What’s the actual cost of hiring developers. 2020 average software development costs

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As the competition over hunting good developers is getting more fierce, hiring managers ask what’s the real cost of adding a new developer to the team? 

The cost of onboarding a new developer doesn’t just depend on the salary. There are more hidden and indirect costs that hiring managers need to consider and analyze. As a software house in the first place, we understand how hard it is for startups to hire a team of developers without breaking a neck. If you’re reading this, we aim to provide you with a complete guide on the actual expenses of hiring a local developer versus outsourcing or hiring a remote developer. 

What determines the salary of a software developer? 

Software developers’ salaries vary significantly. A combination of all the following factors determines the pay. 

  1. Experience 

The level of relevant experience and number of years can impact the software developer’s salary. The size and type of company may also have an impact. Product companies pay more than service companies So, in general, if you’re a startup don’t expect to pay your developer as Microsoft or Google do. 

2. Softskills 

Qualities like proactiveness, interpersonal skills, and good oral and written communication definitely weigh a lot when you compare between candidates. 

3. Programming specialization 

In most cases, a blockchain developer won’t earn as their front-end counterparts. Advanced technologies that are hard to find such as blockchain and AI cost a lot more than Node.js and React. 

  1. The cost of hiring an in-house developer 

The annual salary for Full-Time software developers in Denmark 

Considering the factors above, software developers’ annual salary in Denmark can range between DKK 550K to DKK 600K. This for fresh graduates and entry-level positions. Senior developers can earn up to DKK 770K annually, according to glassdoor. 

Additional cost ALERT  

  • Business overheads 

The cost of hiring an in-house developer doesn’t stop at the salary. With every new hire, there are indirect cost package you need to pay if you decided they work in the office with you rather than remotely. You need to take into account the cost of the office space, desk, chair, computer, software, and other facilities they will need to do their job. 

  • Recruitment costs 

To bring a new software developer on board, you will either pay a recruitment agency to recruit a developer for you or post your job on one of the job boards such as indeed.com. 

If you decide to pay for a recruitment agency, it would cost you between DKK 12K to DKK 15K per hire. 

Productivity loss and the burden of involving your team in the recruitment process

In small teams, engineers and software developers are overused to pre-screen candidates and interview them. They spend their time reviewing code samples and CVs, running interviews, and holding technical phone screens with candidates which becomes a major distraction to their daily tasks. If on average, it takes about 45 days to hire a developer, so, during this time your internal team’s productivity loss can reach up to DKK 200K. Employers overlook that small distraction can take a huge toll on productivity and result in many hours getting wasted on ineffective tasks. So how can you scale up your development team without squandering your internal team’s productivity and without spending a lot of money?  

  1. The cost of hiring a remote developer 

As we have discussed, depending on your internal team for recruitment could be inefficient. Hiring a recruitment agency is also way expensive. One way to improve the efficiency of your recruitment process is by hiring remote developers. 
The cost of hiring remote developers varies significantly from one country to the other. This depends on the labor costs of each country. For example, the salary range in Eastern Europe is significantly higher than in Africa and some parts of South East Asia. Let’s discover how much it’d cost to hire a developer from Egypt. 

The annual salary for Full-Time software developers in Egypt 

According to Glassdoor, software developers’ annual salary in Egypt can range between DKK 40K to DKK 60K. Senior software developers could earn up to DKK 100K a year. 

Imagine how much you’d be able to save if your development team was fully remote? 

Additional costs? 

The cost of hiring a remote developer doesn’t stop at the salary of course. You still need to pay the outsourcing/recruitment vendor their fees. Overall, onboarding a new remote developer costs only 40% of what you’d have paid for in-house talent. 

Cost comparison 

Denmark Egypt 
Annual salary DKK 550K to DKK 600KDKK 40K to DKK 60K.
Indirect costs  DKK 5K-8K
Recruitment costs DKK 12K to DKK 15K 

Over to you 

Whether you’re a product startup or a service startup, investing in qualified and well-educated developers is a must. As explained in the aforementioned sections, it’s a lot cheaper to hire remote developers. By doing so, you can save up to 60% of your recruitment costs. 

Besides cost reduction, it’s a lot more flexible to hire a remote developer than an in-house one. Most outsourcing vendors allow you to test a developer for free before you begin a long-term commitment with them. At SDEX, for example, we give you 2 weeks to test your developers’ technical competency and soft skills free of charge. In the next blog posts, we will offer a more in-depth analysis of the cost of hiring remote developers across Eastern Europe and Africa. 

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