Architecture, engineering, and construction (AEC) firms depend on technical expertise to create intricate infrastructure projects. Mechanical engineering experts, in particular, play an important role in designing building services that guarantee efficiency, safety, and compliance with regulations. Since AEC firms can’t expect project demands to remain the same all the time, they have to decide whether to hire contractors or full-time staff.
Understanding the real cost of both staffing models makes it easier for AEC firms to make an informed decision. This blog compares the costs of hiring mechanical engineering contractors versus full-time staff, and how freelance platforms like Cad Crowd can help AEC firms access experts when needed.
🚀 Table of contents
- What is the staffing structure in an AEC firm?
- Full-time mechanical engineers
- Mechanical engineering contractors
- Operational and financial considerations for an AEC firm’s staffing structure
- What are the benefits of a hybrid staffing model?
- Why is it important to make the right staffing decision?
- Factors that affect the cost of full-time mechanical engineers
- Factors that affect the cost of mechanical engineering contractors
- Comparing the annual cost of hiring mechanical engineer contractors and full-time staff
- Global trends in engineering outsourcing
- Regional cost comparison: Mechanical engineering contractors vs full-time staff
- Mistakes to avoid when hiring mechanical engineers
- Conclusion
- How Cad Crowd can help
What is the staffing structure in an AEC firm?
AEC firms often deal with fluctuating timelines, project workloads, and technical requirements. If you have an AEC firm, you should implement staffing strategies that will allow you to complete projects efficiently without facing major financial losses. Choosing the right staffing option is important, as your decision will help you stay competitive in a highly dynamic industry.
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Full-time mechanical engineers
AEC firms usually hire full-time mechanical engineers. They are permanent employees who are given a fixed salary and other employment benefits. Since full-time staff usually take care of several projects for extended periods, they develop a better understanding of your design standards and workflows.
Over time, they gain an understanding relevant to your past projects, company processes, and expectations of clients. This knowledge can help improve efficiency since they don’t have to learn design standards or workflows multiple times.
Furthermore, they can work closely with civil engineering experts, construction managers, electrical engineers, architects, and other departments in your company. Having an in-house team of professionals streamlines communication and reduces interruptions due to coordination issues.
Full-time mechanical engineers can also help with the company’s strategic growth. It’s common for companies to invest in training to improve the technical capabilities of their employees. However, having a full-time workplace involves a huge cost.
You need to consider other expenses like retirement benefits, software licenses, payroll taxes, and health insurance. Additional costs can cause financial problems if you are dealing with fluctuating project workloads.
Mechanical engineering contractors
Unlike a full-time employee, you can hire a contract mechanical engineer for a specific period of time or on a project basis. Contract engineers may work as freelancers through a staffing agency or engineering design consulting company. They are usually paid a fixed project fee, an hourly rate, or a daily rate. Since they work independently, contract mechanical engineers are in charge of their own professional development, benefits, insurance, and taxes. Thus, you are not required to give employee benefits.
One of the best things about hiring a contract engineer is their flexibility. It allows you to scale your team up or down depending on the number of projects that you have. Contract engineers have specialized skills that you may not be able to get from your existing workforce.
Some projects call for advanced technical expertise like energy modeling. Instead of hiring full-time staff with niche expertise that you may only need occasionally, you can find mechanical engineering contractors who already have the skills you need.
Furthermore, hiring contractors can help accelerate project timelines. Since they are used to working with different companies, they can quickly collaborate with your project team and start contributing immediately. This is particularly helpful when you are dealing with an increased workload and tight deadlines.
However, you also need to keep in mind that hiring contractors has certain limitations. They need to learn about your project management tools, internal processes, or design standards before they can contribute to your projects. Since they’re not full-time employees, the insights they get during the project may not stay with your company after their contract ends.
Operational and financial considerations for an AEC firm’s staffing structure
The main challenge for an AEC firm is choosing which staffing structure offers the perfect balance between operational effectiveness and financial efficiency. You have to consider various factors when selecting the right staffing structure for your engineering design company.
- Project duration
An AEC firm with stable workloads and long-term projects benefits from hiring full-time engineers because they can work on different phases of the project. On the other hand, firms with short-term projects can benefit from hiring mechanical engineering contractors with specialized expertise. Apart from gaining the expertise of the contractors, you don’t need to worry about long-term employment commitments.
- Variability
If you have an unpredictable project pipeline, you may find it difficult to maintain a permanent workforce. Hiring contractors allows you to keep up with fluctuating market conditions without substantial financial risk.
- Project complexity
If you have a project that requires highly specialized skills, look for a mechanical engineering contractor with niche technical skills. However, if your project requires standard building systems, the best option is to form an in-house team.
What are the benefits of a hybrid staffing model?
AEC firms usually implement a hybrid staffing model to maintain a stable engineering team and gain access to external expertise anytime. By adopting a hybrid staffing model, you can hire full-time engineers who will manage the main design tasks, supervise project coordination, and maintain rapport with clients. You can hire mechanical engineering contractors to take care of specialized tasks, provide support for big projects, and add more manpower when you have a lot of projects.
Adopting a hybrid staffing model offers many benefits. One of the best things about this setup is that it helps preserve knowledge within your mechanical engineering firm. It also allows you to respond to changing project demands accordingly. Furthermore, it helps you save money by hiring only a limited number of permanent staff and gaining access to specialized skills when needed.
Why is it important to make the right staffing decision?
Your staffing decision is a strategic consideration with a direct influence on the long-term success of your company. Keep in mind that labor cost is a large part of your project expenses. The wrong staffing model can reduce your competitiveness and profitability. The quality of your work has an effect on client satisfaction, project performance, and safety. Thus, you have to make sure that your strategies and decisions will not have a negative effect on your technical excellence.
Carefully assessing the pros and cons of contractors and full-time staff allows you to create a workforce strategy that matches your project delivery requirements and financial goals. It also helps you balance technical expertise, operational flexibility, and cost efficiency to meet the needs and demands of the construction industry.
Hiring full-time mechanical engineers might seem easy. You get permanent members of your team and pay them a salary. However, the employment cost is higher than the basic pay. Apart from the wages, you need to consider other additional expenses like onboarding costs, employee benefits, human resource and administrative support, paid leave, payroll taxes, office equipment and infrastructure, vacation and professional development, and training.
Operational overhead, for instance, may add around 25% to your employees’ salaries. Fringe benefits can contribute an additional 30%, while general and administrative expenses may add 22%. These costs, when combined, are called the cost multiplier. This cost differs for each company and type of service (i.e., civil engineering services).
In some firms, the cost multiplier reaches 1.7 times the basic pay. So, if you are paying $120,000 annually to one mechanical engineer, it may actually cost you around $200,000 every year when you consider all expenses. Some firms underestimate these hidden costs when assessing staffing strategies.
Factors that affect the cost of full-time mechanical engineers
There are several factors that can affect the cost of full-time staff. One of these factors is the salary. Mechanical engineers usually receive a competitive salary based on geographic location, experience, and certifications. Employee benefits are also one of the additional costs that you must consider. The usual employee benefits include life insurance, paid leave, health insurance, and a retirement plan. You also need to pay payroll taxes, employment insurance andsocial security contributions.
Furthermore, you have to consider the costs associated with the recruitment and onboarding process. Costs may include recruitment agency and job advertising fees, interview process, and training. In some companies, the recruitment costs can take up to 20% of the staff’s yearly salary.
Full-time mechanical engineers also need access to office space, computers and workstations, IT support, and engineering software. Simulation software and other engineering tools have licensing fees, which can further increase costs. Management oversight, human resources, legal compliance, and accounting can also add to the cost of creating and hiring a full-time staff.
Factors that affect the cost of mechanical engineering contractors
When you hire mechanical engineering contractors, you are paying for the services they render instead of a salary and benefits. They are compensated through a fixed project fee, daily rate, or hourly rate. The rates of contractors vary depending on their experience, specializationand location. For instance, a mechanical drawing contractor in Eastern Europe may have an hourly rate of $25-$70. If you hire engineers in North America, you may need to pay $100-$200 per hour.
Since mechanical engineering contractors manage their own professional development, benefits, and insurance, they include these costs in their hourly rate. Their expenses usually include project management, contractor fees, and agency markup if they use a staffing agency. However, unlike full-time engineers, you are not required to give them long-term employment benefits, and this can help you save on costs.
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Comparing the annual cost of hiring mechanical engineer contractors and full-time staff
Costs can differ depending on project requirements, geographic location, and experience level, but it’s important that you understand the financial implications of each staffing model. Let’s say a mechanical engineer earns $125,000 every year. When you hire this professional as full-time staff, you are also required to provide additional employment-related benefits aside from the basic pay. These indirect costs can increase your expenses by around 70%-100% of the basic salary.
Your cost multiplier will be 1.9. If you multiply $125,000 by 1.9, the total cost of hiring a full-time engineer becomes $237,500 a year. Thus, even if the engineer’s basic pay is $125,000, the actual cost to your company is $237,500 annually when you include all indirect costs. Now, what if you hire a contractor?
Mechanical contractors usually charge an hourly rate that includes their own operational expenses, taxes, and benefits. If they charge $100 hourly and work 2,080 hours yearly, you will spend around $208,000 annually for hiring a contractor. So, if you want a slightly cheaper option compared to hiring a full-time engineer, you should consider hiring a contractor, even for other tasks like electrical engineering services. However, you must also take note of several factors that can affect the final cost of both staffing models.
- Number of hours
One important variable is the actual hours used for work. Remember that you have to pay full-time engineers regardless of the number of hours they spend working. When you don’t have a lot of projects, your staff may spend more time on administrative tasks, internal meetings, and training.
On the other hand, mechanical engineering contractors receive payment only for the hours they spend working on a specific project. Thus, you can reduce your labor costs by limiting the number of hours that they spend on a project when your workload increases.
- Workload stability and project duration
Apart from the number of hours, you must also consider your workload stability and project duration. When you have a consistent project workload, hiring full-time engineers could be cheaper in the long run. They can work on multiple projects without any interruption, which can help reduce your dependence on contractors with high hourly rates.
Mechanical engineering contractors are often ideal for short-term projects since you don’t need to worry about recruitment costs and other long-term commitments. For instance, if you need support for just three months, hiring contractors allows you to get the necessary skills and knowledge without maintaining permanent positions once the project is complete for the product design company.
- Productivity and retention of knowledge
Productivity and retention of knowledge can also affect your overall cost. Full-time engineers already know the requirements of your clients, your project management systems, and the design standards you implement. This knowledge can help lessen the time needed to complete tasks and enhance workflow efficiency.
On the other hand, mechanical engineering contractors may need additional onboarding time in order to understand how the company works. This could momentarily lessen productivity at the beginning of the project.
- Coordination and management costs
You need to consider coordination and management costs as well. Contractors may need extra supervision and insights to make sure that their work is aligned with your project schedule, standards, and expectations. These efforts might seem small, but they still add to the actual cost of hiring contractors for your consumer product company.
Due to these variables, you have to evaluate your staffing decision based on a more comprehensive total cost of ownership standpoint that involves both indirect and direct costs.
At the end of the day, the best staffing decision depends on different factors like the level of expertise required, duration of projects, and predictability of the workplace. Most of the time, hiring both contractors and full-time staff can help you enjoy both operational flexibility and cost efficiency.
Global trends in engineering outsourcing
The outsourcing market has grown significantly thanks to advances in cloud platforms, remote collaboration, and digital engineering tools. Cloud-based systems and software like CAD allow engineers to collaborate no matter where they are. Due to these technologies, a lot of engineering tasks can be done without compromising quality and accuracy.
Thus, many AECs have started outsourcing mechanical and structural engineering service tasks to countries with lower labor costs, as it allows them to reduce project costs while gaining access to experts. Rates differ across regions due to several variables like cost of living, labor market, and economic conditions. In North America, the typical hourly rate is $100-$200, while it’s $80-$150 in Western Europe. If you’re in Eastern Europe, expect to pay around $40-$70 per hour.
These cost differences can help you lower costs without compromising technical capability. Outsourcing poses several challenges as well. For instance, you may need to deal with cultural misunderstandings, communication barriers, and language differences. The difference in time zones can also slow down decision-making, particularly when you need to collaborate in real time. Managing a remote team also calls for a clearer communication process and a better project management system.
Regional cost comparison: Mechanical engineering contractors vs full-time staff
The table shows the usual rates charged by contractors and full-time engineers in various regions. Understanding these differences can help you plan your budget much more effectively.
| Region | Staffing model | Rate |
| North America | Full-time engineer | $95,000-$120,000 annually or around $45-$50hourly |
| Contractor | $100-$200 per hour | |
| Western Europe | Full-time engineer | €80,000-€110,000 annually or around $40-$50 hourly |
| Contractor | $80-$150 hourly | |
| Eastern Europe | Full-time engineer | €40,000-€60,000 annually or around $20-$30 hourly |
| Contractor | $40-$70 hourly | |
| Southeast Asia | Full-time engineer | $20,000-$40,000 annually or around $10-$20 hourly |
| Contractor | $25-$50 hourly |
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Mistakes to avoid when hiring mechanical engineers
The right workforce can improve the quality of your designs and boost client satisfaction. Here are some mistakes to avoid when hiring mechanical engineers.
- Focusing on the price alone
Don’t just focus on the salary or hourly rate of your staff. Controlling expenses is crucial, but choosing the cheapest option isn’t always the right choice. Those with low rates may produce designs that require revisions. They may also need more supervision and have a longer delivery time. Assess their technical skills, ability to provide quality work, and experience for your design engineering service.
Experienced engineers may charge higher rates, but they’re often capable of completing tasks faster and working with less supervision and fewer errors. Most of the time, these advantages help reduce the overall project cost.
- Hiring without defining project requirements
Problems usually occur when you start the hiring process without defining your project requirements. Since mechanical engineering tasks require technical skills such as building automation, HVAC system design, and energy analysis, hiring talents who don’t match your needs will definitely affect your budget.
So, before you start hiring, you should create a comprehensive description of your project timeline and scope, expected time of delivery, and required software skills to ensure that you recruit the right engineers.
- Failure to consider collaboration and communication skills
Apart from technical skills, you should also consider the communication skills of your staff. Remember that mechanical engineers must work with clients, electrical engineers, architects, project managers, and civil engineers. Some companies focus only on the technical aspect and forget about communication and teamwork.
Misunderstandings may occur when mechanical engineers can’t coordinate with other team members and communicate their insights. This could slow down the progress of your project and cause losses for the company. You should evaluate their communication skills during the interview so that you can build a team that works more effectively, especially for electronic device companies.
- Failure to retain technical knowledge within the company
Contractors leave once the project is done. Important project knowledge may also leave with them. You can prevent this problem by implementing processes for proper documentation of project workflows, technical solutions, and design decisions. Having an organized record ensures that valuable information will be accessible for internal teams and future projects.
- Making decisions based solely on immediate needs
Making your staffing decisions based on your immediate project needs can result in unstable workforce strategies in the long run. It’s good for solving short-term workload problems, but you should also consider both your existing and future projects when making your staffing decisions.
The ideal approach would be hiring both full-time engineers and contractors. The latter offers flexibility when your workloads increase, while permanent staff maintain continuity and retain insights within the company.
- Rushed staffing decisions
Making a quick decision might be necessary when you have deadlines to meet, but rushing the hiring process can lead to choosing applicants who are not qualified for the job. Take the time to verify their skills, review portfolios, and assess past project experiences to avoid costly mistakes. This will increase your chances of finding mechanical engineers who can effectively and efficiently contribute to your projects for your product engineering firm.
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Conclusion
The best staffing model depends on various strategic and financial factors. Full-time mechanical engineers provide long-term cost efficiency, stability, and institutional knowledge for companies with stable project workloads. However, aside from the base salary, you also need to consider your administrative and overhead expenses.
Mechanical engineering contractors offer access to niche expertise, flexibility, and rapid scalability. They may have a higher hourly rate, but they don’t have hidden employment expenses. Moreover, hiring contractors can be a cheaper option if you have short-term projects.
Overall, you must carefully analyze your workload predictability, organizational goals, project duration, and total cost structures before making a decision. If you implement a strategic staffing approach, you will be able to reduce labor costs, enhance operational efficiency, and stay competitive in your industry.
How Cad Crowd can help
Hiring expert freelance mechanical engineers is a cost-effective option if you are aiming to improve your engineering capabilities without worrying about the costs associated with full-time hires. You will find platforms like Cad Crowd that connect AEC firms with expert mechanical engineers who specialize in CAD modeling, product development, HVAC design, and other technical services.
Visit Cad Crowd to find experienced mechanical engineers who can help you stay competitive in the engineering industry. Request a quote today.
