🔍 Read the full analysis: IT Staff Augmentation Vs Full-Time Hiring: When Does The Cost Balance Shift? on ThorstenMeyerAI.com
Get business pricing on monitors, keyboards and dev gear
- Business-only prices and quantity discounts
- Tax-exempt purchasing
- Multiple users, one account, clear invoices
TL;DR
A November 6 analysis by Thorsten Meyer calculates that a median-wage U.S. software developer costs an employer about $95 per hour actually worked, or about $98 after an assumed one-year hiring cost. The break-even rate depends heavily on how much of the employee’s time is used: at 50% utilization, the analysis estimates about $197 per useful hour. The figures are calculations from public data, not a comparison with surveyed contractor rates.
Thorsten Meyer published a cost comparison on November 6 estimating the employer cost of a full-time developer against the hourly price of outside IT expertise. Using public U.S. and German labor data, the analysis puts a median-wage U.S. developer at about $95 per hour actually worked, rising to roughly $98 when an assumed one-year hiring cost is included; it says the break-even point changes sharply with how much of the employee’s available time is needed.
The calculation starts with U.S. Bureau of Labor Statistics data. For May 2025, the median annual wage for software developers was $135,980. Meyer applies an employer-cost factor derived from BLS compensation data, then estimates roughly 1,830 hours actually worked per year after accounting for paid leave. The resulting employer cost is about $175,000 annually, or approximately $95 per hour worked. This is the author’s calculation, not a figure published by the BLS as a developer-specific hourly cost.
Meyer adds $5,475 per hire, the average non-executive cost per hire in SHRM’s 2025 benchmark, which surveyed 2,371 member organizations. Assuming the hire stays for one year, that adds about $3 per hour and brings the estimated cost to about $98 per hour. SHRM’s reported median was $1,200; the benchmark covers different kinds of roles, not only technology positions. Over a three-year tenure, Meyer estimates the hiring expense adds less per hour, bringing the figure to about $96.
For Germany, the analysis uses Destatis figures: employers paid €29 in non-wage labor costs per €100 of gross pay in 2025, while the information and communication sector’s average labor cost was €58.50 per hour worked. Meyer cautions that this is a sector-wide figure covering IT and telecommunications jobs, not a developer-only rate. The article does not compare either country’s employee cost with a published contractor-rate survey; it says no survey with a sufficiently clear method was identified.
Infographic 01 · The true cost of a hire
A salary is not the cost
Before you compare a hire with an outside specialist, convert both into the same unit: cost per hour of real work.
What a median US software developer costs the employer per hour actually worked. Our calculation from BLS wage and employer-cost data.
From salary to hourly cost
Calculation, each input published by the BLS
- Median salary, US software developer (May 2025)$135,980
- × 1.28 employer costs on top (benefits, insurance, retirement, payroll taxes)$174,600
- ÷ hours actually worked (2,080 paid, about 12% paid leave)1,830 h
- Cost per hour actually worked≈ $95
Sources: BLS Employer Costs for Employee Compensation, June 2026, Table 4 · BLS median wage, software developers, May 2025 · Destatis, 29 Apr 2026 · Destatis non-wage labour costs · SHRM 2025 benchmarking. Load factor = total compensation ÷ (wages + paid leave) = $78.88 ÷ $61.43. German sector figure covers all jobs in the sector, not only developers.
Powered by Thorsten Meyer AI
Utilization Sets the Break-Even Rate
The comparison is not settled by salary, benefits or recruiting fees alone. Utilization—the share of paid hours that produce work the employer needs—can change the effective cost more than the one-time hiring expense. Meyer’s example estimates that if a full-time hire is needed for only half of available working hours, each useful hour costs about twice as much. On that assumption, the break-even rate rises from around $98 to about $197 per useful hour.
That calculation helps explain why neither staffing model is always cheaper. An outside specialist may make financial sense for short, uncertain or highly specialized projects, particularly when a company cannot keep a full-time hire occupied. A permanent employee may compare favorably when work is steady and full-time, or when retaining institutional knowledge is important. These are implications of the model, not universal findings about market prices: actual rates, utilization and project needs vary.
The decision also involves costs the hourly comparison cannot fully capture, including continuity, management time, onboarding, access to specialized skills and the risk of losing knowledge when a contract ends. The article offers a repeatable calculation for comparing a company’s own quotes with its own staffing assumptions, rather than a single market-wide verdict.
Products Worth Considering
Samsung Galaxy Tab A11 8.7-Inch Wi-Fi Tablet, 64GB, 4GB RAM, Silver
Apple iPad mini (A17 Pro), 128GB, Wi-Fi 6E, Space Gray
EcoFlow DELTA 3 Portable Power Station (1024Wh, 1800W)
As an affiliate, we earn on qualifying purchases.
How the Public Data Fits
The U.S. estimate combines several measurements with different scopes. BLS employer compensation data for June 2026 show that private-industry employers paid an average of $46.89 per hour worked, including $32.82 in wages and $14.07 in benefits. For the broader management, professional and related occupational group, the reported cost was $78.88 per hour worked. Meyer uses that group’s compensation structure to estimate a load factor of about 1.28 for the software-developer median wage.
The German figures are also not a direct developer-to-developer comparison. Destatis reports average labor costs for the information and communication sector, while the U.S. estimate uses a particular occupation’s median wage combined with employer-cost data from a broader group. The source presents both as starting points for a local calculation, not as interchangeable salary benchmarks.
Meyer’s analysis also addresses AI’s effect on staffing. It says evidence about how much faster coding agents make developers remains unsettled. The article argues that AI may create more short, specialist projects while also increasing the value of keeping knowledge in-house. Those are the author’s observations, not quantified findings in the cost model.
“Staff augmentation is cheaper than hiring. You hear it in every pitch deck. Sometimes it is true. Often it is not.”
— Thorsten Meyer, in the November 6, 2026 article
Limits of the Cost Comparison
The figures do not establish that augmentation or full-time hiring is cheaper in any particular company. No contractor-rate dataset is included, so readers must compare the calculated break-even rate with actual proposals. The article also does not provide a single utilization estimate that applies across employers; project demand is a key input each organization must supply.
The U.S. and German estimates use different populations and methods, so they should not be read as a like-for-like national ranking. The U.S. figure is a modeled estimate for a median-wage software developer; Germany’s €58.50 figure is an average for the entire information and communication sector. Actual employer costs can also vary with pay, benefits, location, tenure, leave and the mix of work.
The source’s discussion of AI does not quantify a productivity gain or show how AI changes the break-even rate. It describes the evidence on coding-agent speed as unsettled. The calculations are presented as an arithmetic framework, not legal, tax or financial advice.
Apply the Formula to Real Quotes
The next step for an employer is to replace the article’s broad inputs with its own numbers: compensation and benefits, recruiting expenses, expected tenure, productive hours, project duration and the utilization it can realistically sustain. It can then compare the resulting cost per useful hour with quotes from outside specialists. Meyer’s article offers no forecast or follow-up benchmark for those market rates.
For organizations weighing AI-related work, the staffing decision will also depend on whether a project is temporary and specialized or creates knowledge the company needs to retain. The source gives no quantified measure for that trade-off. Its main practical conclusion is that the balance shifts with workload and assumptions, so the calculation should be revisited when project scope, hiring plans or outside rates change.
Key Questions
What is the estimated cost of a full-time U.S. software developer?
Meyer calculates about $95 per hour actually worked for a developer at the May 2025 median wage, using BLS employer-cost data. Including an assumed one-year hiring expense raises the estimate to about $98 per hour.
When does staff augmentation look cheaper in the analysis?
It may compare favorably when the work is short-term, uncertain or specialist, or when a full-time hire would not have enough work. The source does not claim that augmentation is always cheaper and does not supply contractor market rates.
Why does utilization matter so much?
If an employee is needed for only part of their available working time, the employer’s cost is spread over fewer useful hours. Meyer’s example estimates that at 50% utilization, the break-even rate rises from about $98 to about $197 per useful hour.
Can the U.S. and German hourly figures be compared directly?
Not as equivalent developer rates. The U.S. estimate models a median-wage software developer; Germany’s €58.50 per hour is an average for the wider information and communication sector.
Does the analysis show that AI makes developers more productive?
No. Meyer says evidence on how much faster coding agents make developers remains unsettled. The article discusses possible staffing implications but does not quantify an AI productivity effect.
Source: ThorstenMeyerAI.com
