Fractional vs Full-Time CTO: The Real Cost Breakdown

Hiring a full-time CTO seems straightforward. Salary plus benefits. Done.

Except it’s not that simple.

The true cost of a full-time CTO includes recruitment fees, employer NI, pension, benefits, equity, management time, and the risk of a bad hire. When you total it up, it’s 2–3x the headline salary.

A fractional CTO costs a fraction of that — but provides different value.

Let me show you the real numbers so you can make an informed decision.

Full-Time CTO: The Complete Cost Picture

The Headline: Salary

UK CTO salaries vary by company stage and location:

Company Stage	Salary Range
Seed/Early-stage	£90,000–£130,000
Series A	£120,000–£160,000
Series B+	£150,000–£200,000+
London premium	+15–25%

Let’s use £140,000 as a mid-market example for a Series A company.

The Hidden Costs: Employment Overhead

Cost Component	Amount	Calculation
Base salary	£140,000	—
Employer’s NI (15.05%)	£21,070	Above £9,100 threshold
Pension (5% minimum)	£7,000	Often higher for senior roles
Healthcare/PMI	£2,000–£5,000	Typical executive benefit
Other benefits	£3,000–£8,000	Life insurance, training, perks
Total Employment Cost	£173,000–£181,000	—

So a £140k salary actually costs you £175k–£180k in year-one employment costs alone.

The One-Time Costs: Recruitment

Finding a CTO takes time and money:

Recruitment Cost	Amount
Retained search firm	£35,000–£50,000 (25–35% of salary)
Or: Contingent recruiter	£28,000–£42,000 (20–30% of salary)
Or: Internal recruitment	£5,000–£15,000 (job boards, time, tools)
Management time	50–100 hours (shortlisting, interviewing, negotiating)

Even the cheapest route costs significant time. The safest route (retained search) adds £35k–£50k to year one.

The Real Cost: Equity

This is the one most people underestimate.

CTOs typically receive 1–3% equity at Series A, sometimes more at earlier stages.

If your company is valued at £10m and the CTO gets 2%:

That’s £200,000 in equity value at current valuation
If you grow to £50m, that equity is worth £1,000,000
If you exit at £100m, that’s £2,000,000

Equity is real cost — it dilutes your ownership and can represent the single largest expense of hiring a CTO.

Year 1 Full-Time CTO Total Cost

Component	Low Estimate	High Estimate
Employment costs	£173,000	£181,000
Recruitment	£5,000	£50,000
Equity (at current valuation)	£100,000	£300,000
Year 1 Total	£278,000	£531,000

If you factor in potential equity value at exit, the numbers get much larger.

Ongoing Annual Cost

After year one (no recruitment, equity already issued):

Component	Annual Cost
Employment costs	£173,000–£181,000
Salary increases (5% typical)	+£7,000/year
Equity vesting cost (opportunity)	Variable

Ongoing annual cost: £180,000–£190,000+

The Risk Cost: Bad Hire

What if it doesn’t work out?

A failed CTO hire costs:

6–12 months of salary (£90k–£180k)
Recruitment fees (£30k–£50k, non-recoverable)
Lost productivity and morale
Another recruitment cycle
Severance (3–6 months typical for senior roles)

Conservative estimate for a failed CTO hire: £150,000–£300,000 total cost plus 12–18 months of lost progress.

CTO hiring failure rates aren’t well documented, but executive hiring failures run 40–60%. It’s a real risk with real cost.

Fractional CTO: The Complete Cost Picture

Day Rates

UK fractional CTO rates in 2026:

Experience/Specialism	Day Rate
Standard (10–15 years)	£800–£1,200
Senior (15–20 years)	£1,000–£1,400
AI/ML specialist	£1,200–£1,600

Monthly/Annual Cost by Engagement Level

Engagement	Days/Week	Monthly Cost	Annual Cost
Advisory	0.5 days	£1,500–£2,500	£18,000–£30,000
Light	1 day	£3,500–£5,000	£42,000–£60,000
Standard	2 days	£6,500–£9,500	£78,000–£114,000
Heavy	3 days	£9,500–£13,500	£114,000–£162,000

What’s Included

Fractional CTO fees typically include:

Scheduled working days
Email/Slack availability between sessions
No employer NI (they’re self-employed or run through their company)
No pension contribution
No benefits
No equity (usually)
No recruitment fees

What’s Not Included

Expenses (travel, tools) — usually billed separately or included depending on agreement
Out-of-scope work — additional days at agreed rate

Fractional CTO Annual Cost Summary

Engagement Level	Annual Cost
Advisory (light touch)	£18,000–£30,000
Standard (1–2 days/week)	£42,000–£114,000
Heavy (2–3 days/week)	£78,000–£162,000

Compare this to full-time: £278,000–£531,000 year one, £180,000–£190,000 ongoing.

Side-by-Side Comparison

Factor	Full-Time CTO	Fractional CTO (2 days/week)
Year 1 total cost	£278,000–£531,000	£78,000–£114,000
Ongoing annual cost	£180,000–£190,000	£78,000–£114,000
Equity cost	£100,000–£300,000+	Usually £0
Recruitment cost	£30,000–£50,000	£0
Time to hire	4–6 months	2–4 weeks
Hiring risk	High (40–60% failure rate)	Low (month-to-month)
Availability	5 days/week	1–3 days/week
Commitment	Long-term	Flexible

Fractional CTO is 40–60% cheaper on a like-for-like basis. And the gap widens when you factor in equity.

When Full-Time Makes Financial Sense

Despite the higher cost, full-time CTO can be the right choice:

You Need Constant Availability

Some situations require daily technical leadership:

Large engineering teams (20+ developers)
Enterprise customers expecting CTO engagement
Rapid scaling requiring constant decision-making
Complex technical products needing deep daily involvement

You Have the Budget

If you’ve raised significant funding (Series B+) and have 2+ years runway, the full-time investment may be worth it for:

Stability and commitment
Team building and culture
Long-term technical vision ownership

You’ve Found the Right Person

If you’ve identified a CTO who’s a perfect fit — culturally, technically, strategically — locking them in with equity makes sense. The right person at the right time is worth the premium.

You’re Building for Exit

Strategic acquirers and investors value stable leadership teams. A long-tenured, committed CTO strengthens your position.

When Fractional Makes Financial Sense

You’re Pre-Series A

Seed and pre-seed companies rarely need full-time CTO cost. You need:

Architecture guidance
Hiring support
Technical strategy
Investor credibility

A fractional CTO provides all of this at 20–40% of the cost.

Your Team is 3–15 Engineers

Not big enough to justify full-time executive overhead. A fractional CTO provides leadership without the fixed cost.

You Want to Test Before Committing

Use a fractional CTO for 6–12 months. See how technical leadership transforms your business. Then decide whether to hire full-time, convert the fractional relationship, or continue as-is.

You Need Expertise You Can’t Afford Full-Time

A £1,400/day fractional CTO with AI/ML expertise might have credentials your salary budget couldn’t attract full-time.

Cash Is Constrained

If runway is tight, fractional provides capability without burning cash on full-time overhead.

The Hybrid Approach

Many companies use a phased approach:

Phase 1: Fractional (Seed–Series A)

1–2 days/week fractional CTO
Sets technical direction
Hires and develops initial team
Supports fundraising

Phase 2: Hybrid (Post-Series A)

Fractional CTO continues
Add VP Engineering for day-to-day management
CTO handles strategy; VP handles delivery

Phase 3: Transition (Series B)

Evaluate full-time CTO hire
Fractional CTO helps recruit and onboard
Transition to advisory or exit

This approach:

Minimises early-stage cost
Reduces hiring risk (you know what good looks like)
Builds capability progressively
Preserves equity for later-stage, higher-impact hires

Making the Decision

Choose Full-Time When:

20+ engineers needing daily leadership
Budget allows £200k+ annual commitment
You’ve found an exceptional candidate
Enterprise customers expect named CTO
Building toward exit requiring stable team

Choose Fractional When:

Smaller engineering team (<15)
Budget constrained
Need expertise quickly (weeks, not months)
Want to test before committing
Don’t want equity dilution

Consider Hybrid When:

Growing from small to medium scale
Need strategic leadership but have day-to-day coverage
Preparing for eventual full-time hire
Want best of both models

The Bottom Line

For most UK startups and SMEs:

A fractional CTO at £80,000–£120,000/year delivers 80% of the value of a full-time hire at 40% of the cost.

The 20% you don’t get: daily presence, full-time commitment, cultural immersion.

The 60% you save: can fund additional engineering capacity, product development, or extended runway.

Do the maths for your situation. But for most businesses under £10m revenue, the fractional model wins on pure economics.

FAQ

What about equity for fractional CTOs?

Not typical. Some fractional CTOs accept small equity stakes (0.1–0.5%) in lieu of partial fees, but most prefer cash. The flexibility of the fractional model means they’re not seeking long-term ownership.

Can we convert a fractional CTO to full-time?

Yes, and it’s common. You’ve tested the relationship, know their capabilities, and reduced hiring risk. Negotiate terms like any senior hire — but you have much better information than a cold hire.

What if we need more than 3 days/week?

At that point, evaluate whether fractional still makes sense. 4–5 days/week at fractional rates may exceed full-time cost. Either commit to full-time or find efficiencies in how CTO time is used.

How do fractional CTOs handle confidentiality with multiple clients?

Standard practice is strict confidentiality across clients. Fractional CTOs sign NDAs and maintain separation. It’s part of the professional model.

What happens if the fractional CTO leaves?

Since there’s no equity lock-in, this is a real risk. Mitigate by documenting decisions, building internal capability, and maintaining relationship health. If they leave, the month-to-month model means you can find a replacement quickly.