Should you hire an AI developer, a contractor or an agency?
It depends on how much AI work you have, and who will own it. We're Logica HQ, an AI engineering firm that sells the build-firm route, so weigh our view with that in mind. A permanent AI engineer on the UK median salary of £87,500 costs an employer about £101,000 a year once National Insurance and pension are added. That only pays off with a year or more of work for them.
A contractor at the median day rate of £600 suits a defined stretch of work inside your team. You direct them, and you may have to decide their IR35 status. An agency or build firm sells a finished system at a fixed or estimated price. Published prices run from £750 for a one-feature sprint at NRB Consulting to £18,000 to £45,000 for a first pilot at Precise Impact. Our custom AI agents start at £1,450.
What does each route cost?
Each route asks for a different commitment, so the figures below aren't like-for-like. The salary and day rate are ITJobsWatch's medians for the six months to 17 October 2026, and the firms' prices are from their own pages.
| Route | What you pay | Commitment | Who manages the work | Where it falls short |
|---|---|---|---|---|
| Permanent AI engineer | About £101,000 a year at the median salary, before recruitment and equipment | Ongoing employment | You | Costs the same in quiet months; one person's skills |
| Contractor | About £600 a day at the median; £36,000 for 60 days | Days or weeks, set by contract | You | Leaves when the contract ends; IR35 checks if you're medium or large |
| Agency or build firm | A fixed or estimated project price: £750 to £45,000 at the firms below; ours from £1,450 | One project at a time | The firm, against an agreed scope | Less day-to-day control; changes outside the scope cost extra |
| Retained partner or fractional lead | A monthly fee: £1,500 to £6,000 at the firms below; ours £1,450 | Monthly; some firms set a 3 to 6 month minimum | The partner | A set slice of time, not a full-time person |
Employer costs use GOV.UK's 2026 to 2027 rates. Firms' prices were checked on their own pages on 17 October 2026. The sums are in the sections below.
What does a permanent AI engineer cost an employer?
The UK median advertised salary for an AI engineer was £87,500 in the six months to 17 October 2026 (ITJobsWatch). The 10th percentile was £53,375 and the 90th £115,000. Employers also pay National Insurance at 15% above £5,000 a year. They must pay at least 3% pension contributions on earnings between £6,240 and £50,270.
Salary
£87,500 a year.
Employer National Insurance
(£87,500 − £5,000) × 15% = £12,375.
Employer pension
(£50,270 − £6,240) × 3% = £1,320.90, because the minimum stops at the top of the band.
Total
£101,195.90 a year, about £8,433 a month. If your business can claim the £10,500 Employment Allowance, it falls to £90,695.90.
On the same GOV.UK rates, an engineer at the 10th percentile costs £61,952.15 a year and one at the 90th costs £132,820.90. Those figures leave out recruitment, equipment, software and the months it can take to fill the role. They also assume one engineer can cover everything from the model to your accounts software, which is a lot to ask of one person.
Hire when AI is part of your product, or when there's a queue of internal work that will keep someone busy for years. Hire for a single project and you're still paying a full salary once it's live.
What does an AI contractor cost, and how does IR35 affect it?
UK contract ads for AI engineers offered a median of £600 a day over the same six months, according to ITJobsWatch. Sixty working days, roughly three months full time, is £36,000. If you booked one for 220 days, a full working year, it would be £132,000. You pay only for the days you book.
IR35 is the catch. If the contractor works through their own limited company, and your business is medium or large, you decide their employment status for tax. HMRC says you should give them a status determination statement with your reasons. If the rules apply, the deemed employer must deduct Income Tax and employee National Insurance from the fees. If a small client outside the public sector hires them, their own company decides.
Medium or large means meeting two of three tests for two financial years running (HMRC's thresholds from April 2025). The tests are turnover over £15 million, a balance sheet over £7.5 million, and more than 50 employees.
A contractor works well for a defined stretch inside a technical team that can direct and review the work. Without that, you're paying a day rate for someone to guess what you need.
What does an agency or build firm charge for an AI build?
Agencies and build firms sell an outcome, usually at a fixed or estimated price, and they manage the work. These UK firms publish their prices, checked on 17 October 2026.
NRB Consulting
A fixed-price AI feature sprint from £750: one feature in seven working days, paid half up front and half on delivery.
Precise Impact
A first pilot at £18,000 to £45,000 fixed, over four to eight weeks. That covers one automated workflow with integration, monitoring, handover documents and 30 days of support after launch.
The AI Consultancy
Discovery and Pilot from £15,000, and Build and Embed from £40,000, with day rates of £950 to £1,500. All its prices exclude VAT.
Logica HQ (us)
A simple agent, one task and up to one connected system, from £1,450, live in 1 to 3 weeks. A multi-step agent across 2 to 4 systems, with a person signing off, from £2,950 in 4 to 10 weeks. Bigger systems are quoted after a £495 discovery sprint that's credited against the build (full prices).
Our limit is scope: we build on the software you already run, so if you want a new platform, buy one. With any firm, you give up some day-to-day control compared with a hire. Get the code, accounts and data set up in your business's name before work starts.
Is a retained partner or fractional AI lead a better fit?
A monthly arrangement suits a business with a regular flow of smaller AI jobs but not enough for a hire. Insightful AI publishes £1,500, £3,000 or £5,500 a month with a three-month minimum. Hartz AI publishes £2,500, £4,000 or £6,000 a month plus VAT, and recommends at least six months.
Ours is £1,450 a month for an AI build partner: one new automation every month, with no minimum term. A fractional AI lead is the same price, for a day a month plus async. Twelve months of the build partner is £17,400, under a fifth of a median AI engineer's cost. Our guide to what AI consultants charge lists more day rates and retainers.
Which route fits your business?
AI is your product, or years of work are queued
Hire, and expect about £101,000 a year per engineer at the median.
You have a technical team and a defined project
Book a contractor for the stretch, and settle IR35 status first if you're medium or large.
You want one system built and running
Buy it from an agency or build firm at a fixed price. Keep the code and accounts in your name.
You'll want a new automation most months
A retained partner or fractional lead costs less than a hire and stops when the work does.
You're not sure what to build yet
Pay for a short audit or discovery first. Ours is a free call, then a £495 sprint for bigger builds.
Not sure which fits? Book a free audit call. We'll go through the work you have in mind and say which route we'd take, including when it isn't us.
What should you ask before you hire anyone?
- Who will do the work day to day, and who reviews it?
- What happens when the person who built it leaves or the contract ends?
- Is the price fixed, estimated or by the day, and what happens if it runs over?
- Who owns the code, the accounts and the data?
- What will it cost to run each month once it's live?
- For a contractor: has IR35 status been decided, and by whom?
- Can I see something you've built running, us included?
Quick answers
How much does it cost to hire an AI developer in the UK?
About £101,000 a year at the UK median salary of £87,500, once employer National Insurance and pension are added. Recruitment costs come on top.
What is the day rate for an AI contractor in the UK?
A median of £600 a day in UK contract ads, six months to 17 October 2026.
Is an agency cheaper than hiring?
For one project, usually. The published project prices above start at £750, and The AI Consultancy's largest package starts at £40,000, against about £101,000 a year for a hire. For years of continuous work, a hire can cost less per day.
Does IR35 apply if I use an agency?
The rules apply where a worker provides their services through their own intermediary, usually a personal limited company. If an agency places a contractor in your team, ask who has decided their status.