Total developer cost: in-house versus €45 per hour

€45 per hour versus €75,600 per year. The comparison takes ten seconds and leads to a conclusion that costs the company six months of delayed releases. Both figures are true – and both measure different things: one buys the volume of work done, the other buys a person who is paid for the weeks when no work was done. Below is a calculation that replaces those ten seconds with seven minutes and usually changes the decision.

• In Germany, the UK and Australia, an employer’s direct costs for a senior developer at actual utilisation are €48–68 per hour. This is not ‘salary divided by 2,080’, but specifically the employer’s costs divided by available engineering hours.

• In the US, even the most conservative possible calculation (annual salary plus federal payroll taxes, excluding healthcare and everything else) comes to €70–97 per hour.

• When management overheads and the expected cost of turnover are added to the same model, the ‘€57’ figure for Germany rises to €67–70.

• The hourly scenarios of 1,350 / 1,600 / 1,850 hours reflect how sensitive the model is to available hours, not a statement about officially contracted hours. The difference between the extreme scenarios amounts to a +37 per cent increase in the hourly cost without a single new salary being added.

• The same calculation has been applied to our rate. It can be found in the section ‘What lies behind €45 an hour’ – and in terms of rigour, it is on a par with the section on in-house staff.

We compare employer cost and cost per productive hour. This means the in-house side is deliberately underestimated: benefits, workspace and recruitment costs are not included in the numerator. This is fairer – and more interesting, because the argument stands up to scrutiny based on figures, rather than promises.

Exchange rates – ECB reference rates as of 02 October 2026: €1 = $1.1225, €1 = £0.85033, €1 = A$1.6176. Salaries and contributions are in national currency; employer cost and hourly rates are in euros, so that the four markets can be read in a single line.

Our rate for Shopify development services isn’t a single figure across four markets. A uniform €45 in Munich, Manchester, Austin and Melbourne would imply either inaccuracy or the truth about who is actually behind this rate. Rates by grade and team composition can be found on the pricing page.

According to the Federal Employment Agency's Entgeltatlas 2025, the median gross salary for software development roles classified as highly complex expert-level activities is €6,301 per month, or €75,612 per year.

According to Germany Trade & Invest, the employer's share of social security contributions is approximately 21% of gross wages. Applying this rate adds around €15,879 annually, bringing estimated employer costs to €91,491.

The calculation does not separately account for additional employment costs and risks. These include statutory notice periods, which begin at four weeks to the 15th or end of a calendar month and increase with tenure, as outlined by Germany Trade & Invest. Other considerations include U1/U2 employer levies and the statutory obligation to continue paying wages for up to six weeks during qualifying illness, as provided under Section 3 of the German Continued Remuneration Act.

According to IT Jobs Watch, the median advertised salary for Software Developer roles in the UK was £65,000 per year over the six months to 15 September 2026.

Under the UK government's Employer National Insurance rules, employers pay 15% on earnings exceeding the £5,000 annual secondary threshold from 6 April 2025: (£65,000 − £5,000) × 15% = £9,000.

In addition, the minimum employer pension contribution is 3% of qualifying earnings, calculated using the £6,240–£50,270 annual earnings band published by The Pensions Regulator. This adds approximately £1,321, bringing the estimated annual employer cost to £75,321 before other employment expenses.

According to the BLS Occupational Employment and Wage Statistics, the median annual wage for Software Developers is $135,980 (data from May 2025). The employer’s federal contribution: 6.2 per cent Social Security on a wage base of $184,500 in 2026 – as the median wage is below the base, the full 6.2 per cent is payable – plus 1.45 per cent Medicare: $135,980 × 7.65% = $10,402, totalling $146,382 ≈ €130,408. 

Here we have made the most conservative assumption in the entire article: no health insurance, no retirement contributions, no paid leave, and no state unemployment insurance. We have underestimated the US figures – and this works against our own argument. A typical ‘fully-loaded’ salary in the US is closer to $175–200k, i.e. €97–111 per hour at 1,600 hours.

Jobs and Skills Australia: median full-time earnings for Software and Applications Programmers – A$2,537 per week, A$131,924 per year. Superannuation Guarantee – 12% from 1 July 2025, remaining at 12% in 2026–27: A$15,831. Plus an annual leave loading of 17.5 per cent for four weeks’ holiday: A$1,776. Total ≈ A$149,531 ≈ €92,440. 

A disclaimer is essential: the JSA states that ANZSCO-based earnings data is no longer updated. This is the latest published official benchmark, not a recent salary survey – and we are stating this just as honestly as we would state our own.

2,080 calendar hours do not equal 2,080 hours of engineering capacity. Leave, public holidays, sick leave, internal meetings, training, onboarding and waiting for a response from a related team are all deducted from the annual total. How many hours remain depends on the company, and we do not know your specific figure; therefore, these are sensitivity scenarios rather than productivity statistics.

The sensitivity here is striking. For Germany: €91,490 divided by 1,850 available hours equals €49. Divided by 1,350, it equals €68. A 37 per cent difference appears out of nowhere: the same team, the same salary, the same code, but a different denominator. 

This is precisely why you cannot divide an annual salary by calendar hours and place it alongside an hourly rate. One figure describes the cost of a person; the other, the cost of output. In between lie your holiday, your onboarding and those three weeks when the release was waiting for a response.

Your CFO will apply the same rigour to us as they do to a permanent employee. Let’s apply it ourselves, sooner and more forcefully.

Rate = (fully-loaded cost of a specialist + QA, code review and DevOps + bench time and downtime + administrative and commercial costs + risk premium for guaranteed replacement) ÷ billable hours

This adds up to a range of €45–58. €45 – a senior developer from the nearshore core with a tight overlap in working hours and full QA coverage. €58 – a local Western European specialist: fully-loaded €68,000 ÷ 1,498 = €45.4 net cost, +18% for QA and review, + bench and administration at the lower end of the range. The breakdown of figures here isn’t just for marketing purposes: if you don’t factor bench time and guaranteed replacement into the rate, there’ll be no one to pay for them in the month when your developer is replaced.

Two things are not included in this rate – nor in any honest agency rate: downtime caused on your side (waiting for access, design or a response from a related team – these hours are not billable); and scope that we have explicitly estimated at a fixed price (the contingency is factored into the estimate, not the hourly rate). And one thing you can request at any time: the team composition and QA coverage for each release. Do ask. It’s the only way to check that there’s no magic in the section above.

By hiring directly, a company gains control – and takes on the risk itself. An agency does not eliminate the risk: it assumes part of it, if the contract so provides, and the cost of this transfer is included in the rate. We have not encountered a third option.

The expected cost of losing an employee – the calculation we run for every recruitment project. Employer cost €91,490, 15 per cent probability of turnover per year (the typical range for senior roles in the EU is 12–20 per cent), replacement cost of 20 per cent of employer cost, ten weeks of unfilled capacity, six weeks of rework during the handover:

Management overhead – the second line item that doesn’t appear in any salary benchmark. Four hours of a team lead’s time per week per developer – 200 hours a year; at €70 per team-lead hour, that’s €14,000, or €8.75 on top of every hour of development.Plus the cost of the workspace, licences, infrastructure and recruitment itself, which we’ve deliberately not factored into this article.

Total for Germany: €57 (employer cost) + €3.92 (risk) + €8.75 (management) = €69.7 per hour. That’s before you factor in the workspace, licences and the month you’ll spend on the search. This isn’t an argument against hiring. It’s an argument against the ‘€57 vs €45’ comparison, which is based on different denominators.

A rate of $28 per hour competes with €45 not on the basis of the rate itself, but on the number of iterations. The cost of a function is the rate × hours, and hours are part of the price. Let’s look at four ways to complete the same volume of work: 1,600 hours of senior-level work over six months, in Germany.

Row D is the honest part. It does not say that low-cost markets do not work; it says that the rate is not a valid comparison until hours are applied to it. A nearshore team with domain expertise and a close overlap in hours completes the same volume with the same 1,600 hours, and then the maths is clearly in their favour – this, incidentally, is precisely the model behind our eCommerce development services. It only works the other way round where an hour costs less but the work takes longer: you end up paying for the difference twice, the second time in the form of a delayed release.

• United Kingdom: IR35 and off-payroll working. If the company dictates how the contractor works, payment is made via PAYE – the rate is no longer cheaper than that of an employee, and you’ve gained neither flexibility nor the ability to replace them.

• Germany: Scheinselbständigkeit. Long-term staff augmentation by a single person, following your processes and your instructions, is subject to tests for Weisungsbindung, Eingliederung and multiple clients. Fail the test, and you’ll face back payments of contributions for previous years, interest and a fine.

• Australia: Labour hire and Same Job, Same Pay. Since November 2024, labour hire workers covered by a Fair Work Commission order must be paid at least what the client pays its own employees. The difference compared to a ‘platform-based’ rate may turn out to be precisely the jurisdictional difference that the client will ultimately have to pay for.

• USA: Worker classification and multi-state payroll. The ABC test in certain states, state unemployment insurance, and obligations in each state where your contractor resides.

• For all markets at once: AI transparency and data. The EU AI Act, NYC Local Law 144 and similar legislation. Who is responsible for what and how your repository and your data are processed must be set out in the contract, not in Slack messages.

None of these points precludes outsourcing or hiring. They mean one thing: the legal framework is checked before signing, not after receiving a letter from the tax authority. We carry out this check before the start of every contract-to-hire or IT staff augmentation contract – and we’re ready to show you what it looks like before you sign.

We know how a paragraph that tries too hard to sell itself sounds, so let’s write the opposite. If you need one person working at 100 per cent capacity for several years, with in-depth expertise in internal processes and legacy systems that no outsider could get to grips with in a month – hire them directly. 

The work is ongoing, domain knowledge is critical, and capacity will be fully utilised: in this scenario, the economics of employment are more favourable, because you bear the risk yourself and aren’t paying anyone to transfer it. We say this ourselves during calls, and some calls end right there – which, oddly enough, pays off.

An agency comes into its own when you’re not buying a role, but the ability to get the job done: you need it done in six to ten weeks; you need a Shopify expert for a specific stage; you need four areas of expertise instead of hiring four people; you need a guaranteed replacement; the workload varies from quarter to quarter; and you don’t want to turn every project into a separate recruitment cycle.

1. Use ‘employer cost’ rather than ‘gross salary’;

2. Divide by the number of hours actually available, not by 2,080;

3. Add management overhead and the expected cost of turnover – in euros, not in estimates;

4. When dealing with an agency rate, ask about utilisation and the breakdown of the hour, not just the price;

5. Carry out a jurisdiction test (IR35, Scheinselbständigkeit, labour hire) before signing;

6. Calculate the ‘what-if’ scenario: how much would a month cost without this person.

A proper comparison looks like this: fully-loaded employment cost + productive capacity + risk ⟷ contracted capacity + transferred risk + the cost of that transfer. Everything else is just two figures and an assumption.

A company almost never buys a developer. It buys the ability to build something. With in-house staff, you get the person – along with the taxes, holiday entitlement, recruitment, management, notice period and the risk of losing them. With an agency, part of that risk is transferred to the supplier, if the contract so provides – and you pay for that transfer separately, simply as a different line item on the P&L.

Therefore, €45 an hour is neither ‘cheaper than a salary’ nor ‘more expensive than a salary’. It’s a different cost structure: purchasing the required volume rather than hiring a full-time role.

The most expensive developer isn’t the one with the highest salary. It’s the one the company continues to pay for months on end, even after the required volume of work has dried up.

And sometimes the most sensible decision is to take someone on as a permanent employee. Because you’ll need that capacity for the next five years and you have no intention of losing it. We have these sorts of discussions too: in thirty minutes, we’ll plug your workload, your rates and your team composition into this very model and show you the calculation. Even if the conclusion is ‘hire’, you’ll have the matter settled and can get back to your product.

→ Calculate your capacity: 30 minutes, your model, no presentation