How Much Does it Cost to Hire a Software Developer: Everything You Should Know in 2023
Are you a startup founder, tech entrepreneur, or corporate executive looking to hire a software developer? Then read this guide on the cost of hiring a software developer in 2023.
We’ll talk about the following here:
- Cost of hiring a software developer,
- Factors that impact the cost of hiring software developers,
- The pricing structure of software developers,
- And more,
If you prefer a visual text experience, go straight to the bonus infographic “How much does it cost to hire a software developer?”
Let’s dive into the crux of this article.
How Much Does it Cost to Hire a Software Developer?
The average salary of a full-time software developer in the U.S. ranges from $94,000 to $120,000 yearly.
The exact cost you’ll be billed by your developer often depends on a number of factors.
There are generic costing methods and developer-specific considerations that influence the overall price. However, we won’t focus on all costing methods here, but only the most common ones. These include:
- The type of software,
- The developer’s tech stack,
- The experience of the developer involved,
- The developer’s country of residence,
- The type of team you’re hiring,
- The cooperation model between both parties.
Let’s dissect what each of these entails.
Cost Defined by the Type of Software
The type of software you’re trying to create is the most significant cost-influencing factor. There are different types of software, with the most common being websites and mobile apps.
Due to the varying technicalities involved in creating them, developers’ prices differ.
Below is a table showing the hourly rate for different types of software development. This price is the average estimate for developers in the United States.
|Type of development||Cost, $ /hour|
Applications require mobile app development activities, while websites require input from frontend, and backend developers. Alternatively, you can hire a full-stack developer to handle all web app creation processes.
Another fact that influences software cost is tech stacks. Let’s delve into that.
Cost Defined by Technology
By Technology, we mean the combination of programming languages, tools, and frameworks that the developer requires to create the website or mobile app.
Some technologies require more wits than others, invariably affecting the time and cost of the app.
Here’s a spreadsheet depicting how technology affects software cost:
|Software||Tech stack||Cost, $ (Hourly)|
|Backend: Node.js, Laravel, Django, Python, Ruby on Rails.||150|
|Mobile applications||Cross-platform app: React Native, Flutter, and Xamarin.||150|
|Native app: Swift (iOS), Objective-c, Java, and Kotlin (Android).||140|
Prices here differ according to their capabilities, features, and resilience. Besides, developers with specialized skills like Splunk, Blockchain, DevSecOps, etc charge higher fees due to language difficulty.
Experience is another factor that influences the average cost of onboarding software developers. Let’s help you understand how this works.
Cost Defined by Experience
Developers can be divided via experience into senior, middle, and junior programmers.
Below is the cost estimate of hiring per experience:
|Seniority||Cost, $ (Yearly)|
Another important factor to consider is the developer’s country of residence. We’ll consider this next.
Cost Defined by Location
The developer’s location affects the cost of hiring software experts. For example, the cost of hiring senior software developers in the USA is 200,000, while the same position costs 70,000 in Eastern Europe.
This is primarily because of the difference in the cost of living in both countries.
Below is a spreadsheet depicting the payscale of software programmers per country.
|Country||Annual salary, $|
Now that you know how location affects hiring costs, let’s consider another cost-defining factor.
Cost Defined by the Type of Team
Let’s take at the cost of hiring software developers as it relates to different team types. In the table below is a comparison of the cost of the mobile app of average complexity:
|Type of Team||Cost, $|
|The local development company, the US||250,000|
|Freelance, the US||120,000|
Does each team type seem confusing? Let’s help you make some facts about them.
- Local Development Company
Local development companies are software agencies located within your startup’s geographical location. This option can be an expensive one for startups located in high-income countries like the United States.
Freelance software developers are independent programmers that are not full-time employees of any organization. They accept contracts on a per-project basis and help build software according to given stipulations.
- Outsourced Agency
The outsourced agency is an offshore-based development company that renders software creation and maintenance services to investment-backed startups and well-funded companies.
Cost Defined by Cooperation Model
Cost is also determined by your chosen cooperation model.
When it comes to software development, the most common cooperations models are outstaffing and outsourcing. Each differs significantly with its engagement model, each with its cost implications.
Here’s a table depicting the cost implication of each model:
|Cooperation Model||Cost, $|
|Outstaffing (Ukraine)||40,000 $|
|Outsourcing (Ukraine)||60,000 $|
Confused by what both terminologies entail? Let’s help you make sense of them.
- Outstaffing vs Outsourcing
|Outstaffing entails temporarily hiring a software developer from an outsourcing agency to help create a specific solution. |
The outsourcing agency still remains the employer and is responsible for the developer’s salary.
While the startup only provides the developer with tasks.
|Outsourcing entails an agreement whereby the startup contracts its entire project to an agency. |
In this instance, the startup is responsible for all aspects of development.
From UI/UX design to coding, testing, and launch.
Now that you’re conversant with the different ways of costing custom software development, let’s discuss factors that might influence the cost.
What Factors Impact the Hiring Price of a Software Developer?
Some factors can affect what you’re billed by the software developer. These factors affect price irrespective of your location and type of developers. These factors include:
- The complexity of the software project,
- The technology required to develop the product,
- The number and level of developers required to create the solution.
We’ll discuss each of these factors, and help you understand how they affect overall development cost.
Factor 1. The Level of Complexity of the Software to be Created.
By complexity, we mean the features, number of roles, integrations, unique screens, and functionalities that should be in the software. Every character of the software affects its complexity.
As such, software with fewer features and characters is often less complex than those with fewer. Except in a situation where the fewer features are sophisticated ones like AI or blockchain.
Before determining the complexity of a solution, the software developer will first identify:
- The number of object types that need to be managed in the cloud,
- Experience level required,
- The number of external APIs,
- The type of technology required to create the solution,
- The skill set required,
- Licenses and certifications are required.
Let’s discuss the different types of complexity to help you understand better.
Software with basic complexity is often those that pass information to viewers and sometimes gets very little information back. Generally, these are websites with homepages, a blog, and a number of informational pages.
An app in this category is Blogger. Blogger is basically an open-source platform that lets users open blogs.
Softwares of average complexity have multiple basic, and a few sophisticated functionalities.
For example, spdload.com is an example of software with average complexity, as it has a homepage, pages for case studies, and a uniquely built on-site calculator.
Highly complex software requires robust design, multiple functionalities, and in-depth knowledge of the high infrastructures. An example of an app in this category is Duolingo.
This app is complex because of its highly advanced AI features, voice recognition, and chatbots.
Another factor to consider is the tech stack you’d need to create the solution.
Factor 2. The Tech Stack Required
The technology required to launch and scale a software affects its cost.
Although different tech stacks have their individual benefits, they significantly have price differences. The best tech stack to use determines the business requirement.
Java for example is cheaper than Golang as a backend language, largely due to the scarcity of the latter’s programmer.
Factor 3. The Seniority of Developers Hired
The seniority of developers hired affects software development. Software engineers can be divided into three categories, depending on their skill and experience. They are junior, middle, and senior software programmers.
These are developers with a minimal skill set, little experience in a few programming languages, and 0-1 year of programming experience. Due to their common knowledge, they’re the cheapest type of developer to hire.
Here are the pros and cons of hiring junior developers:
| || |
Mid-level developers are programmers with the ability to independently solve problems. They’re familiar with standard templates, have 1-3 years of programming experience, and can create applications in their development.
Here are the pros and cons of hiring middle developers:
| || |
- Senior Developers
These are developers with over 3 years of experience in software engineering. Their expertise is crucial to developing complex solutions and always provides direction to junior developers.
Here are the pros and cons of hiring software developers:
| || |
Beyond these factors, we’ll also discuss software development pricing structures.
Hidden Costs in Software Development Cooperation Model
To know the overall software development cost, you’ll need to consider some hidden factors. Here, we’ll discuss the hiding cost in each software development cooperation model.
Since this process entails entrusting another software development company to handle your entire creation process, there isn’t much additional cost.
The extra software outsourcing cost you’ll incur depends on the size of your startup and the stipulations of your contract. The only generic extra cost here is legal support. Details about legal support costs have been covered below.
Companies in the US enjoy VAT exemption on outsourced roles. For startups in the E.U., the European Court of Justice recently ruled that VAT should be collected for outsourced services.
This means outsourcing to Europe attracts an additional cost of 17.5% of the overall fee.
Beyond outsourcing, outstaffing also has some hidden costs to consider. Let’s discuss each of them in detail.
For example, if you would like to hire an engineer via an outsourcing company, there are many hidden costs to consider. These include:
|Human Resource||The cost of human resources for an out staff new hire in the US is estimated to be about $20,000. This cost covers interviews, coding practice, and verification of legal details. |
This cost also ensures that the recruiter is properly onboarded to the company. It makes sure the company has a high retention rate for top talents.
|Legal Support||An average contract drafting for outstaffing costs between $200 and $500 for a simple contract. |
A complex contract on the other hand ranges between $1000 and $5,000 for a complex contract.
|Equipment||In the case of in-house outstaffing, hardware like computers, routers, and monitors has to be provided. The cost of purchasing a high-powered Linux box and two 30” screens is $4,000. |
There’s also a cost attached to renting an office space if there isn’t one already available.
If you want to avoid hidden costs attached to outstaffing then a more suitable alternative is outsourcing. Use our outstaff calculator for a proper cost estimate.
Now that you’re aware of the overall cost needed for the hiring process, and maintenance of the development team.
What factors should you consider before choosing one?
How to Choose a Preferred Developer
It’s impossible to create a desired solution without choosing the most ideal developer. To help understand how to choose a preferred developer, we’ll discuss some factors to consider.
Factors to be considered before choosing a developer include:
|The complexity of the Software||Complex products require complex solutions. However, only top-notch senior developers can create a highly sophisticated solution that is scalable, predictable, and stable. |
Thus, only hire experienced developers when you’re solving a rare problem.
And since great talents are expensive to retain. To create great and unique solutions, you should make competitive offers.
This won’t just help you retain their commitment to your startup.
|The product’s UI/UX design||This is attributed to full-stack and front-end designers. |
Although there are some basic features of designs that are easily implementable.
Ensure the front-end programmer you’re hiring has experience implementing the design in your preferred tech stack.
|Specific technology demand||Another factor to consider is the programming language and framework suiting for your project requirement. |
For example, if you’re creating a blockchain-based solution, then you need a developer with expertise in Solidity or Rust programming language.
Also, if you want to host your solution on the cloud, then you need a programmer with knowledge of this. Preferably a DevOps expert.
As we’ve mentioned in subsequent headings, developers with specialized skills are always pricier.
|Preferred communication model||According to a report by Accenture, communication is very important to proper cooperation. |
Software developers and development companies have their preferred communication models. Thus you should ensure to hire a developer that fits into the engagement needs.
For example, startups operating in the US should opt for a developer with great knowledge of the English language.
Beyond language, time-zone differences are another factor to consider.
This is a serious challenge in web and app development agency partnerships with startups in another continent.
For example, cooperation between startups in the US and India. However, you can manage the negative effects of the time-zone disparity.
Consult your development team for a workaround solution.
|Your business model||Your app or web developer partner should understand the intricacies of your development project. |
Your development partner should understand challenges in the features you want to develop, advise that you focus on a technical perspective, and help make your app scalable.
To ensure that your business model is considered in development. It’s either you hire in-house tech advisors or business analysts.
An alternative is partnering with a company with one of those.
Now that you have good knowledge of the price tag of hiring a software developer, there’s more.
Want to Learn More about Hiring a Dedicated Development Team?
Knowing the cost of hiring a software developer does not guarantee a great product. You should be aware of your option, one of which is a dedicated development team.
Read this article on how to hire a dedicated development team to know what it entails, and how your startup can benefit from it.
Here’s a summary of our detailed guide. Find out what the main factors will affect the cost of hiring a software developer.