Price is one of the most important decision factors when purchasing goods or services. No matter what your budget is, you always want to find a cheaper option without compromising quality. This is especially relevant for a service sector as costly as IT.
Developer prices can range from $10 to $100 per hour. Does this mean that a $100 developer is better for you? Or should you perhaps choose something in between, for example, a $50 developer?
This is a difficult question to which no one can give a direct answer; it’s up to you and your needs. What is important is to clearly understand them and have the required market information. That’s exactly what we’ll cover in this article.
We’ll walk through:
- How the software developer price is composed;
- Why these prices vary so much;
- Plus, we will give practical advice on how to strike the right balance between price and quality.
PS For the convenience of calculations, we use hourly rates rather than salaries. It also allows you to see the real cost of the developers.
How to calculate hourly rate
To do this, you need to determine the number of hours worked per day (8 for a full-time employee) and multiply them by the total number of working days per year (250 in 2021 in the United States).
Then, divide the annual salary by that number.
For example, based on Indeed’s annual salary data, the average developer hourly rate in the US is: $110,390 / (8 * 250) = $55 / hour.
How the software developer price is composed
Firstly, you should understand that the price must be considered within the context of the developer’s work.
By itself, the figure of $55 per hour does not mean anything. To understand the economy of software development, you need to look at the bigger picture and understand exactly what a developer does.
Your ultimate goal is not to hire a developer. It is about solving a certain problem with the help of software. And the developer, no matter who is engaged in solving this problem. For example, developing a mobile application.
The cost of any software development consists of only two components:
Developer’s hourly rate * total development time = application cost
The second variable completely changes the idea of price. Because a developer who initially seemed more expensive may spend less time developing an application. Therefore, his cost will ultimately be lower, not to mention the quality of the code.
40 ($ per hour) * 180 (hours) = $7200
50 ($ per hour) * 140 (hours) = $7000
A higher rate per hour does not always mean higher development costs.
In this article, we will talk about the first variable: what the rates are and on which factors they depend.
Factors affecting the developer’s price
There are four factors that determine the cost of the software developer:
- Work format (hiring, contracting);
- Developer level (architect, senior, middle, junior);
- Technology (Java, JS, Android, iOS, etc.);
- Region (USA, UK, Germany, Australia, etc.)
Let’s consider each factor in more detail.
Cost of hiring app developer by work format
So, you need a software developer. You have two options:
- You can hire a developer to your team;
- You can work with him/her as an independent contractor.
Difference between employees and independent contractors
An employee is a person on the staff of a company who works for an employer. The employer controls the employee’s work – what will be done and how.
An independent contractor is an individual (freelancer) or legal entity (agency) that provides services for another individual or legal entity in accordance with an agreement between them – which specifies responsibilities, payment terms, scope, type of work, and other issues. However, he/she is not part of the employer’s company.
As already mentioned, when calculating the cost of hiring an app developer, first you should understand the scope of the tasks that will need to be done.
If it’s a long-term project, then building an in-house team is imperative. It’s not even about money, it’s about building and maintaining expertise in the development process. This allows you to not be dependent on external factors.
If this is a short-term project, you need a developer for a couple of months to speed up development or temporarily plug the hole, so hiring an employee is simply inappropriate. In such cases, it is more profitable to work with independent contractors.
Is it possible to work with freelancers and agencies long-term? This option is also possible, and many companies do so. Here is why:
The price difference between hiring and contracting
Determining whether a person is an independent contractor or an employee is important because it determines whether payroll taxes are withheld. You must withhold payroll taxes from employee salaries, but you do not withhold taxes from payments to independent contractors (except VAT for contractors located in the same jurisdiction).
VAT varies from country to country, but on average is about 20%.
Let’s consider two options:
In the case of working with independent contractors, it’s simple – you pay them the agreed hourly rate or project amount.
In the case of hiring a full-time employee, besides the hourly rate you also pay additional costs:
- Training costs;
- Infrastructure costs.
Each country has its own legislation, but such costs, according to MIT, can reach on average from 25 to 40% in addition to the hourly rate.
Based on this, the developer’s annual salary turns from $110,390 to $110,390 + $44,156 (35% of 110 000) = $154,546 or $77 per hour.
You can determine the amount of additional costs by examining the legislation of your country.
Types of additional costs
The types of additional costs and amounts vary from country to country. However, we can distinguish two categories of costs: mandatory and optional.
Mandatory costs are those that you, as an employer, are required by law to pay to your employee. They include:
Payroll tax. This depends on the salary amount. Some of these taxes are withheld from employee salaries while others are your responsibility as the employer.
For example, in the United States you are required to pay Social Security and Health Care Taxes (FICA) and Unemployment Taxes (FUTA and SUTA), and you must withhold some of the employee’s income tax and transfer it to the appropriate tax agency.
Benefits are one of the biggest items of expenditure in the cost of hiring an employee. For example, federal benefits in the United States include:
- Medical insurance;
- Payment of overtime hours;
- Unemployment insurance;
- Unpaid family leave with job retention.
In addition, your state or city may require additional (optional) benefits, including:
- Teeth and vision insurance;
- Pension contributions;
- Paid weekend (including vacation, sick leave, etc.);
- Disability insurance.
While additional benefits are optional, many companies pay for them as it increases their attractiveness in the eyes of employees.
Also, when working with full-time employees, you can face the HR activities costs, infrastructure costs, ongoing training, and staff development costs.
We advise you to acquire software and an accounting specialist. In the end it will save you money, time, and nerves.
Are full-time employees always worth more than contractors?
It may seem like hiring an employee is always more expensive. But you should keep in mind that all independent contractors also pay self-employment taxes and fees. Therefore, they may include these costs in their hourly rate. This means that the hourly rate that you pay for their work may be higher than the hourly rate for an employee. However, do not forget the additional employee costs we discussed above.
Difference between freelancers and agencies
A freelancer is an individual contractor who works directly with clients. This can be through platforms such as Upwork, Freelancer, Fiverr, etc.
An agency is a contractor company that provides services from its employees. You can find a list of agencies on sites like Clutch.co, Designrush, Goodfirms or simply in Google.
Both agencies and freelancers have their pros and cons. However, perhaps the main difference is the fact that agencies have the resources to schedule and replace their employees, as well as scale quickly and reduce resources as needed. This allows you to reduce project risks and have more confidence in meeting deadlines. Because of this, agency rates are often higher than individual freelancers.
If you only have a few projects to handle, a quality contractor will be cheaper than a hired employee. But if you have a lot of projects coming up, it will end up being more profitable to hire an employee. A mixed model seems to be the ideal combination – employees to deal with core tasks and contractors to speed up the development process when needed.
Cost of hiring app developer by level
Like with other factors, before comparing the cost of developers by their level, it is necessary to determine: the tasks they will perform, deadlines, and the desired level of quality and control from your side. This will help you eliminate unnecessary options that seemed profitable at the beginning. If this is difficult for you, we can estimate your project work free of charge and compose the optimal team lineup.
Software developer levels: from trainee to architect
There are usually five levels of developer:
Note: When determining the level of a developer, knowledge and skills weigh more than work experience.
Now we will focus on the financial side of the issue.
How much does it cost to hire developers according to their level?
We analyzed data on the salaries of developers of various levels on platforms such as Indeed, Glassdoor, Stackoverflow, Payscale, and Ziprecruiter, and we found an interesting pattern. Regardless of the region we looked at, the percentage ratio of salaries for developers of different levels was approximately the same. Let’s look at the ratio in the United States:
According to Ziprecruiter, the average developer salary in the US (without additional costs) is:
The wide variation in prices is due to different technologies and states. In San Francisco for example, prices can be significantly higher than the American average.
In comparison, the average developer salary in Germany (without additional costs) is more homogeneous due to the homogeneity of the German economy:
The greatest growth in salaries in both cases we see when moving from Mid-Level Developer to Senior Developer. This can be explained by a qualitative leap in responsibilities, his independence, and his ability to lead a team.
Whom to choose if you don’t have enough money
It seems that everything is simple. You have requirements, and there is a pool of developers on the market. But sometimes budget limits the choice, and you simply cannot afford to hire the developer you need.
Our personal experience, and the experience of hundreds of other people, shows that the developer level is the variable on which you cannot save, simply because it will cost even more in the long term. You can read more about how a lack of experience leads to losses of hundreds of thousands of dollars here.
Poor project quality = higher costs in the future
To reduce costs, you can experiment with other variables. For example: work with a contractor instead of hiring a developer, change technology, choose a different region, or revise the scope of the work.
Cost of hiring app developer by technology
The third by number, but not the third most important factor, differs from the others. You can only choose the language in which to write the application when you start development.
If something goes wrong, you can fire the developer and hire a new one. You can change the region, you can hire a senior developer instead of the middle developer, but you cannot change the technology that everything is already written on.
The choice of technology is based on three elements: scaling and performance requirements, expected functionality, and the human resources available in the labor market. You can read more about how to choose the right language for your application here.
Most used technologies in 2020
According to the annual Stackoverflow report, the following languages were the most used in 2020:
How much does it cost to hire developers according to their technology stack?
The cost differs from country to country and depends on the complexity of the language, the availability of relevant resources, and many other factors. However, there are some patterns.
According to the annual Stackoverflow report, the average world cost of developers (without additional costs) in 2020 was:
We can see that the most used languages are at the bottom of the top-paid languages list and vice versa with the least used the top paid.
What to look for when choosing a language
Again, budgets do not always allow you to choose the best option. If this is the case for you, you need to ask yourself a few questions:
- What functionality will be implemented in the application?
- What type of application is it (web, native, hybrid)?
- Will the application scale in the future?
- What is the expected traffic of the application?
- And other questions, depending on the project.
After answering these questions, you can make up a pool of languages that, in theory, could suit you. If this causes difficulties, we can select the optimal technology for your project for free.
Remember, technology is just a tool for achieving a business goal.
Cost of hiring app developer by region
The cost of hiring an app developer mostly depends on their region. For example, a developer in the US could cost 10 times more than one in India.
The price range is so wide due to the inhomogeneity of the global economy. Neighboring countries belonging to a single economic area are similar in their pricing policies. However, the less they interact, the wider the price spread.
So, there are 12 key regions in the world which are engaged in software development: North America, Latin America, Western Europe, Northern Europe, Southern Europe, Central Europe, Eastern Europe, Africa, the Middle East, Southeast Asia, Eastern Asia, and Oceania.
Cost of hiring app developers in North America
Key countries in the region: USA, Canada.
- The cost of hiring app developers in the USA (without additional costs) ranges from 37 to 77 USD/hour. Average rate – 53 USD/hour.
- The cost of hiring app developers in Canada ranges from 31 to 65 USD/hour. Average rate – 44 USD/hour.
As expected, developers in the United States are the most expensive in the region, and, looking ahead, one of the leaders in the world. The rate in Canada is slightly lower, but it is also quite high due to the developed economy and close ties with the United States.
Cost of hiring app developers in Latin America
Key countries in the region: Brazil, Argentina, Colombia, Mexico.
- The cost of hiring app developers in Brazil ranges from 21 to 52 USD/hour. Average rate – 32 USD/hour.
- The cost of hiring app developers in Argentina ranges from 19 to 49 USD/hour. Average rate – 29 USD/hour.
- The cost of hiring app developers in Colombia ranges from 18 to 50 USD/hour. Average rate – 30 USD/hour.
- The cost of hiring app developers in Mexico ranges from 18 to 60 USD/hour. Average rate – 32 USD/hour.
The cost of hiring app developers in Latin America is fairly homogeneous. Mexico stands out a little bit, probably due to its close location to the United States.
Cost of hiring app developers in Western Europe
Key countries in the region: United Kingdom, Ireland, Germany, France, Netherlands, Switzerland.
- The cost of hiring app developers in the UK ranges from 28 to 60 USD/hour. Average rate – 39 USD/hour.
- The cost of hiring app developers in Ireland ranges from 30 to 60 USD/hour. Average rate – 43 USD/hour.
- The cost of hiring app developers in Germany ranges from 32 to 56 USD/hour. Average rate – 45 USD/hour.
- The cost of hiring app developers in France ranges from 26 to 60 USD/hour. Average rate – 37 USD/hour.
- The cost of hiring app developers in the Netherlands ranges from 26 to 60 USD/hour. Average rate – 38 USD/hour.
- The cost of hiring app developers in Switzerland ranges from 38 to 72 USD/hour. Average rate – 54 USD/hour.
The cost of developers in Western Europe is fairly homogeneous. Switzerland stands out a little bit, where wages and the cost of living are average higher than in the rest of Western Europe.
Cost of hiring app developers in North Europe
Key countries in the region: Norway, Sweden, Finland, Denmark, Iceland.
- The cost of hiring app developers in Norway ranges from 32 to 58 USD/hour. Average rate – 44 USD/hour.
- The cost of hiring app developers in Sweden ranges from 26 to 52 USD/hour. Average rate – 35 USD/hour.
- The cost of hiring app developers in Finland ranges from 30 to 54 USD/hour. Average rate – 43 USD/hour.
- The cost of hiring app developers in Denmark ranges from 32 to 58 USD/hour. Average rate – 37 USD/hour.
- The cost of hiring app developers in Iceland ranges from 29 to 52 USD/hour. Average rate – 42 USD/hour.
The cost of hiring app developers in Northern Europe is fairly homogeneous and is comparable to prices in Western Europe.
Cost of hiring app developers in South Europe
Key countries in the region: Spain, Portugal, Italy.
- The cost of hiring app developers in Spain ranges from 21 to 49 USD/hour. Average rate – 32 USD/hour.
- The cost of hiring app developers in Portugal ranges from 19 to 48 USD/hour. Average rate – 31 USD/hour.
- The cost of hiring app developers in Italy ranges from 20 to 50 USD/hour. Average rate – 33 USD/hour.
The cost of hiring app developers in Southern Europe is homogeneous, but lower than in Western and Northern European countries.
Cost of hiring app developers in Central Europe
Key countries in the region: Poland, Czech Republic, Romania, Hungary, Serbia.
- The cost of hiring app developers in Poland ranges from 23 to 50 USD/hour. Average rate – 35 USD/hour.
- The cost of hiring app developers in Czech Republic ranges from 22 to 50 USD/hour. Average rate – 33 USD/hour.
- The cost of hiring app developers in Romania ranges from 22 to 50 USD/hour. Average rate – 33 USD/hour.
- The cost of hiring app developers in Hungary ranges from 21 to 48 USD/hour. Average rate – 30 USD/hour.
- The cost of hiring app developers in Serbia ranges from 20 to 50 USD/hour. Average rate – 29 USD/hour.
The cost of hiring app developers in Central Europe is homogeneous, and comparable to South European prices.
Cost of hiring app developers in Eastern Europe
Key countries in the region: Belarus, Ukraine, Russia.
- The cost of hiring app developers in Belarus ranges from 20 to 48 USD/hour. Average rate – 28 USD/hour.
- The cost of hiring app developers in Ukraine ranges from 19 to 50 USD/hour. Average rate – 29 USD/hour.
- The cost of hiring app developers in Russia ranges from 22 to 55 USD/hour. Average rate – 31 USD/hour.
The cost of hiring app developers in Eastern Europe is homogeneous, and comparable to South European prices.
Cost of hiring app developers in Africa
Key countries in the region: Egypt, Tunisia, Morocco.
- The cost of hiring app developers in Egypt ranges from 15 to 40 USD/hour. Average rate – 23 USD/hour.
- The cost of hiring app developers in Tunisia ranges from 13 to 38 USD/hour. Average rate – 21 USD/hour.
- The cost of hiring app developers in Morocco ranges from 16 to 42 USD/hour. Average rate – 25 USD/hour.
The cost of hiring app developers in Africa is homogeneous, but at a price level much lower than in Europe.
Cost of hiring app developers in the Middle East
Key countries in the region: Turkey, Israel, Saudi Arabia, UAE.
- The cost of hiring app developers in Turkey ranges from 19 to 45 USD/hour. Average rate – 28 USD/hour.
- The cost of hiring app developers in Israel ranges from 31 to 75 USD/hour. Average rate – 45 USD/hour.
- The cost of hiring app developers in Saudi Arabia ranges from 19 to 39 USD/hour. Average rate – 27 USD/hour.
- The cost of hiring app developers in the UAE ranges from 26 to 48 USD/hour. Average rate – 36 USD/hour.
The cost of hiring app developers in the Middle East is inhomogeneous. Developers in Israel are the most expensive in the region. In second place is the UAE. In Turkey and Saudi Arabia, the prices are approximately equal.
Cost of hiring app developers in Southeast Asia
Key countries in the region: India, Philippines, Bangladesh, Vietnam, Singapore.
- The cost of hiring app developers in India ranges from 8 to 45 USD/hour. Average rate – 19 USD/hour.
- The cost of hiring app developers in the Philippines ranges from 8 to 40 USD/hour. Average rate – 20 USD/hour.
- The cost of hiring app developers in Bangladesh ranges from 7 to 38 USD/hour. Average rate – 19 USD/hour.
- The cost of hiring app developers in Vietnam ranges from 10 to 40 USD/hour. Average rate – 20 USD/hour.
- The cost of hiring app developers in Singapore ranges from 25 to 60 USD/hour. Average rate – 35 USD/hour.
The cost of hiring app developers in Southeast Asia is the lowest in the world. However, the more economically developed Singapore clearly stands out among other countries.
Cost of hiring app developers in Eastern Asia
Key countries in the region: China, Japan, South Korea.
- The cost of hiring app developers in China ranges from 15 to 45 USD/hour. Average rate – 30 USD/hour.
- The cost of hiring app developers in Japan ranges from 29 to 55 USD/hour. Average rate – 41 USD/hour.
- The cost of hiring app developers in South Korea ranges from 17 to 40 USD/hour. Average rate – 28 USD/hour.
The cost of hiring app developers in Eastern Asia is higher than that of its southern neighbors.
Cost of hiring app developers in Oceania
Key countries in the region: Australia, New Zealand.
- The cost of hiring app developers in Australia ranges from 33 to 65 USD/hour. Average rate – 42 USD/hour.
- The cost of hiring app developers in New Zealand ranges from 29 to 60 USD/hour. Average rate – 42 USD/hour.
The cost of hiring app developers in Australia and New Zealand is approximately equal.
How much does it cost to hire developers by region?
To sum up, developer rates in 2021 (without additional costs) in different regions are the following:
Which region to choose to save money and not lose in quality
In recent years, remote work is becoming increasingly popular, especially with the advent of Covid-19. For this reason, you don’t have to choose developers just from your region.
In case of a shortage of staff in the local market, or a lack of funds, you can work with contractors from other regions. So, when you are considering a region, you should think of several points:
Number of meetings. Decide on the number of meetings you want per day. Our experts say that for well-structured development processes, one meeting per day is enough.
Too much communication is a bad signal, as these hours are paid the same as the development hours.
Timezone. If you need closer contact with developers, consider regions with the same time zone. For North America that would be Latin America. For Western Europe that would be Central and Eastern Europe or Africa. For Oceania and East Asia that would be Southeast Asia.
If the development processes are set up, the time zone doesn’t matter much.
Cultural background. Choose developers with similar cultural values. This will make your work easier later on.
In short, in order to understand which developer you need and how much they would cost you must:
- Determine the duration of the task that the developer will solve. If it is a short-term task, a quality contractor will be a better choice than an employee. Choosing a contractor can save you 25 to 40% in costs. If this is a long-term task, or if the developer is a key person within your company, you must hire them as an employee.
- Determine the set of technologies that the developer needs to know. The right choice of technology will become the basis for other factors. It will also save you from unnecessary costs when scaling the project.
- Determine the required developer level to solve the problem. Understanding the complexity of the task will help remove unnecessary options when choosing a developer. This can save you 20 to 40% in costs. You can read about how to build an optimal team here.
- Determine the region in which the developer will be located. The right choice of a region can save you between 20 and 40% of costs without sacrificing quality.
A combination of each of these factors will allow you to find the right developer within your required budget. If you need help choosing a developer, you can contact us.