When you're ready to expand your engineering team, one of the first questions you’ll have is, "How much does it cost to hire an engineer?" This can be especially tricky if you don't know where to start. A good way to begin is to look at staffing agencies. Engineering staffing agencies can help you find the right candidates for your open engineering roles. They can also help you understand the costs associated with your hires, including average salaries, skills that affect compensation, and even the costs of onboarding new talent. This blog will break down how much it costs to hire an engineer, including budgeting for specific types of engineers, like software engineers. Also we will touch upon hiring virtual marketing assistants.
While you're researching the costs of hiring an engineer, you may also want to explore working with virtual marketing assistants or offshore engineers from Founders Arm, ours can cost up to 60% less.
Table of Contents
The Average Cost of Hiring a Software Engineer
The cost of hiring a software engineer depends significantly on factors such as their level of expertise, location, and hiring model. According to Upwork, freelance software developers on the platform typically charge between $10 and $100 per hour, offering a broad range suited to both entry-level and highly skilled talent. Industry data supports this variation. Clutch’s 2024 Software Development Company Pricing Guide shows that software development firms often charge between $24 and $49 per hour, especially for outsourced or offshore teams.
Hourly Rates vs. Salaries: What You Really Pay for In-House Engineers
In contrast, the US Bureau of Labor Statistics (BLS) reports that the average annual salary for a software developer in the USA is $130,160 per year, equating to roughly $62.58 per hour for full-time, in-house professionals. In practice, rates for hiring software developers in the USA range between $70 and $150+ per hour, particularly for specialised skills or senior-level engineers. These differences highlight how platform choice, geography, and skill requirements directly affect hiring costs.
Freelance vs. Full-Time vs. Agency Hiring
Freelancers
Ideal for short-term or one-off projects, freelancers often charge hourly rates or per-project fees. Platforms like Upwork provide access to global talent, making it possible to find cost-effective options. Managing freelancers may require closer oversight, especially for complex or long-term work.
Full-Time Hires
Hiring in-house engineers means paying an annual salary plus benefits, training, and other employment-related costs. While the upfront expense is higher, full-time staff offer continuity, deeper business integration, and long-term strategic value.
Agencies or Development Firms
Contracting through an agency often costs more on a per-hour basis, but it comes with added benefits like project management, access to multi-skilled teams, and a structured delivery process. This model is well-suited to businesses seeking full-service development without managing individual hires.
Pricing Models for Software Engineers
Hourly Rates
The most flexible model, suitable for freelance and contract-based work, where you pay only for hours worked.
Fixed Project Fees
Ideal for projects with clearly defined scopes, such as building an MVP, where costs are agreed upfront.
Monthly Retainers
Best for ongoing work like system maintenance, iterative improvements, or long-term collaboration.
Full-Time Salaries
Employed engineers earn an annual salary, often with additional benefits. This model is typical for businesses seeking dedicated talent deeply aligned with their goals.
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Factors Affecting Software Engineer Costs
Skills and Experience: The More Knowledgeable the Developer, the Higher the Rate
Developers can be divided into junior, middle, and senior based on experience. While the yearly cost estimate for a junior developer is about $70,000, senior developers will command over $130,000. The experience of a developer is not necessarily defined by years in the industry. Other factors, such as the number of successfully delivered projects and industry-specific skillset, play a role too.
Technology: Some Skills Cost More to Hire
By technology, we mean a set of programming languages, tools, and frameworks that a developer will require to build software. Some technologies may be more niche or specialized, require more wits, and invariably affect the final cost. For example, hiring developers for emerging technologies like AI often comes at a premium due to the scarcity of skilled professionals in these areas. On the other hand, hiring developers for more mature or widely used technologies like JavaScript, React, Angular, and Python might be relatively more affordable due to a larger pool of available talent.
Location: Where You Hire Impacts Software Engineer Costs
The costs of software engineering vary depending on the geographical location in which hiring takes place. Developers’ rates can vary significantly across different regions and countries due to factors such as the cost of living, labor costs, and market competition. Hiring developers from tech hubs or metropolitan areas, such as Silicon Valley, New York City, or London, often comes with higher salary expectations compared to hiring in less expensive regions or countries with lower labor costs.
Recruitment Models: How You Hire Matters
There are various recruitment models available, including full-time employment, freelance or contract work, and outsourcing to third-party development agencies or offshore teams. Each model has its cost structure and associated benefits. While hiring full-time employees typically involves a higher upfront cost, it can provide more control and long-term commitment. On the other hand, freelancers and offshore teams may offer more flexibility and cost savings, but impose challenges on project management and coordination.
How Founders Arm Fast-Tracks Startup Success with Pre-Vetted Teams
Looking to build your dream team without the hiring headaches? Founders Arm connects you with pre-vetted, top-tier offshore talent at 60% less cost than traditional hiring. Skip the lengthy recruitment process and get exceptional engineers, marketers, or executive assistants onboarded in under two weeks, with no payroll hassles. Take your startup to the next level with professionals who hit the ground running from day one.
We've helped Cal AI scale influencer marketing to reach millions, Pam build backend operations to support rapid growth, Turbolearn AI amplify their reach in the education market, and many more. Want a 2-week free trial with our offshore talent? Try out an engineer or virtual marketing assistant, entirely for free. Hidden and Additional Costs of a Software Engineer to Consider
Loss of Productivity
New hires typically require time to adapt before reaching full efficiency. According to Investopedia, a new employee’s productivity averages 25% in the first month, leading to a 75% productivity cost. Based on the average monthly salary of a software engineer, this equates to roughly $6,883 in lost output during the initial ramp-up period. This transitional phase can be even more extended if the role involves complex systems or unfamiliar technologies.
Training Costs
Training is critical for equipping engineers with the knowledge of your processes, tools, and codebase. Although there is no software development-specific figure, Training Magazine’s 2020 Training Industry Report notes that US companies spent an average of $1,111 per employee on training. For technical roles, this may increase further if specialised certifications, courses, or internal mentorship programmes are involved.
Onboarding Expenses
Proper onboarding is vital to helping engineers integrate into your team. According to Indeed, onboarding costs an average $400 per employee. This typically covers administrative setup, orientation, and time spent by HR and managers to familiarise new hires with company policies and workflows.
Benefits and Perks for Full-Time Hires
Hiring full-time engineers also includes the cost of employee benefits such as health insurance, retirement plans, bonuses, and professional development allowances. In many companies, benefits can add 20–30% to the total cost of employment.
Software Licences and Tools
Engineers require access to development tools, infrastructure, and licences, which add to overheads. This might include subscriptions for platforms like GitHub Enterprise, Jira, or Slack, cloud infrastructure fees for AWS or Azure, and software testing environments. While individually minor, these costs can accumulate significantly across teams.
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How to Budget When Hiring a Software Engineer
Nail Down the Details Before You Start Hiring
Before bringing a software engineer on board, clearly outline what you want to achieve. Ambiguous project goals often result in scope creep, where new features or changes are added mid-project, driving up both time and costs. Documenting detailed requirements and desired deliverables upfront ensures accurate cost estimates and prevents unnecessary rework.
Consider the Total Cost of Hiring a Software Engineer
A well-planned budget should cover all aspects of hiring, not just the salary or hourly rate. Include costs such as onboarding, training, benefits for full-time hires, and software tools. It’s wise to overestimate your budget to account for small fluctuations slightly, so you don’t run into funding gaps mid-project.
Prepare for the Inevitable Unforeseen Expenses
Even with thorough planning, projects can hit unexpected hurdles, such as needing specialized expertise or additional development hours. Keeping a contingency fund of around 10-15% of your budget helps absorb these unplanned costs without derailing the project.
Monitor Your Budget and Make Adjustments as Needed
For longer or evolving projects, costs can shift due to added requirements, market rate changes, or new technologies. Regularly reviewing your budget and actual spend allows you to spot potential overspending early and adjust priorities or timelines accordingly.
Try Out an Engineer or Assistant for Two Weeks for Free. Book a Call to Learn More
Founders Arm can connect you with offshore engineering talent who are ready to work. Skip the lengthy recruitment process and get exceptional engineers onboarded in under two weeks, no payroll hassles included. You can even try out an engineer completely for free. We've helped Cal AI to scale influencer marketing to reach millions, Pam with building backend operations to support rapid growth, Turbolearn AI to amplify their reach in the education market, and many more.
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