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Full-Time VS. Freelance Software Developer - Cost Comparison Guide

  • 16 March, 2021
Full-Time VS. Freelance Software Developer - Cost Comparison Guide

The contemporary market is flooded with diverse talents and it becomes a great challenge to pick and choose an individual for your project. Hiring a Software developer is not an easy matter either. 

As an owner of a company, you must be anxious about subjects like the company’s vision, its key priorities, and the hiring budget scale.

Most important of all, should you go for a full-time developer or a freelance software developer? This question might have struck you and it’s time you declutter your thoughts to make an informed decision. 

In this article, we'll probe into the costs of two different species of software developers: full-time and freelance software developers.

Cost of Hiring a Full-time Software Developer

expert software developer

Average Annual Salary 

According to Salary.com, the average salary for a software developer in the United States is between $62,520 and $168,340 as of February 2021. 

However, the annual salary of the full-time software developer depends upon the years of experience and their geographical location. For example, Daxx states, the average salary range for a software developer in Switzerland is $95K per year, in Israel $76,791, and in Norway around $64,202.

According to PayScale, the median annual salary of software developers with 5 years of experience is $112,921. Apart from this, an in-house resource may come with additional costs which we will discuss below.

Employee Benefits

hire software developer

To attract the best of talent, many startups and businesses offer benefits such as paid leaves, unlimited tea and coffee, medical facilities, free gym memberships, and more. These are some important expenses to be chewed over when hiring full-time developers. 

According to the Bureau of Labor Statistics, here are some of the most basic company-paid benefits:

  1. 8.5 % for Legal benefits including social security and unemployment insurance

  2. 7.6% for medical and life insurance

  3. 6.7% for annual paid leaves 

  4. 4.3% for retirement and savings

  5. 3.5% for a yearly bonus

  6. 2.6% for additional pay (overtime)

  7. 0.1% employment training

Running or Indirect Costs

expert software developer

What is running or indirect costs? It usually involves overhead expenses and relates to the day-to-day activities of an organization, for example, office rent, supplies, and equipment, cleaning materials, basic electronic items, etc. 

According to Deltek, indirect costs can be classified into three groups: fringe benefits, overhead, and general & administrative (G&A).

  • Fringe benefits are additional benefits to an employee's monetary wage or salary, such as a company-maintained car, health insurance, Life insurance coverage, etc. As per the Bureau of Labor Statistics, the average fringe benefit rate is 30%

  • Overhead refers to the unending costs to run a business but excludes the direct costs associated with creating a product or service. Companies spend an average of 25% on overheads

  • General and administrative (G&A) expenses refer to the day-to-day operations of a business and are not directly tied to a specific function within the company. Businesses spend an average of 18% on G&A

When we combine these costs with the salary and other benefits for full-time software developers, the amount just keeps multiplying! 

Cost of Hiring a Freelance Software Developer

expert software developer for hire

There’s No Annual Salary 

The cost of hiring freelance developers varies greatly depending on the geographical location. According to Codementor, in North America, the cost of hiring freelancers ranges from $50 to $250. Eastern Europe and India have slightly lower ranges.

Most freelance developers charge on an hourly basis or some may charge on a per-project basis as well. The per-project pricing model may start from as low as $20,000 to $500,000. The fixed price model is way more economical to go for rather than freelancers’ hourly rates.

In the hourly pricing model, most freelancers charge somewhere around $60-$100 per hour. For instance, if a freelance developer is working 6 hours a day on your project and it takes 2 months to its completion, it would cost you a maximum of $36,000. 

Many IT companies hire two freelance developers at $9000 a month. In addition, they must pay $45,000 for a period of 2.5 months in order to meet the project's unique specifications. However, if they employ full-time software developers, they would pay $100,000/ year for one and $200,000/ year for two. You can see the difference!

No Employee Benefits

Hiring a freelance software developer comes with no additional benefits as in the full-time employment model. You won’t have to provide office space and supplies, medical or health insurance, paid leaves, company car, annual bonuses, and the list goes on. 

Even the most expert freelance software developers won’t cost you anything extra except for the particular project cost. Also, there is great flexibility in the payment models of freelancers

You can pay your freelance software developer on an hourly basis, per-project basis, or per-day basis, depending on your needs. But, it is more standard to pay freelancers by the hour or by the project rather than by the day.

No Indirect Costs

No Indirect Costs

Hiring freelance developers could also save money by reducing the amount of money spent on retaining employees. Moreover, companies frequently allow underperforming employees to stay on because they are afraid of being sued.

Companies, on the other hand, have more flexibility when hiring freelancers: if the hired freelance software developer isn't a good fit, they can quickly find a replacement without any fear.

The Bottom Line

By the end of this post, you must have noticed the difference in cost between the two modes of employment: full-time vs freelance developer. Well, it is evident that hiring a freelance developer is a lot cheaper as opposed to full-time employees, whether short or long-term.