🔍 Read the full analysis: IT Staff Augmentation Vs Full-Time Hiring: Know When Costs Shift on ThorstenMeyerAI.com
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TL;DR
A November 6 analysis by Thorsten Meyer calculates a U.S. median software developer costs employers about $95 per hour actually worked, rising to roughly $98 when a one-year hiring cost is included. Its central finding is that utilization can change the comparison sharply: at 50% utilization, the estimated break-even rate rises to about $197 per useful hour. The figures are calculation inputs, not current agency-rate comparisons.
Thorsten Meyer published a cost comparison on November 6 estimating when staff augmentation becomes more expensive than hiring a full-time developer, using public employer-cost and hiring data rather than agency price surveys. The analysis puts the cost of a median U.S. software developer at about $95 per hour actually worked, or roughly $98 after an assumed one-year recruiting cost, and says the break-even rate depends heavily on how much work the hire will have.
The calculation starts with U.S. Bureau of Labor Statistics figures. The median annual wage for software developers was $135,980 in May 2025. Meyer applies an employer-cost factor based on the BLS June 2026 data for management, professional and related occupations, then divides estimated annual employer cost by an estimated 1,830 hours actually worked. The result is about $95 an hour. It is Meyer’s calculation from published figures, not a BLS-published software developer hourly cost.
Meyer adds an average $5,475 cost per non-executive hire from SHRM’s 2025 benchmarking survey. Assuming the hire stays for a year, that increases the estimate by about $3 per hour worked, to roughly $98. SHRM’s median was $1,200; the survey covers roles generally, not software jobs alone. The article says the hiring cost has less effect on the estimate than whether the employee’s time is fully used.
For Germany, the analysis cites Destatis figures showing an average employer cost of €58.50 per hour worked in the information and communication sector in 2025, including holiday pay and employer social contributions. This is a sector average across IT and telecom jobs, not a developer-specific figure. Meyer says the article does not compare agency rates because he found no published rate survey with a clear methodology; readers can use the calculations alongside quotes they receive.
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 Break-Even Rate
The practical choice is not simply whether an outside hourly rate is higher than an employee’s salary converted to an hourly figure. Employers also pay benefits and other labor costs, while employees’ paid hours include leave and periods when there may not be enough project work. The relevant comparison is the cost per useful hour, including the risk of paying for unused capacity.
Meyer’s example makes that sensitivity clear: with work available for only half of a new hire’s hours, the estimated break-even rate rises from about $98 to about $197 per useful hour. That is an illustrative calculation, not a forecast for every company. Short projects, uncertain workloads or specialist needs may favor augmentation; sustained work that keeps an employee busy may favor hiring. The analysis also identifies retained expertise and institutional knowledge as reasons a company might keep work in-house even when a short-term cost comparison points elsewhere.
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How the Cost Estimates Were Built
The U.S. employer-cost figures cited by Meyer come from the BLS Employer Costs for Employee Compensation survey. In June 2026, private-industry employers paid an average $46.89 per hour worked, including $32.82 in wages and $14.07 in benefits. For management, professional and related occupations, the article cites $78.88 per hour worked, including $54.06 in wages. Meyer uses that broader occupational group’s cost relationship to estimate the employer load and hours worked for a median software developer.
For Germany, Destatis reported €29 in non-wage labor costs per €100 of gross pay in 2025. Its €58.50 hourly figure for information and communication is not directly identical in scope to the U.S. software developer estimate: one covers a whole sector, while the other is calculated for a particular occupation using a median wage and a broader occupational cost factor. The figures are useful starting points, but not a like-for-like ranking of national developer costs.
“A salary is not the cost.”
— Thorsten Meyer, ThorstenMeyerAI.com
Rates and AI Productivity Remain Unsettled
The analysis does not establish what staffing firms currently charge, or whether a particular quote is above or below the calculated break-even rate. Meyer says agency rates vary too widely and that he found no published survey with a clear methodology. Readers must supply their own quotes, expected project duration and utilization assumptions.
The figures also have limits: the U.S. estimate combines a software developer median wage with employer-cost data for a broader occupational group, while Germany’s number covers the information and communication sector. The assumptions behind actual utilization will vary by employer and project. Meyer also says evidence about how much coding agents increase developer speed remains unsettled; the article offers no measured productivity estimate for AI tools.
Apply the Formula to Your Quotes
The next step for a company considering either approach is to compare its own staffing quote with the relevant local employer-cost estimate, then account for hiring expenses, project duration and the share of a full-time role that would be productive. The article’s $98 figure assumes a one-year stay and the cited U.S. inputs; it should not be treated as a universal threshold.
For decisions involving Germany, employers would need to account for the difference between the cited sector average and the specific role and company. For both markets, the comparison may change as wages, benefits, hiring costs, project scope and AI practices change. Meyer’s figures are historical inputs from the cited periods, not guarantees of future costs or financial, tax or legal advice.
Key Questions
What is the estimated U.S. break-even rate?
Meyer estimates about $98 per hour actually worked after adding an assumed one-year hiring cost to the estimated employer cost of a median software developer. It is a calculation from cited public data, not a market rate.
Why does utilization change the comparison?
A full-time employee’s cost is incurred even when the employer does not have enough useful work for every hour. Meyer’s example raises the break-even rate to about $197 per useful hour at 50% utilization, compared with about $98 under the one-year hiring assumption.
What does the German €58.50 figure measure?
It is Destatis’s reported 2025 average employer cost per hour worked in Germany’s information and communication sector. It covers a range of IT and telecom jobs, not software developers alone.
Does the analysis say staff augmentation is always cheaper?
No. It says augmentation may suit short, uncertain or specialist work, while hiring may suit ongoing core work that keeps an employee busy or requires knowledge to remain in-house. The outcome depends on company-specific costs and workload.
Does the article include current agency rates or AI productivity gains?
No. Meyer says he found no published agency-rate survey with a clear methodology, so the analysis is intended to be used with quotes readers obtain themselves. It also says evidence on coding-agent productivity gains remains unsettled.
Source: ThorstenMeyerAI.com
