YouTeam

How Much Does It Cost to Hire a Developer in Europe

Hiring a software developer may be a painful question to tech companies and startups in the US, UK, and Western Europe. It is quite hard to find developers with reasonable rates locally, and such talent shortage is harmful not only for companies but also for the entire economy. As predicted by the “Future of Work: The Global Talent Crunch” report, the United States will be facing a global talent crisis by 2030. Being the world’s leading technology market in 2019, the US can lose about $162.25 billion by 2030 because of sector skills shortages, mainly the tech sector. The United Kingdom may be also affected by the digital skills gap and it can cost the country £141 billion in GDP growth. Therefore, with the ever-growing demand for tech talent, companies in the US and Western Europe find the solution in outsourcing. Here, we provide you with a calculator that will help you figure out the difference between hiring a software developer in Western and in Eastern Europe. We will also provide you with understanding how much cheaper than in the UK you could hire a top developer remotely thanks to YouTeam .

Real cost of tech staff

IN HOUSE
31.1% Saving
REMOTE

Years of experience

NEED TO KNOW

To develop a true and accurate comparison we also need to take into account extra effort required for communicating and managing the remote resources. Our calculator takes this into account by multiplying the salary paid to the Remote Full-Time Employed Contractors in Central or Eastern Europe by 1.2.

This comparison calculator was prepared by Tristan Senycia in exact accordance with the Accounting Methodology utilised Accounting Services for Business UK in their True Cost of an Employee Calculator

Use the calculator can be used to compare the real costs of:
  • Remote Full-Time Employed Contractors in Central or Eastern Europe
    vs
  • In-House Employees in Western Europe, based on their salaries and hourly rates.
Definitions of Seniority of Developers (for the purpose of this calculator):
  • Mid-Level Developer = 3-4 years experience
  • Senior Developer = 4-7 years experience
  • Super-Senior Developer = 7+ years experience
Naturally, the calculator is based on a number of assumptions, many of these figures are clearly accurate or standard figures. Others are more like assumed values which have been provided below for complete transparency. Efforts have been made to be conservative with every assumed value.
IN-HOUSE SIDE OF THE CALCULATOR
  • Work hours/week = 40**
  • Actual productive working days
    • Weekdays in a year = 261 Days**
    • Deducting:
    • Holidays (2010 minimum is 28 days) = 28 Days/Year**
    • Formal training = 5 Days/Year**
    • Sick Days = 7.7 Days/Year**
    • Wasted/unproductive time (allow 10 mins per working hour) = 37.5 Days/Year**
  • Wages / Salary & NIC’s
    • Class 1 NICs = 13.8% on earnings above Earnings Threshold [£6,475 p.a]**
  • NI Rates
    • Employer’s NI threshold (per week) = £144.0**
    • Class 1 NICs: 13.80%**
  • Salary – London Average
    • Mid-Level Developer = £40811/year* = £21.26£/hour*
    • Senior Developer = £52229/year* = £27.20£/hour*
    • Super-Senior Developer = £58000/year* = £30.21£/hour*
**Standard figures provided by Accounting Services for Business UK in their True Cost of an Employee Calculator
*Based on figures provided by Payscale Research updated 17th March 2016
REMOTE SIDE OF THE CALCULATOR
  • Hourly, monthly & annual salaries = average for Remote Contractors available for hiring through YouTeam
SeniorityExperience££/hour
Mid-Level Dev3-4 years21
Senior Dev4-7 years25
Super-Senior7+ years30
IN-HOUSE SIDE OF THE CALCULATOR
  • Conservative Management of Outsourced Resource Co-efficient = 1.2
  • Employee specific costs
    • Software licences = £1,500/year
    • Training = £500/year
    • Computer & IT support = £500/year
  • Apportionment of business costs
    • Share of general overheads (rent, rates, building maintenance, water, heat & light, telephone, insurance, etc) = £500/year
    • Consumables (stationery, toner, tea/coffee, toilet paper, etc) = £100/year
    • Administrative overheads (HR, payroll, secretarial, appraisals, etc) = £1,000/year
  • Benefits Bonuses + Profit Sharing at each different seniority level
    • Mid-Level Dev = £5000/year*
    • Senior Dev = £6000/year*
    • Super-Senior = £7500/year*
*Based on figures provided by Payscale Research updated 17th March 2016
Here is the high level calculator methodology for the YouTeam calculator:
  1. ‘Equivalent salary paid’ – For engineers of equivalent levels of experience, ascertain both:
    1. The Direct Cost of employing a remote contractor (the amount paid to the company employing that individual in the remote location), retrieved from YouTeam
    2. The raw salaries paid to full time employed engineer, retrieved from Payscale Research updated 17th March 2016
  2. Calculate the multiple of equivalent salary paid in both the in-house employee model and the outsourcing model
    1. In the in-house employee model this varies between 1.8 and 2, depending on the seniority of the staff involved
    2. In the outsourcing model this varies between 1.1 & 1.2, depending on the effort required to communicate & manage external engineers
  3. Equivalent salary paid X multiple of equivalent salary paid = Total Cost of Resource (for both the remote contractor & in-house employee)
  4. Compare percentage cost difference between the total cost of resources of both the remote contractor & in-house employee
Here’s a fairly typical list of indirect costs associated with the employment of in-house staff:
  1. Accounting and legal expenses – Accounting fees, Bank service charges and fees, Credit card processing fees, Insurance (liability, workers comp, etc.), Legal fees, Overhead staff (executive, administrative)
  2. Administrative Costs – Administrative salaries, Delivery and postage, Digital certificates, Dues and subscriptions, Filing fees, Recruiting (advertising and fees), Interview expenses, Payroll, Secretarial, Appraisals
  3. Sales & Marketing – Advertising, Conferences and trade shows, Corporate graphics and web design
  4. Computer Related costs – Computer hardware, Computer software licenses, Computer software subscriptions and maintenance, Hosting services
  5. Office expenses – Books, Check orders, Equipment, Furniture, Meals and entertainment, Meeting expenses, Consumables – stationery, toner, tea/coffee, toilet paper
  6. Rent – Rent, Corporate taxes (property, etc.), Rates,
  7. Telephone expenses – Voice and data communications
  8. Utilities – Printing services, building maintenance, water, heat & lighting,
  9. Other Overheads – Overtime, Holidays, Repair services, Training, Travel, Maternity/paternity leave, Jury service, Sick leave holiday pay
  10. Optional Benefits – Company car, Gym, Healthcare, Life assurance, Pension, Bonus, Profit Sharing

However, you can always hire a developer in Central or Eastern Europe in a cost-effective way. This is particularly relevant if you are, currently, bootstrapping your new software product.

FROM YOUTEAM BLOG

The Freakonomics of IT Outsourcing:

Is it really more cost effective than hiring in-house staff for software projects?

Back in 2014 Toptal’s VP of User Engagement Hyam Singer challenged the notion that in-house developers were always more cost effective that contractors, who on the surface charge higher hourly rates.

Do you think hiring developers remotely is a good idea?

Building remote world-class software development teams
has never been easier.

To hire a developer or a team of developers, you need to ask yourself the following questions:
  1. What are the project requirements? Define the project scope, deadlines, technology stack, functionality of the web or mobile app that you are going to build, supported platforms, etc. This will help you get a clearer picture of a candidate that you are looking for.
  2. What is the collaboration model? Are you hiring a full-time, part-time, or freelance developer? Do you consider outsourcing the development services to an offshore country?
  3. What is the project budget?
  4. Do we need recruitment agency services for a fee, or do we spend a lot of time on manual research (which can be tricky), or do we use “no recruitment fee” services like YouTeam?
The cost of hiring a software development team depends on a range of factors, such as the cost of recruitment services, participation in career events, employee onboarding, job boards such as Monster.com, freelance website fees, LinkedIn job postings and other costs. As per Glassdoor, an average company in the US spends around $4,000 to hire a new employee. Outsourcing or hiring freelance talent will cost you less because you pay only for the software development services that you get. However, you should carefully study the freelancers’ rankings because you may fall for low rates but pay twice in the end. Fortunately, if you start building your remote development team with YouTeam, we take care of all the trouble and provide you with the pool of vetted tech specialists from trusted dev shops of Europe and Latin America.
Again, the rates depend on different factors such as the tech stack and location. They can differ even depending on the US region. For example, here are the statistics of hourly wages for app developers as of 2017 by CareerOneStop:
  • California: $34 - $90 per hour
  • District of Columbia: $38 - $76 per hour
  • New York: $30 - $82 per hour
  • Texas: $31 - $74 per hour
  • Washington: $38 - $160 per hour
Now let’s take a PHP and a Java developer as an example and compare their freelance hourly rates in several countries. We’ll be using the data from Upwork.com and Ziprecruiter.com as of May 2019.

PHP Developer
  • United States: $35 per hour – junior, $125 – senior.
  • Poland: $ 15 per hour – junior, $ 75 – senior.
  • Ukraine: $23 per hour – junior, $45 – senior.
  • India: $5 per hour – junior, $50 – senior.
Java Developer
  • United States: $30 per hour – junior, $80 – senior.
  • Poland: $20 per hour – junior, $85 – senior.
  • Ukraine: $20 per hour – junior, $65 – senior.
  • India: $4 per hour – junior, $65 – senior.
Now you know how much does it cost to hire a developer, and that outsourcing the development services to other countries will help you to significantly cut down your hiring costs. Good luck and feel free to contact YouTeam if you need help.