There are many challenges that businesses must face when tackling software development, but none are more important than budgeting. Software development costs can be deceptive, and if you’re not prepared for the most common pitfalls, you’ll have a huge issue on your hands.
Most of these costs will revolve around forming and maintaining a team of developers. But how much does it cost to hire a software developer, exactly? It all depends on the hiring method and the type, and expertise of developers you’re looking for.
In this article, we’ll give you the tools you’ll need to accurately estimate software development costs for your projects. Before we get started let’s see what actual data has to say!
How Much Does It Cost To Hire A Software Developer?
Based on the data available on Glassdoor, it costs an average US employer approximately $4,000 for a new hire. On a freelance platform such as Upwork, the cost for software developers is between $25 – $100 per hour.
SHRM’s report states that the average cost per hire rose from year-to-year to reach approximately $5,000 in 2023.
Of course, these are only estimations and factors like the size and region of your business, the position that needs to be filled, and the sector in which you are operating could all affect the ultimate cost.
What is the Cost of Hiring Freelance Software Developers
Small projects don’t need full teams to get done. In these cases, sometimes, a single developer is enough. In other cases, you’ll want two specialists: one for the back-end/programming side and another for the front-end/design. The commonality in these cases is that these developers can work on their own for the most part.
In this particular case, Freelancers can be a good option to integrate your project.
Freelancers
Freelancers are free agents that businesses can hire for a certain amount of time to integrate or develop a project.
Why Hire Freelancers?
- Lower costs: The costs for a freelancer will highly depend on the place that freelancer hails from. Freelance software developer rates will usually be higher than an in-house software developer’s salary, but the business will usually save money on legal fees and other benefits that in-house workers require.
- Flexibility: Hiring a freelancer tends to be a temporary arrangement that ends with a project or a specific time frame. You can hire niche talent on a project-by-project basis if you know that you’ll only need that particular skill set. You can always re-hire them at any time if you see the need, making them extremely flexible and cost-efficient.
The Costs Of Freelance Developers
Freelancers’ costs tend to be fairly straightforward since their operating costs are usually included in their rates.
However, there are other small costs you should be aware of:
- Communication: Constant communication is essential when working with freelancers. It’s a safe bet you’ll need to set up tools to both communicate and transfer information (such as files, etc.) so the project goes smoothly. You can easily do this for free, depending on your project’s specific needs. The tools need to be set up by someone, which can translate into unexpected costs for your business.
- Evaluation: To find the best freelancer for your project, you’ll need to compare them somehow. Setting up people and tools to evaluate your candidates’ skills can translate into unforeseen costs.
Besides that, there is, of course, the hourly rate of the developer. How much does it cost to hire a programmer?
The value can be highly variant depending on their place of living and their skills:
| Geographical Location | Average Hourly Rate |
| United States | $70 / hour |
| Australia and New Zealand | $70 / hour |
| Canada | $65 / 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 |
| Former Soviet Union | $49 / hour |
| Northern Africa | $41 / hour |
How Much Does It Cost to Hire A Team of Developers?
When the project is too big or ambitious for a freelancer or two, it’s time to start thinking about either hiring or creating a dedicated team to develop it. That’s where Outsourcing and In-House development come in, respectively.
Outsourcing
Outsourcing is the process of hiring a team from a development house to build the project for you. Usually, these software development houses have all the talent needed to see a project to completion and will scale the talent in the team by its needs.
Why Outsource?
- A flexible, expert team: Outsourcing businesses will usually be able to fill in all needed positions for a project in-house and will scale the number of experts according to the needs of the project at any time.
- Cost-efficient: Compared to hiring a full development team for in-house use, outsourcing is more practical and cost-efficient.
- Quality Assurance: If you’re working with an established software development house, you can be assured you’ll get a quality final product.
The Costs Of Outsourcing
Outsourcing has very few operational costs outside of the values agreed upon in contract at the start of the project. However, there are a few things to consider:
- Legal Fees: When negotiating the outline of the project, it will be important for the contract to be specific and agreed upon by both parties. For that to happen, you’ll have to rely on lawyers on your end to help you write and review said contract.
- Management: You’ll need someone to oversee the project and be the bridge between your business and the development house. This can translate into extra costs for your business.
- Contract Renegotiation: If your project changes priorities or defines new features to be implemented mid-development, be prepared to incur heavy costs. These can be established in the contract or defined at the moment the new parameters are set.
Besides these costs, there are the obvious costs of the project’s development. These will usually be agreed upon at the time of writing the contract, and will depend on the development house’s reputation and the scale of the project:
| Project Scale | Hourly Rate | Minimum Budget |
| Small | $75 – $125 / hour | – |
| Medium | $200 – $300 / hour | $100,000 |
| Large | $250 – $850+ / hour | $500,000+ |
In-House
When you want full control over your projects and their development, the in-house software development team is the solution. You choose exactly who you work with, and their skills, and can tackle projects at your own pace.
Why Build An In-House Team?
- Full control: When you have control over the people you hire, you dictate the pace at which things happen and the skills necessary to tackle your projects.
- Better Communication: Communication becomes far more streamlined when contrasted with outsourced teams, where you can’t communicate directly with developers, and instead rely on the software house’s project manager to mediate.
- Self-sufficiency: Building an in-house team makes you self-sufficient and able to tackle more projects in the future, as well as allowing you to support current projects during their lifetime without the need for third parties.
- Capitalization of software development costs: Over time, your team will gain expertise and resources that will make it more efficient and able to tackle more ambitious projects. Although the initial setup costs may be high, they can be partly recovered in continuity, performance, and quality delivery for your projects.
The Costs Of An In-House Team
An in-house team is by far the costliest solution to tackle project development, but the costs can be offset with advantages, depending on the needs of the business. It’s important to evaluate early on if your business can handle all the extra expenses that forming a team like this can incur:
- Hiring: Hiring people requires not only dedicated staff to perform that job, but you’ll also probably want to buy software to streamline the hiring process, as well as software to help you assess your candidates. A hiring process can take several months until you find people to fill your positions, and this translates into costs for your business in the form of salaries and other operational costs. You can also hire agencies to help you with this process. As a point of reference, a USA-based Human Resources Manager earns, on average, $111,648 per year (Salary.com).
- Training: Even though you can hire experts that can easily fit in your company’s culture and processes, they will probably need some time to learn and adjust to your business practices. These costs will be highly dependent on the type of job these developers will perform. These costs are around the $980 – $1.300 mark for each employee.
- Onboarding: The costs of onboarding will highly depend on the conditions of the job. Paperwork and other administrative obligations will usually cost around $400 while setting up a workspace for a new employee can range from $500 to $1,000+ depending on the needs of the workstation. If the person needs to be relocated, the cost of that process can be high, going from $20,000 to $80,000+, depending on the location and conditions.
Besides these costs, there are the usual salaries for your developers. These will vary depending on their expertise and the place they work in. Here are some of the most common examples:
| Expertise | Average Yearly Salary |
| Senior Software Developer | $137,130 |
| Software Developer | $93,490 |
| UI Designer / Developer | $81,763 |
| QA Analyst | $79,590 |
How to Reduce the Cost of Hiring Software Developers
The average cost of software development is a delicate balance between a lot of variables. Choosing the best processes and avenues for your software development needs is a must to not overblow your budget. We hope to have given you a comprehensive list of all the costs associated so you can make the best decision for your particular case.
If you want to hire a senior vetted software developer to be part of your current team, DistantJob’s IT recruiters can help you find the tech talent you’re looking for. No matter the size of the project or the budget available to you, we have a large array of people with different skill sets that are sure to fulfill your needs. We can find you the people best qualified to tackle your projects while making sure they are a good culture fit. Contact us!
