🔍 Read the full analysis: How The Cost Break-Even Point Guides IT Staffing Decisions on ThorstenMeyerAI.com
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TL;DR
A November 6, 2026, analysis from ThorstenMeyerAI.com offers a repeatable method for comparing the cost of hiring a developer with staff augmentation. Its calculations put a median US software developer at about $95 per hour actually worked before recruiting costs, and show that low utilisation can roughly double the hiring break-even rate. The figures are estimates based on public data, not a comparison with published contractor rates.
Thorsten Meyer published a calculation on November 6 for estimating when hiring a full-time developer costs less than using an outside specialist, using public employer-cost data rather than vendor rate comparisons. The analysis estimates a median US software developer costs employers about $95 per hour actually worked before recruiting expenses, and says the hiring break-even rate depends heavily on how much of the employee’s time is usefully occupied.
The analysis draws on US Bureau of Labor Statistics figures and Germany’s Destatis data. For the United States, it combines a $135,980 median software developer wage in May 2025 with employer cost and paid-leave assumptions from BLS data for June 2026. Meyer estimates total annual employment cost at about $175,000, divided by roughly 1,830 hours worked annually, for an estimated $95 per working hour. This is Meyer’s calculation, not a BLS-published software-developer hourly cost.
For Germany, Destatis reports an average employer cost of €58.50 per hour worked in the information and communication sector in 2025. That sector figure covers different jobs across IT and telecommunications, not developers alone, so it is not a like-for-like match with the US occupational median. Destatis also reported €29 in non-wage labour costs for every €100 of gross earnings in 2025.
Meyer applies SHRM’s 2025 average cost-per-hire estimate of $5,475 for non-executive roles to the US calculation. Assuming a one-year stay, he estimates recruiting adds about $3 per hour, bringing the rate to roughly $98; over three years, the estimate is about $96. SHRM’s figure covers all non-executive roles, not just technology hires, and its reported median was $1,200.
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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Utilisation Sets the Hiring Threshold
The calculation’s main practical finding is that the employee’s productive workload can matter more than recruiting fees. A salary and employment costs continue even when a company has less work than the employee’s available hours. If only half of those hours are needed for productive work, Meyer’s example says the effective cost per useful hour doubles, moving the estimated break-even rate from about $98 to about $197 an hour.
That changes how staffing choices should be assessed. Short assignments, uncertain demand or narrowly defined specialist work may suit augmentation if a company can buy only the expertise and time it needs. A continuing role with steady work may favor hiring, particularly when the organisation needs to retain internal knowledge. These are decision-making implications of the model, not a finding that one staffing approach always costs less.
The article does not establish whether outside specialists are cheaper overall: it gives no agency or contractor rates. Instead, it supplies an estimated employee-cost threshold that readers can compare with actual proposals. The result is useful only when the wage, benefits, hiring costs, expected tenure and realistic workload fit the organisation’s own circumstances.
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Public Data Behind the Estimate
Meyer says provider rates vary too widely for a meaningful comparison and that he found no published rate survey with a clear methodology. The analysis therefore focuses on the cost side of employing staff and asks readers to compare that estimate with quotes they receive. Its inputs combine statistics collected for different purposes and dates: the US wage figure is from May 2025, the BLS employer-cost data from June 2026, and the German sector measure from 2025.
The US calculation uses BLS employer cost figures for the broad occupational group “management, professional, and related” to estimate the load above wages and paid leave. Meyer applies a factor of about 1.28 to the software developer median wage, then estimates roughly 1,830 hours actually worked from 2,080 paid hours. The German hourly figure already includes holiday pay and employer social contributions, according to the source analysis, but its sector-wide coverage differs from the US occupation-specific wage input.
Hiring expenses are a smaller adjustment in the example. SHRM’s survey included 2,371 member organisations and reported an average of $5,475 per non-executive hire. Meyer notes that a higher average than median reflects some expensive hires. His one- and three-year comparisons are assumptions about employee tenure, rather than forecasts of how long workers will stay.
““Staff augmentation is cheaper than hiring.” You hear it in every pitch deck. Sometimes it is true. Often it is not.”
— Thorsten Meyer, ThorstenMeyerAI.com
Inputs Still Depend on Each Employer
The figures are estimates, not a universal break-even price. Meyer’s US calculation applies employer-cost data for a broad professional group to a software developer wage, while the German comparison is a sector average covering multiple occupations. Local benefits, payroll taxes, compensation, location, seniority and actual hours worked can all change the result.
The analysis does not provide contractor or agency rates, so it cannot show which option is cheaper for a particular company without current quotes and internal cost data. Its $5,475 recruiting-cost input is an average across non-executive roles, not a technology-specific figure. The source also says evidence about how much coding agents increase developer productivity remains unsettled; it does not quantify an AI-related adjustment to the hourly estimates.
Compare the Model With Real Quotes
The next step for an employer applying the method is to replace the illustrative inputs with its own wage, benefit, recruiting, tenure and workload assumptions, then compare the resulting hourly threshold with proposals from outside specialists. The source presents no scheduled follow-up or new dataset. Its stated approach is a repeatable calculation using public figures and the quotes available to each organisation.
Any future update to the estimate would depend on newer wage and employer-cost statistics, better technology-specific recruiting benchmarks, or measured evidence about AI’s effects on developer output. Until those inputs are available, the analysis treats AI as a factor that may alter the assumptions, not as a proven productivity multiplier.
Key Questions
What does the break-even rate mean?
It is the highest hourly price for an outside specialist at which hiring is estimated to be cheaper under the model’s assumptions. The threshold changes with employment costs, recruiting expenses, tenure and how much of the employee’s time is used.
How much does the analysis estimate a US developer costs per hour?
Meyer estimates about $95 per hour actually worked for a median-wage software developer, before recruiting costs. Adding the assumed one-year recruiting cost brings the estimate to about $98. These are calculations based on public figures, not a published BLS hourly wage for developers.
Why does utilisation change the result?
Employment costs are incurred even when the employee has no productive assignment. In Meyer’s example, using only half of a new hire’s available time doubles the cost per useful hour and raises the estimated break-even rate from about $98 to $197.
Does the analysis prove that staff augmentation is cheaper?
No. It does not provide market rates for agencies or contractors. It calculates an estimated employee-cost threshold, which must be compared with actual outside-service quotes and the employer’s own costs.
What does the article say about AI and developer productivity?
Meyer says evidence on how much coding agents increase developer speed remains unsettled. The article argues that AI may affect the kinds of specialist projects companies need and the value of retaining internal knowledge, but it does not assign a measured productivity gain to the cost calculation.
Source: ThorstenMeyerAI.com
