The comparison is almost always made badly. Somebody sets a salary against a monthly retainer, notices the salary is lower, and hires. The salary is not the cost of an employee, the retainer is not the cost of an agency, and neither figure says anything about the thing that actually decides the outcome, which is whether the work is continuous enough to fill a person's week and specialized enough that one person cannot do it.
What an employee actually costs
Salary plus employer taxes, benefits, equipment, software licenses, recruitment cost amortised over expected tenure, and the management time of whoever they report to. Then the tools: the analytics, the SEO platform, the design software, the email system, several of which an agency already owns and spreads across clients. The honest comparison adds all of that, and it typically moves the number a long way from the salary line.
What an agency actually costs
The retainer, plus whatever is excluded from it, which is usually content production, development work and media spend, plus your own time managing the relationship, which is real and is never counted. Ask for the exclusion list in writing and for what a comparable client spends on those in a year. An agency retainer with three large exclusions is not the number you think you are comparing.
The question that actually decides it: is the work continuous?
An employee is the right answer when the work is continuous enough to fill their week and institutional knowledge compounds: running campaigns daily, owning a channel, knowing the product and the customers. An agency is the right answer when the work is intense and occasional, or needs four skills you cannot justify four salaries for. Most businesses have both kinds of work and the mistake is choosing one model for all of it.
The second question: can you manage the work?
A junior in-house hire with nobody to learn from produces junior work slowly, and the business often blames the person. An agency with nobody internally to brief it and judge its output produces plausible work aimed at nothing. Both models need somebody who can tell good from bad. If nobody in the business can, buy the smallest engagement you can and use it to learn, rather than buying either at scale.
The hybrid that usually wins, and why nobody proposes it
One capable in-house person who owns strategy, briefs and judges, plus specialists bought as needed for the channels where depth matters. It costs less than a team, produces better work than a lone junior, and keeps the knowledge in the business. Agencies rarely propose it because it reduces the retainer, and recruiters rarely propose it because it reduces the headcount. It is still usually the right answer for a mid-sized business.
Questions people ask about in house marketing vs agency
Is an agency cheaper than hiring?
Compare fully loaded cost against retainer plus exclusions plus your management time, and the gap is usually much smaller than the salary comparison suggests. Below roughly one full-time person's worth of continuous work, an agency is almost always cheaper because you are buying a fraction of several people. Above it, an employee frequently wins.
What should stay in house?
Anything that needs deep product and customer knowledge, anything continuous, and the judgement about what to do. Strategy, briefing and knowing whether the output is any good are hard to outsource well, and a business that outsources them ends up unable to evaluate what it is buying.
What is better bought from an agency?
Specialist depth you cannot justify a salary for, intense and occasional work such as a site build or a campaign burst, and channels where tooling and experience across many accounts genuinely help. Also anything where you need to start next week rather than in three months.
How do we decide without getting it wrong twice?
Buy a small agency engagement first, three months with defined deliverables, and use it to learn what the work involves and what good looks like. It is the cheapest possible education in what you would be hiring for, and it makes the eventual job description far better if you do hire.