🔍 Read the full analysis: The Rate That Determines Whether IT Staff Augmentation Costs Less on ThorstenMeyerAI.com
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TL;DR
A Nov. 6 cost analysis by Thorsten Meyer calculates the hourly break-even rate at which an outside IT specialist becomes more expensive than hiring a US software developer. Using public data, it estimates about $98 per hour when the hire is fully utilized, rising to about $197 at 50% utilization; the result depends on assumptions about workload and costs.
Technology analyst Thorsten Meyer published a cost model on Nov. 6 that estimates the hourly rate at which hiring an outside IT specialist stops costing less than employing a full-time developer. Using public US labor-cost figures, the analysis puts the break-even rate at about $98 per hour for a fully utilized hire, and about $197 when only half of the employee’s working time is needed.
The calculation starts with the cost of employee time actually worked, rather than salary alone. Meyer uses the US Bureau of Labor Statistics’ median software developer wage of $135,980 a year in May 2025 and employer cost data from June 2026. Applying the estimated benefits load and accounting for paid leave, he calculates an employer cost of roughly $175,000 annually, or $95 per hour worked. That figure is Meyer’s calculation from published statistics, not a quoted market rate.
For Germany, the analysis cites Destatis data showing an average employer cost of €58.50 per hour worked in the information and communication sector in 2025. That is a sector-wide average covering IT and telecommunications jobs, not a developer-only figure. Meyer says the US and German figures should be treated as starting points rather than direct salary benchmarks because they cover different populations.
Meyer adds an estimated $5,475 average cost per non-executive hire, based on SHRM’s 2025 benchmarking survey. Assuming a one-year stay, he estimates that recruiting adds about $3 per hour worked to the US comparison, bringing the calculated break-even rate to approximately $98. The survey included 2,371 SHRM member organisations and covered roles across sectors, not technology hires alone. Its reported median cost per hire 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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How Utilization Changes the Cost
The model’s central finding is that the break-even rate depends heavily on whether a company can keep a full-time employee productively occupied. If a developer is needed for only half of their available working hours, the cost per useful hour roughly doubles. Under Meyer’s assumptions, that moves the US break-even rate from about $98 to about $197 per hour.
That makes workload predictability a more important input than a simple salary-versus-contractor comparison. A short project, specialist task or uncertain workload may make augmentation financially attractive, even when an outside hourly rate is high. For sustained work that fills an employee’s schedule, hiring may cost less over time. These are conclusions from the model, not a guarantee that either option will be cheaper in a particular company.
The decision also involves more than hourly spending. Meyer points to the value of retaining internal knowledge as a reason to keep some work in-house. The model does not assign a dollar value to continuity, management time, onboarding, or the risk of losing expertise when a contract ends. Those factors can change the business case, but the source does not quantify them.
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The Public Figures Behind the Model
Meyer’s report, published by ThorstenMeyerAI.com, says it uses public labor and recruiting data rather than provider price lists. It does not name staffing firms or claim to establish a typical agency rate. Meyer says he found no published rate survey with a clear method and argues that rates vary too widely for one market figure to settle the comparison.
The US employer-cost figures come from the BLS Employer Costs for Employee Compensation survey. In June 2026, the BLS reported average private-industry employer costs of $46.89 per hour worked, including wages and benefits. For the broader “management, professional, and related” occupational group, the reported cost was $78.88 per hour. Meyer uses that group’s relationship between wages, paid leave and other benefits to estimate the loaded cost of a median-paid software developer.
The international comparison uses a different measure. Destatis reported that German employers paid €29 in non-wage labor costs for every €100 of gross earnings in 2025. Its €58.50 hourly figure applies to the information and communication sector, while Meyer’s US estimate applies to a particular occupation. As the report cautions, the figures are useful inputs, but they are not like-for-like national developer wage estimates.
““Staff augmentation is cheaper than hiring.” You hear it in every pitch deck. Sometimes it is true. Often it is not.”
— Thorsten Meyer, in the Nov. 6 report
Inputs That Can Change the Result
The break-even rates are estimates, not universal thresholds. They depend on assumptions about annual work hours, employee utilization, how long the employee stays, benefits and recruiting costs. A company with a different compensation package, hiring process or project schedule could get a materially different result.
The source material does not provide a complete calculation for every possible utilization level or a corresponding German break-even rate. It also does not compare the model with actual quotes from staffing providers. Meyer says agency rates vary and that he found no published survey with a clear method, so readers would need to apply the calculation to their own quotes and costs.
The report also raises AI as a factor that could change the inputs, but says evidence about how much coding agents increase developer productivity remains unsettled. It offers no quantified productivity adjustment. Whether AI makes a hire more productive, creates short-term specialist needs, or increases the value of retaining internal knowledge will vary by project and organization.
Apply the Rate to Real Quotes
The next step for readers is to substitute their own figures into the comparison: the loaded cost of a hire, realistic hours actually worked, expected utilization, recruiting costs and the outside specialist’s quoted rate. The result can help identify where the two options cross, but it will not capture every operational or knowledge-retention consideration.
Meyer’s article also links to a roughly four-minute explanatory video describing the cost-per-hour calculation and the role of AI. The report states that it is not legal, tax or financial advice. No additional release, follow-up analysis or provider-rate survey is specified in the source material.
Key Questions
What does the break-even rate mean?
It is the highest hourly rate for an outside specialist that Meyer’s model compares with the cost of employing a full-time worker. Above that rate, hiring is less expensive under the model’s assumptions; below it, augmentation costs less.
How does the report estimate the US cost of a developer?
Meyer combines the BLS median software developer wage of $135,980 in May 2025 with employer benefit-cost data from June 2026, then estimates annual cost per hour actually worked. His result is about $95 before recruiting costs. It is a calculation, not a BLS-published developer cost figure.
Why does utilization matter so much?
A full-time salary continues to be paid even when the employee has less work to do. If only half of available working time is useful to the company, each useful hour carries a larger share of the employment cost. Meyer’s example puts the break-even rate at about $197 per hour at 50% utilization, compared with about $98 when fully utilized.
Does the analysis show that augmentation is always cheaper?
No. The report says the outcome depends on the company’s workload, costs and assumptions. It suggests augmentation may suit short or uncertain specialist work, while hiring may be less expensive for long-running work that keeps an employee busy.
Can companies use the German figure as a developer salary benchmark?
Not directly. The €58.50 per hour figure is a 2025 average for the German information and communication sector, not specifically for software developers. The report recommends treating it as a starting point rather than a like-for-like comparison with the US occupation-based estimate.
Source: ThorstenMeyerAI.com
