How Much Does an External HR Department Really Cost? Prices, Models, and Sample Calculations
In short: Depending on the model and scope of services, an external HR department in Germany costs anywhere from around 800 euros per month (retainer fee for small businesses) up to several thousand euros per month for comprehensive support. In most cases, this is significantly lower than the total cost of a full-time in-house HR position, which—including payroll-related expenses, onboarding, and the time the position remains vacant—can quickly add up to 4,500 euros or more per month.
The first question we hear from every management team we speak with at DIGIVI is, “How much does this actually cost?” And rightly so: Without an honest figure, it’s hard to decide whether external HR support is a cost center or an investment. That’s why we’ve broken down the different pricing models here, what they include, and how the costs actually compare to those of an in-house position.
The Three Most Common Pricing Models
Retainer (monthly flat fee)
On-demand (based on time and effort)
Project-based
Many companies combine these models: a lean retainer for day-to-day operations, supplemented by on-demand capacity for exceptional situations.
Sample Calculation: External HR vs. In-House Full-Time Position
Let's take the example of an SME with 30 employees that currently does not have its own HR specialist and is considering filling a full-time position.
Dedicated full-time HR position:
- Salary, including benefits: starting at approximately 4,500 euros per month, often more depending on experience and region
- Time until the position is filled: several months, during which the tasks must be handled on the side
- Training period: several weeks to months without full productivity
- Turnover risk: If the employee resigns after 18 months, the entire process starts over
- Risk of Absence: There is no automatic replacement in the event of vacation or illness
External HR Department on a Retainer Basis:
- Monthly flat rate: starting at approximately 800 euros, depending on the scope of services
- Ready for use immediately; usually within one to two weeks
- No training required on your part, since a well-coordinated team will handle it
- No risk of downtime: If someone on the team is unavailable, you won't even notice
- Scalable up or down, as needed
The difference lies not only in the price on paper, but also in the costs that are rarely factored in: vacancies, onboarding, and employee turnover. Those who compare only gross salaries regularly underestimate the actual costs of an internal position.
What factors influence the cost of an outsourced HR department?
- Company size and number of employees: More employees mean more ongoing processes (contracts, onboarding, questions).
- Scope of Services: Purely administrative support is more cost-effective than a fully outsourced HR function that includes recruiting, payroll support, and labor law consulting.
- Response Time and Availability: Dedicated contacts with quick response times generally cost more than a project-based assignment.
- Industry and Legal Complexity: International employees or special collective bargaining agreements increase the need for consulting services.
FAQ
Frequently Asked Questions
Frequently Asked Questions About the Costs of an External HR Department
How much does an outsourced HR department cost per month?
Retainer plans for small and medium-sized businesses start at around 800 euros per month. The actual price depends on the number of employees and the scope of services.
Is an external HR department more cost-effective than having an in-house HR position?
In most cases, yes, once you factor in the time a position is vacant, the onboarding period, and the risk of employee turnover associated with an internal hire. A full-time position often costs 4,500 euros or more per month, including payroll expenses.
At what company size does it make sense to have an in-house HR department rather than outsourcing?
A rule of thumb based on practical experience: As long as the ongoing HR workload does not justify at least one full-time position—which is usually the case when there are well over 50 employees—an external solution or a hybrid model is generally more cost-effective.
What is typically included in a retainer model?
Typical services include contract management, onboarding support, payroll support, assistance with ongoing labor law issues, and serving as a point of contact for employees. The exact scope of services is determined on a case-by-case basis.