🔍 Read the full analysis: The Break-Even Rate For Choosing IT Staff Augmentation Or Full-Time Hiring on ThorstenMeyerAI.com
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TL;DR
A Nov. 6 analysis by Thorsten Meyer calculates the hourly cost of employing a developer and a break-even rate for comparing that cost with staff augmentation. Its US example reaches about $98 per hour after an estimated hiring cost, but the threshold rises to about $197 when a hire is needed for only half of available work hours.
Thorsten Meyer published an analysis Nov. 6 calculating the hourly cost of employing a developer and the rate at which staff augmentation becomes more expensive than hiring. Using public labor-cost figures, the analysis estimates about $98 per hour as a US break-even point under its assumptions, while a hire needed for only half of available work time raises that figure to about $197 per useful hour.
Meyer’s calculation starts with Bureau of Labor Statistics data. The median US software developer wage was $135,980 a year in May 2025. Meyer applies employer cost data to estimate annual employment costs of roughly $175,000 and divides that by about 1,830 hours actually worked, producing an estimated $95 per hour worked. These are his calculations from published figures, not a reported market rate for contractors.
The analysis adds an estimated $5,475 cost per hire, based on SHRM’s 2025 average for non-executive roles. Assuming the employee stays for one year, Meyer says this adds about $3 per hour, taking the estimate to roughly $98. Spread over three years, the hiring cost contributes less per hour, and the estimate is about $96. SHRM’s reported median cost per hire was $1,200; the average is higher because some hires are much more expensive.
For Germany, Meyer cites Destatis data showing an average employer cost of €58.50 per hour worked in the information and communication sector in 2025. That figure covers the broader sector, not developers alone. The article’s central comparison is a formula: adjust the cost of a hire for the share of available work hours that will be productively used, then compare it with an outside specialist’s quoted rate.
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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How Utilisation Changes the Threshold
The calculation’s main practical finding is that utilisation matters more than recruiting fees. If an employee has enough work to use all available hours, the US example’s break-even rate is about $98 per hour after the estimated hiring expense. If the organization has real work for only half those hours, the cost per useful hour roughly doubles, and the break-even point rises to about $197 an hour.
That makes the comparison relevant to teams deciding between a permanent role and a time-limited specialist. Augmentation may be less costly when demand is uncertain, short-lived or requires a skill the team needs only temporarily. A full-time hire can make more financial sense when work is steady and the employee can remain productive. The analysis also identifies knowledge retention as a reason to hire, even where a contractor’s rate appears competitive.
The figures are decision aids, not universal price ceilings. An organization’s wage, benefits, recruiting costs, location, workload and contractor quote can differ substantially from the examples. Readers need to substitute their own inputs before treating a threshold as applicable to a specific role.
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The Labor-Cost Inputs Behind the Estimate
The US estimate uses BLS employer-cost figures for the broad occupational group “management, professional, and related.” For June 2026, the group’s employer cost was $78.88 per hour worked, including wages and benefits. Meyer derives a roughly 1.28 cost factor from that data and estimates about 1,830 hours worked annually after accounting for paid leave. He applies the factor to the developer median wage from May 2025. The wage and employer-cost inputs come from different periods and describe different measures, a limitation readers should keep in mind.
In Germany, Destatis reported that employers paid €29 in non-wage labor costs per €100 of gross earnings in 2025. The €58.50 hourly figure is for information and communication overall and includes employer costs such as holiday pay and social contributions. It is not a developer-specific wage figure. Meyer says he found no published staff-augmentation rate survey with a clear methodology, so the article provides a repeatable calculation rather than a claimed market average.
The analysis also addresses AI as a factor that may change the inputs, rather than the calculation itself. Meyer says evidence about how much coding agents increase developer productivity remains unsettled. In his assessment, AI may create more short-term specialist projects while also increasing the value some organizations place on retaining technical knowledge internally.
“The assumption that matters most is how much of that time you really need.”
— Thorsten Meyer, describing the calculation
What the Published Figures Cannot Settle
The break-even estimates depend on assumptions, including the employee’s pay, length of employment, annual hours actually worked and share of time spent on useful work. A company’s benefits, recruiting expenses and workload may not match the averages used. The $98 US figure is an estimate, not a quoted contractor rate or a universal threshold.
The data also do not provide a like-for-like comparison across countries or roles: the US example combines a developer wage with broader professional-group employer-cost data, while Germany’s hourly cost covers all jobs in information and communication. The analysis does not establish what a particular augmentation provider charges. The size of any AI-related productivity gain is also unresolved, according to Meyer.
Apply the Formula to Local Quotes
The next step for employers is to calculate their own fully loaded employment cost, estimate realistic hours of productive work, include recruiting expenses over the expected tenure, and compare the resulting hourly threshold with actual augmentation quotes. The result can change if the role is difficult to fill, the workload is intermittent, or the employee’s knowledge needs to remain inside the organization.
No follow-up data or additional milestone was announced in the source material. The analysis presents its figures as a method readers can update when their costs, workload assumptions or vendor quotes change. Meyer cautions that it is not legal, tax or financial advice.
Key Questions
What does break-even rate mean here?
It is the estimated highest hourly rate for an outside specialist before the cost of hiring an employee becomes lower, given the assumptions entered into the calculation.
Why does a half-utilized hire have a higher threshold?
If a new employee is needed for only half of available work hours, the employer still carries the cost of the full-time role. The analysis says the US example’s break-even rate rises from about $98 to about $197 per useful hour.
Are the US and Germany figures directly comparable?
Not exactly. The US estimate uses a software developer’s median wage and broader professional-group employer-cost data. Germany’s €58.50 per hour is an average across the information and communication sector, not a developer-only figure.
Does the analysis establish typical staff-augmentation rates?
No. Meyer says the article does not provide market rates because he did not find a published rate survey with a clear method. The calculation is designed to be compared with quotes an employer obtains.
Source: ThorstenMeyerAI.com
