Offshore Engineer True Cost Calculator — Offshore vs In-House

Most offshore-versus-in-house comparisons put an hourly rate next to a salary and stop. That comparison is wrong in both directions: it ignores what an in-house hire costs beyond salary, and it ignores what an offshore engineer costs beyond their rate. This page models both properly and lets you put your own numbers in.

We are an offshore supplier, so read the model sceptically. The defaults are the figures we publish and the inputs are all editable — including the one that makes offshore lose.

What an in-house hire actually costs in year one

Base salary is the number everyone quotes and roughly 65% of the real figure.

Payroll burden and benefits — add 25 to 30%. Employer payroll taxes run about 7.65% FICA in the US plus unemployment, then workers' compensation, health cover, retirement contribution and paid leave. In the UK, employer National Insurance plus pension auto-enrolment lands in a similar band.

Recruiting — 15 to 30% of first-year salary. Agency placement fees run 15–18% for entry-level roles, 20–22% mid-level and 25–33% for senior and executive hires. Recruiting in-house is not free either; it is your engineers' interview time.

Vacancy — 2 to 4 months of nothing. Between opening a senior engineering role and that person's first productive week, most markets run two to four months. That gap is a real cost: it is the work that did not happen, and it is the cost most comparisons silently set to zero.

A $150,000 senior engineer therefore costs roughly $150,000 + 28% + a 20% fee + three months of vacancy ≈ $270,000 in year one. From year two it drops to about $192,000, because the fee and the vacancy do not repeat.

What an offshore engineer actually costs

The rate, which for us is $22–85/hr by role and seniority. A senior engineer at $55/hr full-time is $114,400 a year.

Your management time — the input that decides this. Someone senior on your side spends 2 to 5 hours a week directing, reviewing and unblocking. At 3 hours a week and a $90/hr internal cost, that is $14,000 a year. Push it to 8 hours and it is $37,000, and the comparison changes shape entirely.

Ramp — about 2% amortised over a twelve-month engagement. Reduced output for the first two to six weeks, spread across the year. On a three-month engagement the same ramp is nearer 8%, which is the argument for longer engagements.

Replacement risk — about 2.5%. Assume one replacement per engineer per 18 months as a planning figure, costing two to six weeks of reduced output. Not zero, and a supplier who tells you it is zero is managing your expectations.

Tooling and licences — $100 to $300 per engineer per month. IDE seats, CI minutes, observability, VPN, password manager.

The calculator

Move the management-time slider first. It is the input that decides most real comparisons, and it is the one every vendor leaves out.

Reading the result honestly

Year one flatters offshore. The recruiting fee and the vacancy are one-off. Run the same model for year two and the gap narrows by roughly a third. If you expect to need this capability for five years, model five years.

Management time is the swing factor. At 2 hours a week offshore wins comfortably at almost any rate. At 8 hours a week it stops being obvious, and at 12 it is usually wrong — you are paying a senior engineer to supervise instead of build. If your honest answer is 8+, the problem is not the rate, it is that the work needs an owner you do not have. That is an argument for a managed service, not a cheaper engineer.

A saving of 35 to 45% is the realistic number for a full-time senior engineer over twelve months. Anyone promising 70% is comparing a rate to a salary.

The model says nothing about quality. Two engineers at the same rate can deliver wildly different amounts, which is a separate and larger question.

What is not in the model

Severance and notice risk on an in-house hire. The option value of a permanent employee who grows into a lead. The cost of the institutional knowledge that leaves when an engagement ends. Currency exposure on a multi-year engagement. Any of these can move the answer, and none of them belong in a slider.

When in-house is simply the right answer

If the role is core to what your business does, permanent, and you can hire for it — hire. Augmentation is for capacity you need now, capability you need temporarily, or a role you are still defining. We would rather tell you that on the first call than three months into an engagement.

Related

• The hidden costs of offshore engineers nobody quotes you
• Why the cheapest offshore rate usually costs the most
• The 90-day offshore engineer onboarding playbook
• Hire dedicated developers — the rates used as defaults above