The Cost of Hiring a Software Developer in 2022: The Definitive Guide

Hiring developers is an initial outlay that can range up to five figures. Let us look into the costs of hiring a software developer to make the most of the investment.

Cost of Hiring a Developer

The need for software engineers has increased in recent years, and it is not likely to end anytime soon. Technical expertise is in high demand, and the cost of hiring a software engineer is higher than ever.

Recruitment expenses depend on whether we're looking to hire an in-house developer, a freelancer, or an agency. Particularly for in-house developers, there are additional hiring expenses like sourcing fees. 

However, suppose we require developers on the team full-time. In that case, hiring in-house developers is typically less expensive in the long term.

Full-time Software Developer Cost

First, let us consider the costs of hiring a software developer. 

Total costs

Developers can earn more or less depending on their experience level and seniority. A DevOps specialist, for example, will most likely make more than a full-stack engineer. Most opinions estimate developers' hourly wages between $61 and $100. We can derive the cost per hire by combining internal and external expenses. 

The following is a breakdown of how these expenditures may appear.

Sourcing costs

The first step is to find suitable individuals. How much does it cost? Consider the following:

Job posting sites

The job board expenses will vary depending on where we publish. On LinkedIn, for example, we can post for free to show our posts to our network and in search results. However, with the Pay Per Click Model, we are charged based on the number of clicks our ad receives for improved performance. LinkedIn makes recommendations depending on parameters such as our industry and the role we are looking to fill. For these promoted posts, the minimum daily budget is $10, and the minimum lifetime budget is $100 to advertise a job posting on LinkedIn.

Applicant tracking software

An applicant tracking system (ATS) is necessary for a proper recruitment process. For instance, the ATS centralizes all information and data elements about potential (and actual) hires. This makes it simple for recruiters to identify individuals in their database and enables them to identify which prospects are worthwhile engaging (or re-engaging) for particular opportunities. The pricing of these systems varies, but the lowest monthly cost is roughly $200. As our company expands, we may expect to spend thousands of dollars yearly on our ATS. 

Outside recruiters

The average cost of using an external recruiter or headhunter is 20-25% of the new employee's first-year compensation. However, depending on the job being filled, it can fall between 15% and 40%. If we apply a recruitment charge of 25% of the typical developer's income, the total cost can be $27,000 to $29,000.

HR/internal recruiting expenses

According to Indeed, the national average compensation for an HR manager is $76,010. This amount works out to almost $32.72 per hour. 

Assume our HR manager spends 40 hours finding candidates for a position (through job postings and other sources). It will involve assessing their applications, connecting with candidates, and sharing with external recruiters. Then the amount works out to $1,308.  

Recruitment costs

Once we narrow our list of prospects, the next step is to select one.

Assessment

Assume we ask a developer on our team to review each submission and write a brief feedback report. The person-hour used for the assessment is an additional cost as a particular developer will be working on it, leaving their core work. We will also need to solicit the help of some members of our hiring team to analyze the submissions and provide feedback to the candidates.

Interviews

The cost of our interview process is determined by how we arrange it. We would probably involve the HR manager and someone from our technology team. However, we will usually have a brief pre-screening call followed by two in-person interviews. Overall, these take about 2 hours and 15 minutes. 

For clarity, we will base the interview duration on the typical wages of an HR manager and a developer. Our interviews would cost $190 per candidate or $1,900 for ten candidates.

Other expenses

We may also incur other expenses as a result of hiring a developer. First, productivity loss occurs whenever we hire a new person. We will also have to pay for training and onboarding to help our new employees get started on our team.

Productivity declines

According to Investopedia, a new employee's productivity in the first month is approximately 25%. So, the lost production cost is 75%.

Training expenses

What is the cost of training a software developer? 

There is no industry-specific data; however, according to Training Magazine's 2021 Training Industry Report, US corporations spent $1,071 on training per employee in 2021.

Onboarding expenses

Indeed, the average onboarding cost is around $400 per employee.

Costs of recruitment

The total recruitment costs could be around $13,000 to $14,000, even if we did not hire a recruiter. This expense doesn't include indirect costs such as office space. Furthermore, we will likely spend more on sourcing, increasing our budget for recruitment charges.

Recruit Developers from Other Countries

Generally, foreign talent is less expensive. However, in the end, it boils down to whether we need a small or local crew. Both options have advantages and disadvantages. According to YouTeam, Asia and Africa are the most affordable continents for outsourcing. 

For example, a developer in the USA will charge $52 per hour. On the other hand, a developer from the Asia Pacific will charge about $28.

Rates for Freelancing Software Developers

What is the price of hiring a freelance software developer? 

The cost of employing a freelance software developer will differ from hiring an internal developer. One must consider the following expenses:

HR expenses

The cost of hiring a freelance developer is determined by where our developer is based. Freelancers usually charge a higher hourly fee to pay their benefits and other expenses. Finally, where and how we work with them and the expertise/skills we require are factors that determine the charge for a freelancer.  

If we need a staff that mainly works with our company, and we have a lot of work, freelancing may not be the appropriate option. Conversely, a contractor is a viable alternative if we have flexible work hours and do not want to engage an employee.

Conclusion

Hiring a software developer, especially for an in-house position, may cost anywhere from $13,000 to $41,000, or even more. It just gets more expensive as time passes! So, before hiring a developer, let's make sure we thoroughly evaluate them. 

With Cogent University's Full Stack Java Bootcamp, a company can hire a developer at zero cost. Connect with us to stay updated and get more insights. 

FAQs

1. How much does it cost to hire a software developer in the USA?

The average rate for a developer from the USA will be $52 per hour. We would pay a Texas developer $7,877 a month to work full-time based on these prices.

1. What are developers paid per hour?

Most opinions estimate developers' hourly wages between $50 and $70.

1. What is the hourly rate for freelance software engineers?

In the $50 to $130 hourly pay bracket, finding independent software developers with 10+ years of expertise is simple.

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