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Outsourced vs in-house IT: what an internal hire actually costs in Ontario
Verified against 2026 CRA, Ontario Ministry of Finance and ESA figures
An $85,000 IT generalist costs an Ontario employer about $100,976 a year once mandatory contributions, benefits and recruiting are loaded in. The statutory portion alone is $7,876.25, roughly 9.3% on top of salary, made up of base CPP, CPP2, employment insurance and Ontario Employer Health Tax. Managed IT for the same 25-person business at $145 per user per month is $43,500 a year. The cash gap is real, but the decision usually turns on coverage rather than cost: one employee cannot cover 24/7, and one employee is unavailable at least 22 working days a year.
The employer-side statutory cost, line by line
These are 2026 tax year figures for an employee earning $85,000 in Ontario. Each rate is linked to its primary source so you can re-run the arithmetic with your own salary number.
| Cost | How it is calculated | Annual |
|---|---|---|
| Base salary | The assumption in this example | $85,000 |
| Employer CPP | 5.95% of ($74,600 YMPE − $3,500 exemption) | $4,230.45 |
| Employer CPP2 | 4% of ($85,000 YAMPE − $74,600 YMPE) | $416.00 |
| Employer EI | 1.4 × (1.63% of $68,900 maximum insurable earnings) | $1,572.30 |
| Ontario Employer Health Tax | 1.95% marginal, once payroll clears the $1,000,000 exemption | $1,657.50 |
| Statutory subtotal | Mandatory. Not negotiable. | $92,876.25 |
| Group health & dental (assumption) | Single-employee coverage, mid-range. Get your own quote. | $3,000 |
| Recruiting, amortized (assumption) | 18% agency fee spread over a 3-year tenure | $5,100 |
| Loaded annual cost | One IT generalist, one seat | $100,976 |
Sources: CPP and CPP2 rates and ceilings from the Canada Revenue Agency; the 2026 EI premium rate and $68,900 maximum insurable earnings from the Canada Employment Insurance Commission; Employer Health Tax rates and the $1,000,000 exemption from the Ontario Ministry of Finance. Salary benchmarks for Toronto IT generalists span roughly $58,000 to $128,000 depending on the source and the seniority being measured, which is why the salary here is stated as an assumption rather than a fact. Benefits and recruiting are assumptions. Replace both with your own quotes before you use this number in a decision.
The number the salary comparison misses: coverage
Ontario has nine public holidays under the Employment Standards Act. The ESA minimum vacation entitlement is two weeks for employees with under five years of service, and the ESA provides three unpaid sick days. That is 22 working days, about 4.4 weeks, in which a single-person IT department does not exist. It does not count training, jury duty, a secondment to a project, or the four to twelve weeks between a resignation and a replacement being productive.
This is the part of the comparison that is not really about money. A 25-person business with one IT employee has a single point of failure with a calendar. A business on a managed agreement has a rota. Neither arrangement is automatically better, but only one of them is honest about what happens in the last week of December.
Termination liability, which nobody prices at hiring
Statutory notice under the ESA termination provisions is one week per completed year of service, capped at eight weeks. On an $85,000 salary that is $4,904 at three years and $13,077 at the cap. ESA severance pay is a separate entitlement that applies only where the employee has five or more years of service and the employer's global payroll is at least $2.5 million, at one week per year up to 26 weeks. Where there is no enforceable termination clause in the employment contract, common-law reasonable notice can run well beyond the ESA floor. A managed agreement with 30 days' notice does not carry any of this.
The comparison, stated plainly
| 25-person business | Year one | What you get |
|---|---|---|
| One in-house IT generalist | ~$100,976 | Undivided attention, institutional knowledge, business-hours coverage only |
| Fully managed IT at $145/user/month | $43,500 | Rota coverage, tooling included, no termination liability, 30 days' notice |
| Co-managed at $95/user/month plus the hire | ~$129,476 | Your person keeps the environment, we cover what one person cannot |
Our pricing is published in full on the pricing page.
The tooling nobody puts in the comparison
An internal hire is a person, not a department. That person still needs the software an IT department runs on: remote monitoring and management, a ticketing system, endpoint detection and response, backup with tested restores, and somewhere to document the environment. Every comparison we could find on this subject stops at salary, and this is the line item that makes the in-house number worse than it looks.
The reason is structural rather than a matter of shopping around. RMM and ticketing platforms are licensed per technician or carry device minimums, so their cost barely moves between one seat and fifty. A provider spreads one platform fee across every client it serves. A business with one IT employee pays a similar fee to cover one person, which is the worst unit economics available in this category. Some vendors will not sell at that size at all, and some carry an endpoint floor above what a 25-person business has.
Not all of it is expensive, and it would be dishonest to imply otherwise. Endpoint detection is the cheap part: Microsoft Defender for Business lists at $3.00 per user per month paid yearly and covers up to 300 users, which is well inside the range of a business this size. It is the monitoring, ticketing and documentation layer where the amortisation gap actually lives.
We have deliberately not put a total on this section. Stack costs vary enough by vendor and contract that any figure we published would be fake precision, and the numbers above are only useful because every one of them is checkable. Price your own stack, or ask us and we will tell you what we pay for ours.
When hiring internally is the right answer
- IT is part of what you sell rather than something that supports it.
- There is genuinely enough work to occupy someone full time. Below roughly 40 seats there usually is not, which is how in-house IT people end up doing facilities and phones.
- The environment is unusual enough that institutional knowledge beats breadth: custom line-of-business software, a regulated process, a plant floor.
- You want undivided attention and are willing to pay for the coverage gap. This is a legitimate trade and we will say so on a call.
Questions people ask
What does an IT employee actually cost an Ontario employer beyond salary?
On an $85,000 salary in the 2026 tax year, mandatory employer contributions come to $7,876.25: $4,230.45 in base CPP, $416.00 in CPP2, $1,572.30 in employment insurance, and $1,657.50 in Ontario Employer Health Tax at the 1.95% rate if the business is already above the $1,000,000 payroll exemption. That is roughly 9.3% on top of salary before a single benefit is added.
Is managed IT cheaper than hiring someone in-house?
For a 25-person business in Ontario, usually yes on cash cost. Fully managed IT at $145 per user per month works out to $43,500 a year for 25 users, against roughly $100,976 for one loaded IT generalist. The more important difference is coverage: one employee cannot cover 24/7, and one employee takes holidays.
How many days a year is a single in-house IT person unavailable?
At minimum 22 working days. Ontario has 9 public holidays under the Employment Standards Act, the ESA minimum vacation entitlement is 2 weeks for employees with under 5 years of service, and the ESA provides 3 unpaid sick days. That is about 4.4 working weeks a year with no internal IT coverage, before any training, secondment or resignation.
What is the termination liability on an in-house IT hire in Ontario?
Statutory notice under the ESA is one week per completed year of service to a maximum of eight weeks. On an $85,000 salary that is $4,904 at three years and $13,077 at the eight-year cap. ESA severance pay is separate and only applies where the employee has 5+ years of service and the employer's global payroll is at least $2.5 million. Common-law reasonable notice can be considerably higher than the ESA minimum where no enforceable termination clause exists.
When is hiring internally the better decision?
When IT is close to the product rather than supporting it, when there is enough work to keep someone busy full time, or when the environment is genuinely unusual and institutional knowledge outweighs breadth. A single in-house person also gives you undivided attention, which no shared provider can match. The honest split for most 10 to 150 person businesses is co-managed: keep the person, buy the coverage they cannot personally provide.