The True Cost of Hiring A Software Developer in North America

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The true cost of hiring a full-time software engineer in North America is not only determined by the salary or compensation you pay, but also by a wide variety of factors. This can include the team’s size, level of experience and expertise, and technological stack, and can also be heavily influenced by the stability of a country’s economy, currency, and local market scenario. Whether you want to engage an in-house developer, a freelancer, or an agency, your recruitment costs will vary. It is important, therefore, to assess the exact cost of hiring a software developer for your organization before deciding if outsourcing your specialized software development team is the most effective alternative for your business, or whether employing an in-house developer is a better route for you to take.

For new firms, this process can be quite complex and frightening, so we’ve decided to put up this guide to provide insights into the true cost of hiring a full-time software engineer in North America. It will go over how much software development services cost, the typical cost of software development services, software development rates in North America, how to choose the best offshore vendor, and why you should go borderless.

The True Cost of Hiring a Software Developer in North America

true cost of hiring software developer in north america

Over the last few years, the need for skilled software engineers has increased, and there are no indicators that this demand will decrease anytime soon. Because technical expertise is in high demand, the cost of employing a skilled software engineer has also gone higher than it has ever been.

Consider the following data on software developer hiring:

Other recruitment costs, such as sourcing fees, are high for in-house developers. On the other hand, in-house developers are usually less expensive in the long run if you need full-time developers on your team.

What is the True Cost of Hiring a Full-time Software Developer in North America?

In calculating the true cost of hiring a full-time software developer in North America, start with the costs of hiring an employee. Then we’ll talk about how much it costs to hire a full-time software developer, and finally compare the costs of hiring local vs. remote developers.

Total expenses

Hiring is a costly endeavour. According to a research report by the Society for Human Resource Management, the average cost of hiring an employee is $4,129, and it takes 42 days to fill a post. Glassdoor also reports that the average cost of hiring a new employee in the United States is $4,000. According to research done by the National Association of Colleges and Employers, employing an employee in a firm with 0 to 500 employees costs, on average, $7,500.

Recruiting a new employee often costs 20-25 percent of their base salary. According to the United States Bureau of Labor Statistics, the median annual wage for software engineers was $110,140 in May 2020. 

(Keep in mind, though, that this is the average.) Developers can make more or less money depending on their level of experience and seniority. A DevOps specialist, for example, is likely to earn more than a full-stack engineer.)

In the United States, the costs of employing an employee include (on average):

Benefits that are needed by law: 7.6%

  • 7.8 percent insurance
  • 7.4 percent of employees have paid time off.
  • 3.5 percent for retirement and savings
  • 3.3 percent supplemental pay (overtime and premium)

All of these costs add up to $32,601 if we use the median yearly compensation for software developers. In total, a developer’s pay is $142,741 each year. In other words, recruitment costs can range from $28,548 to $35,685. Internal and external costs are combined to determine your cost per hire. We’ll lay down what these fees could be in the sections below.

According to Glassdoor, the median annual wage for software engineers was CA$85,776 in Toronto, ON, Canada Area in 2021. An inexperienced software engineer in Canada can earn upto CA$58K while experienced software engineers earn CA$127K and more.

Sourcing

The first step is to identify potential applicants. How much does it cost? Take a look at the following:

Job Posting Sites

job posting sites
Source: https://www.mightyrecruiter.com/blog/job-posting-sites-vs-job-aggregators-what-the-hecks-the-difference/

The cost of advertising for a role on a job posting site varies from site to site. For example, you can post for free on LinkedIn to show your ad to your network as well as in search results. LinkedIn will make a recommendation for you based on your industry, the position you’re looking for, and other factors. However, for greater results, you can choose to run sponsored posts on LinkedIn and will be charged depending on the number of clicks your ad receives. These sponsored posts have a minimum daily budget of $10 and a lifetime budget of $100. To put it another way, you’ll have to commit to paying at least $100 on LinkedIn to advertise a job posting.

Stackoverflow, BorderlessHR, and other job boards provide customized offers. You can post positions for free on more generic job boards like Indeed, and improve your visibility for $5 and higher each day.

Applicant Tracking System 

Applicant Tracking System (ATS)is a system that allows you to keep track of a smooth recruitment process and is a must-have. Applicant tracking systems are priced differently, but the lowest regular monthly cost is roughly $200. As your company expands, you may expect to spend thousands of dollars every year on your ATS.

Recruitment Agencies

The average cost of hiring an external recruitment agency or recruiter is 20-25 percent of the new employee’s first-year compensation. Depending on the job being filled, this percentage can range from 15% to 40% or more. The cost is $27,535 or CA$34,949.48, assuming a recruiting charge of 25% of the typical developer’s income.

Human Resource & Internal Recruitment Expenses

The average income for a Human Resources Manager in the United States is $68,611 per year, according to Indeed. This works out to $32.50 per hour. Let’s say your Human Resource manager spends 40 hours finding people for a position (through job ads and other sources), assessing their applications, connecting with them, and maybe sharing with external recruiters. That’s a total of $1,300. If your team is fortunate enough to have a full-time technical recruiter on board, the percentage could be considerably higher.

Recruitment Expenses

After you’ve narrowed down your list of candidates, the subsequent step is choosing one candidate.

Assessment

Your coding assessment platform is the initial cost. Platforms like  CodeSubmit, costs $199 per month for scaleups (30 applicants per month and unlimited team members), $99 per month for startups (15 candidates per month), and $349 per month for the Business plan (60 candidates per month) on an annual basis. You’ll also need to solicit the help of a few professionals of your hiring team to analyze the applications and provide comments to the candidates. Let’s assume you ask one of your team’s developers to do it, and it takes them an hour to go over each submission and produce a brief feedback report. The cost of this evaluation would be $521 if you had 10 candidates and paid your developer the average developer wage in the United States. You’d spend roughly $720 if you used our Scaleup plan and had someone review your applications.

Interview Process

The cost of the interview procedure is determined by the nature of your process. However, you should expect a brief pre-screening call followed by two in-person interviews. In total, these will take about 2 hours 15 minutes. You’d probably enlist the help of your Human resource manager and a member of your engineering team. Just for sake of simplicity, we’ll estimate the interviewing duration using the typical salaries of a Human resource manager and a software developer. Your interviews could cost $190 per candidate or $1,900 for ten candidates. This is an estimate; not all applicants would go to the final stage, but you would have more applicants engage in the early rounds.

Other Expenses

Other expenses will be incurred as a result of hiring a developer. The first is the inevitable loss of productivity that comes when you recruit a new hire. You’ll also have to pay for training and orientation to get your new employee up to speed on your team.

Performance

According to Investopedia, a new staff’s first-month performance is approximately 25%. Based on the average monthly pay, the performance cost is 75 percent, or $6,883.

Education Expenses

What is the cost of educating a software developer? Although there is no sector data, the Training Magazine’s 2020 Training Industry Report estimates that US corporations invest $1,111 per person on training in 2020.

Orientation Costs

According to Indeed, the average cost of orienting a new employee is around $400.

Analysis of Hiring Costs 

All in all: 

cost of hiring software engineers

The table above provides an idea of the costs you would incur in the process of hiring software engineers in North America, and this is without factoring in a whole slew of other expenses, such as the cost of using office buildings. Furthermore, you’re likely to spend significantly more on sourcing, which will increase your recruitment expense.

The True Cost of Hiring A Software Developer in North America Vs Outsourcing From Other Countries

Is it better to recruit developers from other countries? That’s a question worthy of note. While It is true that foreign talent is less expensive, in the end, you will have to decide whether you need a distributed team or a local workforce for your company. Both options have advantages and disadvantages. Outsourcing overseas, for example, necessitates working in multiple time zones. And with a remote staff, it might also be a little challenging to create and sustain a coherent business culture.

According to YouTeam, the following are the average hourly fees for developers in various countries:

Within a country, differences can also be enormous. For instance, a developer in California will demand $56.46 per hour, whereas a developer in Texas will be paid $44.76 per hour. Asia and Africa are the most cost-effective regions for outsourcing. A developer in India, for example, will charge $29 per hour. So, based on these prices, you’d pay a full-time developer in India $5,104 each month. For the same amount of work, a full-time developer in Texas would expect to get paid $7,877.

The True Cost of Hiring A Software Developer in North America Vs Hiring A Freelance Software Developer?

Hiring a freelance software developer will not cost the same as hiring an in-house programmer. For instance, the average hourly wage freelancers charge on Upwork is $15-$30. To engage a freelance software developer, the following are the most important costs to consider:

  • Costs of human resources: locating and connecting with the developer
  • Tool for evaluating the developer’s abilities

In terms of how much it costs to engage a freelance developer, it depends on where your developer is based. Freelancers usually charge a higher hourly fee because they are responsible for their benefits and other expenses. 

According to Codementor, the typical fee for a freelance developer is:

  • United States: $70/hour
  • Canada: $65/hour
  • Australia + NZ: $70/hour
  • Middle East: $64/hour
  • Western Europe: $63/hour
  • Eastern Europe: $56/hour
  • Sub-Saharan Africa: $55/hour
  • Latin America: $51/hour
  • Asia: $49/hour
  • Northern Africa: $41/hour

.In the end, a freelancer’s prices are determined by where or how you engage, as well as the knowledge and expertise you require. There are advantages and disadvantages to working as a freelance developer. If you need a workforce that focuses solely on your company and you have a lot of work, freelancing might not be the ideal option. An Employer of Record, on the other hand, is a wonderful alternative if you have flexible work and don’t go through the stress of hiring a software developer. The advantages and disadvantages of in-house vs. freelance developers are as follows:

IMAGE

The True Cost of Hiring A Software Developer in North America Vs Hiring A Software Development Team or Agency?

How much does it cost to hire a software development team? Everything hinges on the kind of team you choose to work with. A corporate agency will often charge $250-$850 per hour and will frequently need significant budgets exceeding $500,000. The next level pays roughly $200-$300 per hour, and their contracts are typically in the six-figure range. Smaller contracting agencies can charge anywhere from $75 to $175 per hour. When should you hire an Agency? When you have large projects and not enough in-house talent, an agency is a viable option.

Triple Your Chances of Hiring the Right Technical Talent with BorderlessHR

BorderlessHR has carefully evaluated strategic alliances with renowned worldwide benefit providers to guarantee that you have a solution for all of your needs. This covers, among other things, pensions, medical care, Employer of Record payroll, and employee support programs.

Here are some reasons why you should use BorderlessHR as your Employer of Record (EOR):

Market penetration is Quick.

By posing as the legal employer of your overseas hire, BorderlessHR can help you create your firm in foreign nations in as little as 48 hours. This enables your company to hire the greatest global personnel and take advantage of new market possibilities as soon as they become available.

More Ease and Adaptability

Borderless (EOR) solutions are adaptable. Without establishing a physical office or presence, businesses can explore new markets or engage in short-term ventures. This is especially beneficial for smaller businesses who lack the corporate infrastructure or budget to deal with local payroll, immigration, and tax procedures. BorderlessHR gives you a legal organization that can handle all of these responsibilities. We also take steps to guarantee that you comply with all of the host country’s rules and regulations.

Helps You Save Time

Borderless saves you time by managing all of the paperwork on your behalf, from payroll to local regulations. Borderless saves you thousands of dollars by eliminating the need to set up an area entity in the host country where your workers are based. We also save you money by eliminating the need to hire internal teams to handle administrative tasks ranging from finance to legal procedures related to local labor laws.

Limits the Number of Unnecessary Risks.

BorderlessHR handles the legal aspects of your business and assists you in assuming responsibility for the risks that come with hiring and operating globally. Borderless handles human resources issues such as employee benefits, payroll and taxation, administrative operations, and compliance, safeguarding you from the hazards that arise from mismanagement of such intricacies. We also provide peace of mind by taking steps to ensure that these duties are properly handled.

Cuts Down on Overhead Expenses

BorderlessHR (EOR) Services let you avoid the overhead costs that come with managing and maintaining remote software engineering teams in another country. BorderlessHR allows you to restructure your income and apply these resources towards intensifying your growth ambitions, from recruiting foreign personnel to maintaining compliance difficulties.

Maintains Regulations & Manages Administrative Operations

BorderlessHR takes care of employee onboarding, payroll processing, and other administrative tasks on your behalf. We also make sure you follow all applicable state and federal requirements. This includes monitoring a remote employee’s pay, guaranteeing prompt payment, and withholding any required taxes.

Conclusion

Hiring a full-time skilled software developer is a significant investment for any enterprise company and software development firm in 2021, and with the emergence of modern technology, you are no longer constrained to hiring locally or undertaking in-house recruitment. Because of a software developer skills shortage in North America, many American organizations hunt for workers from other countries. You will not only gain access to a huge talent pool but will also save money by outsourcing software development to an international programming team. Hiring a remote development team can also save you time and money by obviating the need for time-consuming HR and administrative processes like hiring and onboarding. Furthermore, because you will be recruiting a full team rather than a single individual, you will obtain extra professional viewpoints.

That is all there is to the true cost of hiring a software developer in north America. You now have an idea of how much a software developer costs. Hiring a software developer, especially for an in-house position, can cost anywhere from $13,000 to $41,000 or more, and the longer it takes, the more expensive it becomes! So, before you hire a developer, make sure you thoroughly evaluate them.

BorderlessHR empowers businesses like yours to build your fast-growing companies with pre-vetted senior software engineers without the risk or hassle

3 Comments

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hotshot bald cop April 12, 2022

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hotshot bald cop April 13, 2022

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