for the team that leaves | Varies by tenure |
| Ramp-up | Lost output while the new team learns your system | Early-phase loss, not in the total |
| Coordination (project management) | Handoffs, reviews and project-management overhead | 20-30% of effort |
| Rework | Fixing work that missed the spec | 15-30% of effort |
The last three are estimates from Kaopiz, another offshore vendor, which puts the common total hidden-cost uplift at 20-40% or more of project cost. Its rows don't add up to that total, so don't add them. Ramp-up is a separate Kaopiz estimate, a productivity loss in the early phase. Kaopiz doesn't name the studies behind its figures, so treat them as a vendor's estimates.
What does it cost to get from here to there?
Redundancy is the line you control least. In the UK, anyone with two years' service is owed statutory pay: half a week, one week or one and a half weeks per year of service depending on age, with service capped at 20 years and weekly pay capped at GBP 751. At five years' service aged 22-40, that's 5 x GBP 751 = GBP 3,755 a person. The maximum, GBP 22,530, needs 20 years' service, all of it after the person's 41st birthday, for redundancies on or after 6 April 2026. Notice and contractual terms come on top.
The collective consultation rules start at 20 redundancies within 90 days, so a ten-person move usually doesn't trigger them. A bigger programme would, with 30 days of consultation at 20-99 and 45 at 100 or more. Germany and Poland have their own exit rules, covered in German and Polish notice and severance rules.
Worked example: ten engineers, year one and year two
Take a UK company with ten engineers at a fully loaded GBP 90,000 each (an example input). That's GBP 900,000 a year. The board applies 40%, the low end of AQUANEST's range: a gross saving of GBP 360,000, and an offshore bill of GBP 540,000. Against US pay that range holds. A UK team should check the gap against its own salaries.
The uplift of 20-40% on that bill is GBP 108,000-216,000. Redundancy runs from GBP 37,550 for ten people aged 22-40 at five years' service to GBP 225,300 at the maximum; shorter tenures cost less. Put your own tenures into the table.
| GBP | Year one | Year two |
|---|---|---|
| Rate saving | 360,000 | 360,000 |
| Hidden-cost uplift | -108,000 to -216,000 | -108,000 to -216,000 |
| Redundancy | -37,550 to -225,300 | none |
| Net | -81,300 to +214,450 | +144,000 to +252,000 |
All figures are in GBP. Ramp-up isn't priced in the table, so year one is lower still. Notice pay and any overlap between the two teams aren't in it either.
The saving is real. Year one nets anywhere from a loss to most of the headline, depending on who you're letting go, and year two is where it settles.
What should you put to the board instead?
A refusal gets overruled. A costed alternative gets compared. Bring options.
Stay and fix
If the board is reacting to specific cost lines, fix those lines first: tools, cloud, contractors and open roles come before headcount. The order to cut engineering spend in sets that out, and it avoids paying redundancy on your best people.
Offshore the commodity slice, keep the senior core
Move the work you can specify tightly: QA, maintenance, support, well-defined feature work with clear acceptance criteria. Keep architecture and anything ambiguous with people who know the product. A smaller slice also means fewer redundancies and a smaller ramp-up hit.
Nearshore the same slice
Price it on the same lines as the offshore bid. HighCircl's senior engineers run EUR 45-105 an hour. That rate is not where nearshore wins, and we won't pretend otherwise. What you get is engineers one to two hours ahead of UK time, so reviews and handoffs don't wait a day. Whether that closes the gap depends on how big the coordination and rework lines are for your work. For the model differences, see how nearshore, offshore and onshore models differ.
Full offshore, when it is right
It's the right call for large, well-specified, process-mature work, for follow-the-sun support, and for very high headcount where the rate gap swamps the overhead lines. If that describes your product, say so to the board and plan the exit cost honestly.
How do you test the quality question before committing?
The pilot is how you find out. Pick one bounded module and give it to the offshore or nearshore team for 8-12 weeks, with the same acceptance criteria your in-house team works to. Then compare cycle time and escaped defects against your in-house baseline.
A pilot costs a fraction of a redundancy round, and it gives the board a number from your own codebase instead of a vendor's. If it fails, you've lost a quarter on one module. If you'd skipped it, you'd have found out after the team had gone.
What this means for your answer to the board
You're deciding two things: the budget line and the shape of the team. Budget year one net of your own redundancy bill, not as the headline saving, and commit the rest to year two. Put the redundancy and hidden-cost lines in the plan before anyone else finds them.
On team shape, decide which slice of work is specifiable enough to move, and keep everyone who holds context on the rest. Before the next board meeting, read what to put in the engineering update to the board. The wider choice of models sits in software development engagement models.
Then decide: fund the pilot before you sign with a vendor or serve notice on anyone. If the board still wants the full move after seeing the net, you'll have your own data to design it with.
Hiring nearshore engineers through HighCircl
If the staged option wins, the pilot is where nearshore is easiest to test, because one bounded module gives you a cost and quality reading on the same lines as the offshore option. HighCircl charges a capped 20% margin on what the engineer earns, shown openly, and there's no minimum hour commitment, so a small module runs at the hours it needs. You can hire senior nearshore engineers for the slice.
FAQ
What are the disadvantages of offshore outsourcing?
Mostly the lines the headline leaves out: redundancy for the team you replace, a ramp-up dip while the new team learns your system, coordination across time zones and rework on work that missed the spec. Kaopiz, an offshore vendor, estimates that hidden costs add 20-40% or more to the project cost, with coordination at 20-30% of effort and rework at 15-30%.
How much does software development outsourcing cost?
Start from your own loaded cost and apply the vendor's rate saving, then subtract the hidden-cost uplift and any exit costs. For a ten-engineer UK team at an example GBP 90,000 each, a 40% rate saving is GBP 360,000 and the uplift takes back GBP 108,000-216,000.
Is offshoring cheaper than nearshoring?
On hourly rate, yes. On total cost it depends on the work: the more coordination and rework your work needs, the more of the rate gap disappears. Price both on the same lines before deciding.
How long until offshoring saves money?
In the example, the saving settles in year two at GBP 144,000-252,000. Year one nets between a loss of GBP 81,300 and a gain of GBP 214,450, for tenures from five years to the maximum.
What redundancy costs apply when you offshore a team in the UK?
Statutory redundancy pay for anyone with two years' service: GBP 3,755 at five years' service aged 22-40, up to GBP 22,530 at the maximum, plus notice and contractual terms. Collective consultation starts at 20 redundancies within 90 days.