The Top 15 Hidden Costs of In-House IT: 2026 Guide

Should your organization manage an in-house IT department or outsource IT services? The right answer depends on factors like company size, regulatory compliance needs, and industry. Your budget also heavily influences whether an in-house, outsourced, or hybrid model is right for you. To help you avoid surprises, we’ve dug deep to find the hidden costs of in-house IT for businesses in 2026.

Key Takeaways:

• In-house IT costs extend far beyond salaries. Payroll taxes, benefits, office space, tools, training, and overtime can significantly increase total spend.
• Many organizations overpay for unused capacity. Full-time IT staff often aren’t needed around the clock, yet businesses still absorb fixed labor costs.
• Poor IT management introduces major financial risk. Bad hires, misconfigurations, and missed security updates can lead to downtime, breaches, and data loss.
• Downtime and data breaches are among the most expensive hidden costs. Even short outages or a single breach can cost hundreds of thousands—or millions—of dollars.
• Outsourcing or hybrid IT models can reduce risk and improve cost control. These approaches shift unpredictable expenses into more flexible, service-based pricing.

HOW MUCH DOES IN-HOUSE IT COST IN 2026?

Not all expenses related to in-house IT are hidden. How much should you budget for mainline expenses?

Salary Costs

The salary range for IT workers varies considerably by role and region. Here are some averages based on data from the U.S. Bureau of Labor Statistics and national job search platforms:

• IT support personnel: About $65,000 a year
• IT technicians (including help desk): $80,000
• Cybersecurity specialists: $128,000
• Network engineers: $135,000
• Database architects: $142,000
• Software developers: $144,500

Administrative roles are even more costly in 2026. In many cities, IT directors make about $185,000 annually, and CISOs often command salaries surpassing $200,000.

Workers’ Compensation Insurance

In the U.S., workers’ compensation costs employers about 1% of each employee’s wages. Roles that pay a salary of $100,000 would cost about $1,000 per year.

Security Software

Network security is an essential part of IT for all organizations, regardless of size or business model. At a minimum, you should budget for anti-malware software, a firewall, and network vulnerability scanning. Platforms are priced per seat, per endpoint (e.g., $50 to $3,000 per server), or on a subscription basis.

WHAT ARE THE HIDDEN COSTS OF IN-HOUSE IT FOR YOUR ORGANIZATION?

Now that the obvious expenses related to in-house IT are covered, it’s time to look at costs that many organizations overlook. Hidden costs affect your working capital and business overhead.

1. Full-Time Pay

Depending on your organization’s networking needs, the in-house model can be a poor fit in terms of work performed per hour of compensation. Third-party IT companies often charge based on a break-fix model, so you only pay for the services you need each month. With full-time in-house IT employees, you may end up paying workers many extra hours to sit around and wait.

2. Overtime Costs

Financial businesses, cloud service providers, healthcare organizations, and many other companies need 24/7 uptime for network operations. But system emergencies can strike at any time of day or night, and IT personnel have to respond at a moment’s notice, regardless of their normal schedule. For in-house teams, this often means significant overtime pay, costing your business at least 150% the normal hourly rate.

3. Payroll Taxes

When you outsource IT services to a third-party firm or independent contractors, you’re not liable for any taxes. On the other hand, with in-house IT technicians, your company must pay:

• Social Security: 6.2% of total wages per worker
• Medicare: 1.45% of total wages
• Federal unemployment tax: $420 (or 6% of the first $7,000 paid)
• State taxes for unemployment benefits: Varies by state and business factors, such as 2.4% in Oregon and potentially up to 5.4% in Nevada and 8.2% in Illinois

For one employee making $100,000 a year, your organization would also have to pay about $8,000 in federal taxes and $2,400 to $5,000 on average in state taxes.

An average rule of thumb for an in-house IT department is at least one IT technician for every 100 people. For five tech workers, an in-house department would cost you at least $50,000 per year in taxes.

4. Office Space

Because of the sensitive nature of IT work, a cubicle doesn’t cut it for IT. You must set aside office space with enough room for team members, desks, equipment, and repair components.

How much this costs you depends on where your offices are located. Office space in Houston averages $30 per square foot, and San Francisco companies pay more than $50. Offices range from 150 to 250 square feet per employee, so a small IT team would need around 1,500 square feet. In San Fran, that would cost your company about $75,000.

5. Hardware Infrastructure and IT Management Tools

Infrastructure costs for IT techs can add up quickly. PCs and laptops (preferably multiple for IT workers with admin accounts) are just the beginning:

• Network security monitoring software
• Diagnostic tools
• Remote access and system management tools
• Documentation and database management software
• Troubleshooting tools
• Physical tools (e.g., port tracers, testing kits, and power inverters)

When you outsource IT, the third-party organization handles these costs. For in-house teams, employers are responsible for equipping their team for the necessary work. Network security software ranges in cost depending on the size of your organization. Some tools cost $500 to $1,500 a year for mid-size companies, and enterprise solutions may cost $2,000+ a month.

6. Hiring Perks

To attract excellent tech talent, your organization may need to sweeten the offer with work benefits. For cybersecurity professionals, database engineers, or data center specialists, you may have to look outside your local market, covering moving costs, transportation, and other perks.

Even if you only offer health insurance to employees, benefits are expensive. In 2024, the average employer paid more than $500 a month ($6,000 a year) for worker-only coverage and $1,225 ($14,700) for family plans. This is apart from retirement or 401k benefits, paid-time off, and bonuses. 

7. Onboarding and Training

The hidden costs of in-house IT also include the onboarding and training processes. In IT roles, this often takes four to 12 weeks. During that time, you’re paying both the new hire and members of your HR staff. Even assuming a conservative estimate of $20/hr for 50 hours of training, that’s at least $1,000 per worker involved.

8. Ongoing Upskilling and Certification Costs

Network and cybersecurity professionals need ongoing training and periodic certification to protect your organization against emergent threats. Costs for key roles to attend annual workshops can include thousands of dollars in attendance fees, accommodations, and travel costs.

9. Turnover Costs

The rate of employees quitting has dropped significantly in the last few years, but you can still face turnover from hires that don’t meet your standards. These costs are a waste of time and money because you need to re-invest in onboarding and training for the person’s replacement.

10. Consulting Fees

Another expense that catches some in-house IT teams by surprise is the need for consulting. Even experienced network technicians may not have the specialized knowledge necessary for complex operations such as server migrations, cybersecurity system design, or penetration testing. Experts often charge hundreds of dollars per hour in consulting fees.

11. Added Labor Costs

When your IT team consists mainly of workers who are fresh out of college, it can take several times longer to diagnose and resolve network issues. Of course, investing in in-house growth can pay off in the long run, but in the meantime, expect to pay more than simply outsourcing to experienced professionals.

HOW CAN POOR IT MANAGEMENT ADD HIDDEN COSTS?

In-house IT can be beneficial for your organization, but only if you hire high-quality IT professionals and adhere to cybersecurity best practices. Poor IT management has its own set of hidden costs that can catch business owners by surprise.

12. Bad Hires

Filtering employee applications is more challenging these days. Individuals may exaggerate their qualifications or flat-out lie. Gen AI can even help someone pass written IT tests.

Poor hires introduce bad habits, such as:

• Skipping security patches
• Snooping around sensitive data
• Leaking credentials to bad actors
• Misconfiguring important software
• Not backing up critical data

The domino effect can put your entire database at risk, leading to security breaches or insider threats.

13. Network Downtime

One of the most serious hidden costs of poor IT management is system instability. Whether caused by malware, DDoS attacks, configuration errors, software bugs, or novice mistakes, network downtime is devastating. Some experts estimate the average cost of downtime in IT at a whopping $9,000 per minute. Depending on your operations, an hour-long shutdown can cost you $50,000 to $5 million.

14. Security Vulnerabilities and Data Breaches

Increased cyberattacks against financial services, Fintech, cloud, and SaaS organizations mean a single weak point can allow a breach. Poor IT management can allow vulnerabilities to slip through undetected until it’s too late.

The average cost of a data breach in 2025 was $4.4 million. In addition, there are long-term costs related to reputational damage, loss of contracts, loss of customers, regulatory penalties, and potential lawsuits.

15. Accidental Data Loss

Don’t underestimate the price of IT mistakes. Allowing inexperienced workers too much access can result in accidental loss of vital data. Sometimes, incorrect disaster recovery settings are to blame. In either case, business operations can come grinding to a halt when you can’t find key contracts, supplier data, or customer information.

HOW TO MINIMIZE THE HIDDEN COSTS OF IN-HOUSE IT

Don’t get us wrong: In-house IT isn’t a bad thing. For some enterprises, this model is a smart investment that maximizes control and compliance.

But if your organization is losing profitability because of the hidden costs of in-house IT, it may be time for a better solution. At TSP, we’re experts in IT outsourcing, including contract-for-hire, managed IT, recruitment services, and hybrid models. Request a quote today.