In-house vs outsourcing cost calculator
Hire a software engineer or work with a contractor? Compare the full cost of both on your own numbers: salary and employer costs, time to hire, months to full speed, idle time, and the contractor's rate, onboarding and your management time. Free, no sign-up.
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Why "salary vs hourly rate" is the wrong comparison
The usual comparison divides a salary by 2,080 hours and puts it next to a contractor's rate. That leaves out most of what an employee costs: employer taxes and benefits, the weeks it takes to hire, the months before a new engineer is fully productive, and the time they are paid for but have no project work. It also leaves out what a contractor costs beyond the rate: your time managing them, onboarding and any platform fee.
This calculator counts all of it month by month, and compares the cost per hour of work actually done. The answer usually comes down to how much work you really have and for how long, so it also shows where the balance tips.
How the comparison works
- The same work on both sides. You enter how many hours of engineering work you need a month. Both options are measured against it.
- In-house, month by month. No salary until the hire starts; then salary, employer costs and equipment every month, a one-time hiring cost, and productivity that grows from zero to full over the ramp-up period. Work that cannot be done yet waits and is caught up later, if there is spare capacity.
- Contractor, month by month. A few weeks to start, onboarding hours billed once, then the hours you need at their rate plus any platform fee. Work that waited for the start is caught up within a month. Your management time is counted on both sides.
- The verdict. Total cost divided by the hours of work done. Within 5% is reported as a tie, because the assumptions are not more precise than that. You also see how many hours a month make hiring worthwhile, and after how many months.
Where the default numbers come from
- US salary, $135,000: the median annual wage for software developers was $135,980 in May 2025 (BLS Occupational Outlook Handbook).
- US employer costs, 31%: in private-industry professional jobs, benefits are $22.71 an hour on top of $50.98 in wages (BLS ECEC, June 2026). Leaving out paid leave ($6.78), which is already in the salary, gives 31%.
- Germany employer costs, 21%: the employer's share of statutory pension, unemployment, health and long-term care insurance in 2026, up to the contribution ceilings (€69,750 a year for health and care, €101,400 for pension and unemployment). Above the ceilings the real share is lower; accident insurance and small levies add a little.
- Germany salary, €65,000: a typical gross salary for a software developer in Germany according to published salary surveys. Enter what you would actually pay.
- Time to hire, 6 weeks: median time to fill a non-executive role is 39 days, measured to an accepted offer, so a notice period comes on top (SHRM recruiting benchmarking, 2026).
- Time to full speed, 4 months: new technical hires take about 4.8 months to reach full productivity on average (Linux Foundation, 2024).
- Our assumptions, no single source: 80 hours of work a month and a 12-month period as a starting example, hiring cost 20% of salary, equipment and software 3,000 a year, 85% of paid time on project work, 4 and 8 hours a month of your management time (valued at the engineer's hourly cost), 2 weeks for a contractor to start, 16 onboarding hours. Change any of them.
- Two simplifications that favour the contractor: their ramp-up is only the onboarding hours, while an employee ramps up over months; and once started, a contractor catches up on any waiting work within a month. Raise the onboarding hours if you expect more.
- Contractor rate, 85 an hour: the middle of our own rate ($60–110), in either currency. With a US salary this compares a US hire with our rate; for a local agency, enter their quote.
FAQ
Is it cheaper to hire a developer or to outsource?
It depends on three things: how many hours of work you really have each month, for how long, and how an employee's full cost per productive hour compares with the contractor's rate. An employee costs the same whether there is work or not, and needs weeks to hire and months to get up to speed. A contractor bills only the hours worked. Part-time or short-term work favours a contractor; hiring pays off only with steady work over a longer period and a full salary cost per productive hour below the contractor's rate. In a high-salary market that may never happen. The calculator shows where the line is for your numbers.
How much does an employee cost on top of salary?
In the US, private-sector employers in professional jobs pay about 45% on top of wages in benefits, according to the BLS Employer Costs for Employee Compensation survey; about 31% if you leave out paid leave, which is already part of the salary. In Germany the employer's share of social security is about 21% of gross pay, up to the contribution ceilings.
How long does it take to hire and onboard a software engineer?
SHRM's 2026 recruiting benchmarking puts the median time to fill a non-executive role at 39 days. Getting to full productivity takes longer: in the Linux Foundation's 2024 State of Tech Talent report, organisations said new technical hires need about 4.8 months on average. The calculator uses 6 weeks and 4 months; change them to match your experience.
Why does the calculator compare cost per hour of work?
Because the totals alone can mislead. While you are still hiring, an in-house option looks cheap simply because nothing is being paid and nothing is being done. Dividing by the hours of work actually delivered puts both options on the same footing.
What does the calculator leave out?
Attrition and rehiring, equity, office space beyond the equipment budget, and harder-to-price things: knowledge that stays in the company with an employee, or the flexibility to scale a contractor up and down. Treat the result as one input to the decision, not the decision.
You are a contractor. Is this biased towards outsourcing?
Judge for yourself: every default has a source or is marked as our assumption on this page, and you can change all of them. The contractor side includes your management time, onboarding hours and any platform fee; the in-house side includes hiring, ramp-up and idle time. Two simplifications favour the contractor: onboarding is a fixed number of hours, and after starting the contractor catches up on waiting work within a month. The default rate is ours, and pairing it with a US salary is what makes outsourcing win in the US preset; enter a local agency's quote to compare like with like.
Is my data stored anywhere?
No. The calculator runs in your browser and keeps your numbers in its local storage. The only exceptions are a share link you create, which contains the numbers, and the optional message you send us.
Need a backend built, not a hire?
This tool is made by ISTRALLEN. We build backends from scratch, payment and API integrations, fix problems in existing systems and set up deployment. You pay for the hours of work, with no hiring and a short onboarding.