COMPARISON CALCULATOR

Real cost of tech staff
IN HOUSE
31.1% Saving
REMOTE
Years of experience
IN-HOUSE
Employee in
Western Europe
Remote
Contractor in
Central & Eastern Europe
Hourly Rate
£/hour
Annual Salary
£/year
Multiple of salary paid
1.80
£/hour
£/year
1.2
Real Annual Cost
£/year
£/year

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.co.uk
Seniority Experience ££/hour
Mid-Level Dev 3-4 years 21
Senior Dev 4-7 years 25
Super-Senior 7+ years 30
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.co.uk
    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

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.

READ MORE