🔍 Read the full analysis: Full-Time IT Hiring Or Staff Augmentation: Which Side Of The Rate Wins? on ThorstenMeyerAI.com
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TL;DR
A November 6, 2026 analysis by Thorsten Meyer calculates that a median-wage US software developer costs an employer about $95 per hour actually worked, rising to about $98 after an estimated hiring cost. The article says the break-even rate depends heavily on how much of the employee’s time is used: at 50% utilization, its example rises to about $197 per useful hour. It does not compare against a specific contractor or agency rate.
Thorsten Meyer published a public-data comparison on November 6 estimating the cost of employing a software developer per hour actually worked and showing how to calculate the rate at which outside staff augmentation becomes more expensive. The analysis puts a median-wage U.S. developer at about $95 per worked hour, or about $98 when an estimated hiring cost is included for a one-year tenure; Meyer says utilization can move the break-even figure sharply.
The calculation uses U.S. Bureau of Labor Statistics data: a median software developer wage of $135,980 in May 2025, combined with employer-cost figures for the professional occupational group in June 2026. Meyer estimates annual employer cost at about $175,000 and divides it by roughly 1,830 hours actually worked, rather than by all 2,080 paid hours in a standard 40-hour work year. The result is an estimated $95 per worked hour. This is Meyer’s calculation from the cited figures, not a published BLS estimate specifically for software developers.
Meyer adds an average $5,475 cost per non-executive hire, using SHRM’s 2025 benchmark. Assuming the employee stays for one year, he estimates that recruiting and related hiring expenses add about $3 per worked hour, bringing the figure to approximately $98. He notes that SHRM’s median was $1,200 and that the survey covered multiple types of roles, not only technology hires. For a three-year tenure, his estimate is about $96 per hour.
The analysis also gives a German comparison. Destatis reported that an hour worked in Germany’s information and communication sector cost employers €58.50 on average in 2025, including employer contributions and paid leave. Meyer cautions that this is an average across jobs in the sector, not a developer-specific figure, while his U.S. estimate is based on a particular occupation’s median wage. The figures are starting points, not directly equivalent salary benchmarks.
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.
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Utilization Sets the Hiring Threshold
The central finding is that the comparison is not simply an employee’s salary against a contractor’s hourly invoice. A hire’s cost per useful hour depends on whether the business can keep that person productively occupied. Meyer’s example says that when a new employee is needed for only half of their available work time, the cost per useful hour doubles, pushing the break-even rate from roughly $98 to about $197 an hour.
That framing gives employers a way to test actual vendor quotes against their own workload, rather than relying on a general claim that augmentation is cheaper. It also highlights a trade-off beyond price: short, uncertain or specialist work may suit temporary outside support, while sustained core work can favor a full-time hire. Meyer argues that retaining institutional knowledge may also weigh in favor of hiring, but those choices depend on the organization’s circumstances.
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How the Cost Estimate Is Built
The article’s method starts with the cost of an employee’s time actually worked, then adds hiring expenses and adjusts for the share of that time the organization expects to use. For the U.S. professional occupational group, BLS June 2026 employer-cost data put wages at $54.06 per hour worked and total compensation at $78.88. Meyer uses the relationship between wages, paid leave and total compensation to estimate an employer-cost factor of about 1.28, then applies it to the developer median wage.
In Germany, the comparison uses a different published measure. Destatis reported €29 in non-wage labor costs for each €100 of gross earnings in 2025. The information and communication sector’s €58.50 hourly employer cost was up from €49.00 in 2020, according to the source material. Because the U.S. and German figures use different populations and methods, they should not be read as a direct country-to-country ranking.
Meyer says he excluded agency rates and provider names because he found no published rate survey with a clear method and because prices vary. The article instead offers a calculation that readers can compare with quotes they obtain themselves. Its figures are estimates and are not legal, tax or financial advice.
“The evidence on how much faster coding agents make developers is still unsettled.”
— Thorsten Meyer, on the evidence about coding agents
Rates and Productivity Remain Open
The analysis does not establish whether staff augmentation is cheaper across the market. It provides no contractor or agency rate survey, and actual quotes, contract terms, location, seniority and specialist skills can differ. The calculation also depends on assumptions about tenure, hours worked and how much of a hire’s time will be used; employers must supply those inputs for their own comparison.
The U.S. estimate combines a May 2025 developer wage median with June 2026 employer-cost data for a broader professional group. The German figure covers an entire sector rather than developers alone. The source material also says evidence about how much coding agents increase developer speed remains unsettled. It does not quantify an AI productivity effect or provide a revised break-even rate based on one.
Apply the Formula to Real Quotes
The next step for an employer is to compare the estimated cost of a hire with actual augmentation quotes and its expected workload. That means specifying the likely duration of the work, the portion of the employee’s time that would be used, relevant hiring costs and the value of retaining expertise in-house. The article supplies no market-wide forecast or date for a follow-up comparison.
As AI tools and project needs change, employers may need to revisit those inputs. Meyer’s analysis treats AI as a reason both for new specialist projects and for keeping some knowledge inside an organization, while leaving the size of any productivity effect unresolved.
Key Questions
What is the estimated hourly cost of a U.S. developer hire?
Meyer calculates about $95 per hour actually worked from the BLS median developer wage and employer-cost data. Including an estimated hiring cost for a one-year tenure raises the estimate to about $98.
Why does utilization affect the break-even rate?
A hire’s fixed employment cost is spread across the hours they contribute useful work. In Meyer’s example, using only half of the available time doubles the cost per useful hour and raises the break-even figure to about $197.
Does the analysis prove staff augmentation is cheaper?
No. It does not compare specific provider rates with a particular employer’s costs. It offers a method for comparing actual quotes with an estimated hiring cost under stated assumptions.
Can the German and U.S. hourly figures be compared directly?
Not as like-for-like developer pay figures. The German €58.50 figure is an average for all jobs in the information and communication sector, while the U.S. estimate is based on the median wage for software developers and a broader professional-group cost factor.
How does AI change the calculation?
The article says AI may create specialist projects and increase the value of keeping some knowledge in-house. It also says evidence on coding agents’ effect on developer speed remains unsettled, so it does not assign AI a productivity multiplier.
Source: ThorstenMeyerAI.com
