How to calculate BPO ROI: the full in-house cost model

Last verified against the primary sources on 15 October 2026.

Most outsourcing decisions stall because the cost comparison never gets done properly. Teams compare a quoted monthly fee against an employee's gross salary and call it the analysis. That approach misses four or five cost categories that are real and consistently under-counted. A full model either makes the case or shows that there is none.

Quick answer: a return-on-outsourcing model sets the total cost of your current in-house finance, payroll or accounting function (salary, employer contributions, overheads, management time and error costs) against the total cost of the outsourced service, including the one-off cost of moving the work. The result depends entirely on your own inputs and the quote you receive, so treat any headline saving figure, including the illustration below, as a test of assumptions rather than a promise. You can run your own numbers in the BPO ROI calculator.

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What a full model counts

The calculation is only as useful as its inputs. These are the costs in-house teams rarely see in one place.

Current in-house cost:

• FTE count: the people working in finance, payroll or accounting, with part-time staff pro rata (a half-time employee is 0.5 FTE).
• Fully loaded employment cost per FTE: gross salary plus the employer's statutory contributions, health insurance, training and professional subscriptions, and recruitment cost spread over average tenure. Recruitment fees and sick-leave cover are the items most often left out.
• Office and infrastructure: desk cost, equipment, software licences and IT support. If staff work from home or in a serviced office, use the actual cost per person.
• Management time: the hours a manager or director spends supervising the function each week, priced at that person's hourly cost.
• Error and rework: payroll corrections, late filing penalties and reconciliation clean-up.

Outsourced cost:

• The monthly fee in the provider's written quote for the same scope.
• The one-off transition cost: system access, process documentation, onboarding and any period of parallel running.

Outputs worth calculating: the annual net saving, the saving over three years after the transition cost, and the break-even month, when cumulative savings first exceed the transition cost.

What employer contributions to include

For a team in the United Kingdom, employer National Insurance is 15% of earnings above the secondary threshold of £5,000 a year for 2026 to 2027 [1], and the minimum employer contribution to a workplace pension is 3% of qualifying earnings [2].

For a team in Sri Lanka, the employer pays 12% of total monthly earnings to the EPF and 3% to the ETF [3] [4]. An employer of 15 or more also owes gratuity of half a month's salary for each completed year to an employee who leaves after five years or more, so accrue for it [5].

Converting currencies

If the two sides of the comparison are in different currencies, convert at a current published rate and record which one you used. The Central Bank of Sri Lanka's weekly indicators for 9 October 2026 show an average rate of Rs 438.21 to the pound [6]. Rupee figures worked out at an older rate can understate the onshore cost by a wide margin.

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If the transition is financed with debt, include business-loan repayments and interest assumptions in the investment case.

What drives the result

The size of any saving comes from a few factors, and each one can move it a long way:

• The wage gap between the in-house location and Colombo for the same role.
• The provider's margin, which covers supervision, review and governance on top of raw labour cost.
• Transition and coordination cost in the first year.
• The ramp period while a new team learns your processes.
• How lean the in-house team already is. An efficient team in a lower-cost city leaves less to save than a central-city team carrying full overheads.

Ask each provider to show how their quote is built, and run the model on the quote, not on a headline percentage.

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How to build the model step by step

Step 1: Choose the function

• Finance and accounting (management accounts, bookkeeping, payables and receivables)
• Payroll (processing, payslips, PAYE in the UK or APIT in Sri Lanka, year-end reporting)
• Tax compliance (VAT returns, corporate tax returns, instalments)
• Combined (several functions together)

Step 2: Enter the FTE count

Count the full-time equivalents in the function, with part-time staff pro rata.

Step 3: Build the fully loaded cost per FTE

Add gross salary, employer statutory contributions, pension, health insurance and an annual figure for training and recruitment. Build it from the components rather than applying a rule-of-thumb multiplier.

Step 4: Add office overhead per FTE

Use your actual annual cost of desk space, equipment and shared services for each person.

Step 5: Add management time

Estimate the weekly hours a manager spends on the function and price them at that manager's hourly cost.

Step 6: Enter the outsourced quote and transition cost

Use the written quote for the same scope, and ask the provider what transition involves and what it costs.

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Worked example: hypothetical UK company, small finance team

This is an illustration of the arithmetic, not a WinCore result or price. Every figure is an assumption, stated so you can replace it with your own.

Assumptions: a hypothetical company in Manchester with two full-time finance staff on GBP 35,000 each and a half-time finance manager on GBP 17,500 (2.5 FTE, GBP 87,500 in salaries). Employer National Insurance at 15% above £5,000 per employee [1], before any allowance the company may be able to claim. Pension at 3%, simplified to apply to the full salary [2]. Overhead of GBP 8,000 a desk. An outsourcing quote of GBP 4,500 a month and a transition cost of GBP 6,750, both assumed for the example.

Current annual cost:

Outsourced cost (assumed): GBP 4,500 a month, GBP 54,000 a year.

Result on these assumptions:

Change the quote to GBP 9,000 a month and the annual saving falls to GBP 35,800, about 25%. The model is only as good as the quote and the in-house figures behind it.

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For a software business, include subscription-finance processes and handover controls in the outsourcing scope before estimating savings.

Test the number before you act on it

A headline saving needs four checks.

Quality equivalence. The saving only holds if the outsourced work is as good as the in-house work. Ask the provider how work is reviewed before it reaches you, and who signs it off.

Transition time. Moving a function takes weeks, usually with a period of parallel running. Put the transition cost and the parallel-running cost in year one.

Control and visibility. Ask how you will see the working files, reconciliations and reports, and how quickly. You should keep full visibility while the production work moves.

Currency. If your costs are in pounds but the fee is in dollars or rupees, you carry exchange risk. Ask which currency you will be invoiced in.

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When outsourcing makes financial sense

The model gives you numbers, but the decision also depends on other factors. Outsourcing typically makes sense when:

The function is high-volume and rule-based. Payroll processing, VAT return preparation, payables matching and bank reconciliation are well-defined, repeatable processes with clear inputs and outputs.

In-house capacity is constrained by cost. A business that needs more financial oversight than one part-time bookkeeper can give, but cannot justify a full-time finance manager, can fill the gap without a new hire.

Staff turnover in the function is high. Each departure starts a recruitment and training cycle. Outsourcing moves that burden to the provider.

Compliance obligations are growing. More VAT returns, more employees on payroll and more reporting add up. An outsourced service can scale in smaller steps than a new hire.

Outsourcing is less likely to be the right answer when the function depends on knowledge only internal staff hold, when a regulator requires the work to be done in-house, or when the work is so small that managing a provider costs more than it saves.

Talk to us. Run your figures in the BPO ROI calculator, then see our BPO services, accounting and payroll outsourcing pages, or ask for a scoped proposal through our contact page.

This guide is general information on the law as at 15 October 2026 and is not advice on your specific situation.

References

1. HM Revenue and Customs, GOV.UK. Rates and thresholds for employers 2026 to 2027, Class 1 secondary threshold and employer rate. https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2026-to-2027 . Primary. Accessed 15 October 2026.

1. GOV.UK. Workplace pensions: what you, your employer and the government pay, minimum contributions. https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay . Primary. Accessed 15 October 2026.

1. Central Bank of Sri Lanka. Employees' Provident Fund Act, No. 15 of 1958 (reprint), s.10. https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/acts/en/epf_act.pdf . Primary. Accessed 15 October 2026.

1. Employees' Trust Fund Board. Employees' Trust Fund Act, No. 46 of 1980, s.16(1). https://etfb.lk/wp-content/uploads/2021/03/ETF-Act.pdf . Primary. Accessed 15 October 2026.

1. Parliament of Sri Lanka. Payment of Gratuity Act, No. 12 of 1983, ss.5(1) and 6(2). https://www.parliament.lk/uploads/acts/gbills/english/3120.pdf . Primary. Accessed 15 October 2026.

1. Central Bank of Sri Lanka. Weekly Economic Indicators, 9 October 2026, exchange rates. https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/statistics/wei/WEI_20261009_e.pdf . Primary. Accessed 15 October 2026.