Eventually, most software companies think about hiring more people to grow their businesses. Often, vendors extend the software development team to develop a new project or expand their product line. They also need specialists when the product becomes large and complex or requires new features, and the team lacks the necessary skills.
Fortunately, we live in an age with plenty of options for hiring professional developers. What’s more, they do not even have to stay in the office five days a week. As you know, high-speed Internet is available to everyone today, and people can work from anywhere in the world.
Cost is critical when you are choosing between expanding an in-house team or hiring an offshore team. Even for large companies, cooperation with outsourcing software development companies turns out to be more profitable than hiring personnel. What about startups where aspiring entrepreneurs have limited funds and do not hire high-level professionals?
We at Relevant have worked closely with many startups and product development companies in the United Kingdom. We know firsthand how difficult and costly it can be to hire a developer UK.
To back up our findings with facts, we investigated the costs of setting up a software development team in London. Based on this data, we compared the actual cost of hiring an in-house software development team in London, UK, with the cost of contracting a development agency. We also compared the average software development rates in Ukraine with the rates of developers in the UK to see which model is more cost-effective. Read on to find out all the details.
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If you choose between hiring an internal team and working with a development agency, you should know the costs comprise different components in each case.
|In-house||Offshore software development company|
|Developers’ salaries |
|Hourly rates x number of hours|
As you can see, the list of expenses for your team is much longer than with hiring a developer or a whole dedicated team from an offshore app development company.
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Therefore, looking for software developers, you should carefully calculate how much a full-time team in London will cost to hire remote developers.
If you are thinking of software development outsourcing to London, carefully read the following points.
According to Glassdoor, the London-based front-end developer makes around £4,087 a month. The same resource shows that the salary for the back-end developer is 5,435 pounds per month and the wages of a QA engineer – £3,452 per month.
If you hire software developers full-time, remember that workers are entitled to 28 working days of paid leave under UK law. Every year, you will pay each developer a salary for almost a month while they do not work.
Office rent depends on the location you plan to operate. After reviewing the proposals, we found that an elementary office with open space for ten people and minimal amenities would cost £3 630 per month when considering a long-term lease.
If you plan to run your development company, you will need people for other roles. At least an HR manager or recruiter to look for candidates for you, and an accountant who will keep the ledgers. If your company continues to grow, you’ll need to hire an SYS-admin, office manager, or additional recruiter.
If we look at Glassdoor again, we can see that the average salary in London for the positions we mentioned is:
So an accountant and recruiter will add to your business’s expenses £6 163 per month.
The product defines the technology stack, and it selects the tools and frameworks to help you develop software better and more quickly. Therefore, we will include in our assessment the primary means that are commonly used in development companies. These tools are more of an administration and collaboration tool, so they are suitable for any project:
Simple calculations show that a basic set of tools for your internal team of five people will cost you £191.7 per month.
These are the costs that every software company has to handle, but it’s hard to estimate on average. For example, employee benefits can vary depending on the size of the company and the stage of development.
Everyone uses extra perks to keep their employees, but each company decides for itself what to offer to its team:
Of course, in each specific case, the total cost of the buns offered by the company will be different. The same goes for hardware costs, as the hardware requirements depend significantly on the development project.
As for taxes, here we will quote Benjamin Franklin: “In this world, nothing can be said to be certain, except death and taxes.” Therefore, you must also add taxes that your company will pay, but the actual amount of taxes is difficult to estimate.
Let’s use the numbers we calculated to estimate the cost of owning a software company in London, the UK, for one month, six months, and 12 months (excluding taxes, employee benefits, and hardware costs from our calculations).
If you’re using an outstaffing model, your only expense is the hourly pay for each developer you hire. The development agency assumes all administrative and related costs, and they do not bother you in the least.
The reason companies will hire app developers in Ukraine is because the average hourly fee for a front-end or server-side developer is around £19,47. That is £3,115.2 per month if you contract with a developer for 160 hours.
The average hourly rate for a QA engineer is £14,83 or £2,373.4 per month. A team of the same three professionals will cost you roughly the following amounts:
These are the only costs you will have to incur. As you can see, submitting a project to offshore software development outsourcing is cheaper than hirе a developer in the UK (meaning in-house developers in London UK).
In conclusion, we note that internal and outsourcing models of hiring developers have nuances, not only in price. For example, hiring is a rather lengthy process with an in-house team, as the candidate must quit the previous job with proper notice. In addition, it can be difficult to fire someone who does a mediocre job for legal reasons.
With outsourcing, you can hire developers for a startup and get a complete team quickly. You can expand or cut the group if it depends on the requirements of your project. You will only have to pay for the actual number of hours the developer has spent on your project, not a penny more.
Specific skills for a short-term task, for example, UX / UI Design or QA, you will receive for as many hours as it takes. And these are not the only advantages. For more information, see our study of the benefits of outsourcing in top outsourcing countries in 2021. We hope our in-house and software outsourcing research can help you find the best option for your project! And if you want to know more about the models for hiring professional software developers or find specialized staff, for example, hiring Node.js programmers, contact us.