How Much Fractional Executives Actually Cost to Hire

You may have heard that hiring a fractional exec (and other fractional talent) is cheaper than hiring them full-time. And you’d be right! This is one of the big reasons why fractional hiring is popular in the first place.

In this post, we’ll break down the reasons why fractional hiring is cheaper, and give you benchmarks, with real numbers, to understand how much different types of fractional talent costs to hire in general. (If you do fractional work yourself, you might instead find more benefit in our Playbook “How Much Money Can I Make as a Fractional Employee?”, since the below Playbook is focused on companies hiring.)

NOTE: This Playbook assumes U.S. based hiring, if you’re reading this from outside the U.S., you should discount these rates according to the average salary differences between your country and the U.S.

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Why Fractional Hiring is Cheaper Than Full-Time Hiring

Let’s start with the most obvious reason - because a fractional leader works for your company part-time, not full-time. And you only need to compensate them in relation to their time commitment to your company.

But that’s not the only reason. There are several other important factors that contribute to fractional hiring being cheaper:

• You don’t pay payroll taxes (typically 10% of salary) for fractional talent
• Fractional talent doesn’t receive company benefits like healthcare, 401K matching, and other costly perks
• You don’t pay for vacation days, sick days, or other time off that fractional talent takes
• No bonuses, and no equity is expected (unless you want to of course)

So it's clearly more cost effective to hire fractional talent. But do not make the mistake of assuming a fractional executive that works for you 10 hours per week (or quarter time), will be 25% the cost of a full-time hire. You’ll see why below.

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Fractional Talent Compensation Benchmarks

First, a quick note that fractional talent is typically compensated in one of two ways: 1) a monthly retainer, or 2) an hourly rate. And this amount represents the total amount you pay the fractional. This is different from full-time salaries, where the base salary is just that - the base (not including the payroll taxes, the health benefits, bonuses, etc.)

Let’s now explore how much fractional executives, and other fractional talent will actually cost your company to work with. To do this, we’ll look at data from Fractional Jobs. We’ve helped 100+ companies to date to hire fractional talent of all shapes and sizes. We’re like the clearinghouse for fractional work, and therefore have all the data and a good sense for where the market lies.

The basic variables that determine compensation are:

1. How much time you need from the fractional (usually measured in hours per week or per month)
2. Their seniority
3. The uniqueness of their expertise / skillset

Fractional Compensation by Seniority Level

Let’s focus on seniority to create a basic matrix, grounded in hourly rates, to understand rough compensation benchmarks across seniority levels (putting aside function area)

Of course, this is both a broad generalization AND does not take function area into account. While it’s not possible to list every fractional role and what the going rate is, let’s walk through several common fractional roles.

Fractional Compensation by Function Area

Certain function areas, like Fractional Engineering leaders, tend to receive a premium compared to other roles. We see this in full-time hiring too.

Other function areas, like Fractional Finance execs, are in such high demand by companies that they tend to receive a premium too.

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Even broken out by job title, this is still a broad generalization. And there are many good reasons why someone would fall outside of the ranges listed above.

When to Apply a Premium or a Discount

Hourly rates can also vary when the fractional talent falls into any of the following buckets:

• Former founders → apply a premium
• Blue-chip past employers like Stripe, Airbnb, etc. → apply a premium
• Just starting fractional work → potential discount
• Already has a full-time job with full benefits → potential discount

There are other reasons why premiums and discounts should be applied too. 

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Calculate the Monthly Retainer

Most fractional leaders prefer to be paid on a monthly retainer. In effect, this means you as the company agree to pay the independent contractor a set monthly rate in exchange for a rough time commitment.

Below is how different hourly rates convert into a monthly retainer. (We assume the average month has exactly 4.34 weeks in it.)

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How Fractional Hiring Compares to Full-Time Hiring

We now know how much it costs to hire fractional talent. We also know several different reasons why it’s much cheaper (and more flexible), than hiring an equivalent person full-time.

The final point to explore is exactly how much cheaper it is than hiring full-time, with numbers.

Let’s imagine you want to hire a Fractional CMO for 10 hours per week. You know that the type of CMO you need would command roughly a $225,000 base salary if they were hired full-time. A CMO of that caliber would likely command a roughly $10,000 monthly retainer (for 10 hrs per week).

Comparing Fractional vs. Full-time Compensation

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This comparison doesn’t even take into consideration that full-time CMOs would receive equity grants or vacation/sick days. Nor does it price in the added flexibility of bringing on a 1099 Contractor vs. a W2 Employee.

With a fractional hire, you can increase your spend and decrease your spend at your discretion (keeping in mind your contract). Try doing that with a full-time employee and you’ll be left with a very pissed off person (and rightfully so).

The comparison doesn’t factor in the time-to-impact either. Fractional talent is trained to get up to speed and start adding value immediately.

And it also doesn’t recognize the diminishing returns on hours worked. In other words, a Fractional CMO’s 10 hours per week are going to be virtually all high-impact hours, whereas the 40th hour of a full-time CMO’s job is much less likely to be as fruitful.

If you’re a small or growing business, where costs matter, and hiring a full-time CMO might just be overkill, perhaps by now you can see why hiring a Fractional CMO (and any other fractional exec) is a no-brainer.

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If you want to hire fractional talent, and these rates sound good to you, then Fractional Jobs (the site you’re reading this on!) can help. We’ll introduce you to a handful of the best candidates for your need. Learn more here.

The best part?

You pay them directly. We’re not a middleman. So there’s no markup on their rates.

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