The true cost of hiring developers in the US, the UK, Germany, the Netherlands

To know how much it really costs to hire a software developer in the US, the UK, Germany, and the Netherlands, you have to budget a net salary and 30–50% for taxes and benefits. A software developer’s total cost in San Francisco is $157K gross, which is three times more than in Ukraine.

If you hire a developer in the US, the cost will be $157,570 including taxes; if you hire software engineers in the UK, you’ll have to pay around $82,199 with taxes included; hiring a developer in Germany will cost you $97,396 with taxes; in the Netherlands, it will cost you $95,669 to hire a programmer. 

If you hire a dedicated team, you’ll pay less for a year on average for a middle developer, at the same time getting good quality. This includes all the costs, meaning you won’t even have to spend extra time to get to know the employment tax system country. 

Our research compares employment taxation in the UK, Germany, the Netherlands, and the US with the expenses employers have to cover when hiring developers in Ukraine with Grid Dynamics.

Hiring a software developer in the US will cost you between $137K and $173K per year including taxes and benefits. A middle software developer in the Bay Area will cost you $157,570. On average, 70% of the total developer cost consists of the net salary, while the remaining 30% represents taxes and benefits. 

US developer cost structure:

• supplementary pay (3.2%)
• insurance (8%)
• paid leave (7.1%)
• retirement and savings (3.8%)
• legally required benefits (7.6%)

• supplementary pay (3.2%)
• insurance (8%)
• paid leave (7.1%)
• retirement and savings (3.8%)
• legally required benefits (7.6%)

The Internal Revenue Service (IRS) controls the payments employers are expected to contribute. There are several different types of charges, among these are federal withholdings, unemployment taxes, and workers’ compensation.

Software developer cost structure

Tax rates vary in the US depending on the region. On average, the net salary accounts for approximately 70% of all contributions for an employee, while the remaining 30% represent taxes and benefits.  

The average rate of taxes can amount to as much as 29.7% in the US.

The total after-tax annual developer costs in the UK are considerably higher than the net salary. Hiring a middle software developer in London will cost you $82,199, and 35% of this figure is made up of taxes, insurance, and other legally required cost items.

UK developer cost structure:

• income tax (20%)
• insurance (12%)
• auto enrolment pension (3%)

• income tax (20%)
• insurance (12%)
• auto enrolment pension (3%)

Each employee in the UK has the right to a tax-free allowance — a sum of £12,500 that is excluded from their annual salaries. 

Thus, we left out the tax-free amount and counted how much an employer will have to pay in addition to the net salary of a developer in the UK.  

If you hire a developer in Ukraine with Grid Dynamics, you’ll pay less for a year on average for a middle developer, at the same time getting good quality. This includes all the costs, meaning you won’t even have to spend extra time to get to know the employment tax system country.  

Hiring a software developer in Germany will cost you between €70,463 and €80,827 per year including taxes. On average, 44,8% of the total developer cost consists of the taxes and insurance that need to be covered by an employer.

German developer cost structure:

• personal income tax (14%)
• different types of insurance (21.8%): pension insurance 9.3%, unemployment insurance 1.2%, health insurance 7.3%, long-term care insurance 1.525%, accident insurance 1.25%, and nursing care insurance 1.275%. 
• church tax (9%)

• personal income tax (14%)
• different types of insurance (21.8%): pension insurance 9.3%, unemployment insurance 1.2%, health insurance 7.3%, long-term care insurance 1.525%, accident insurance 1.25%, and nursing care insurance 1.275%. 
• church tax (9%)

Germany’s employment tax system is complex and depends on multiple factors including age, marital status, and geographical location. Each employee in Germany has the right to a tax-free allowance, however, the amount depends on your marital or civil relationships. 

For a single person, the sum makes up €9,408. We counted the amount of taxable income to find out how much each separate tax for hiring a developer in Germany will cost you. 

We also took into account the church tax, which is paid under state law. The tax rate is 9% of the income tax payable, with the exception of Bavaria and Baden-Württemberg, where the rate is 8%.

On the whole, there are around 30 different types of taxes in Germany, which may or may not apply to you depending on your particular situation. On average, employment taxes can vary between 14% and 42% of the taxable income.

If you hire a developer in Ukraine with Grid Dynamics, you’ll pay less for a year on average for a middle developer, at the same time getting good quality. This includes all the costs, meaning you won’t even have to spend extra time to get to know the employment tax system country. 

Hiring a junior software developer in the Netherlands will cost you €47,072 (including taxes), hiring a middle programmer in the Netherlands costs €79,393, and to hire a senior software engineer, you’ll have to spend €89,412 a year. 

Dutch developer cost structure:

• income tax (37.35%)
• pension funds (5%)
• holiday allowance (8%)

• income tax (37.35%)
• pension funds (5%)
• holiday allowance (8%)

There are three tax Boxes in the Netherlands, each covering separate criteria. Box 1 applies to software developers’ income. With this tax, annual salaries of up to €68,507 are taxed at a 37.35% rate, while workers with higher salaries have to contribute 49.5%.

In addition to the Box 1 tax, we also took into account pension funds (5%) and holiday allowance (8%) to determine the after-tax costs of hiring software engineers of different seniority levels in the Netherlands.

The Netherlands’ government fosters recruitment from outside of the EU to fill the local tech talent gap. For this, a 30% incentive was introduced — employees from outside of the EU can have 30% of their annual salaries tax-free. 

However, this rule applies only if the salary of an employee is at least €37,743.

And just like in Germany, having a tax partner or someone registered at your address may influence the amount of taxes you pay in the Netherlands. 

If you hire a developer in Ukraine with Grid Dynamics, you’ll pay $45–50K a year on average for a middle developer. This includes all the costs, meaning you won’t even have to spend extra time to get to know the employment tax system country. 

As of 2021, hiring a junior software developer in Ukraine with Grid Dynamics will cost you $34,440 in total, hiring a middle programmer in Ukraine costs $50,820, and to hire a senior software engineer, you’ll have to spend $73,500 a year.

We’ll provide your team with everything they need to get started, including a standard hardware/software setup, equipment, furniture, office supplies, and support staff. All recruitment and replacement services come free of charge, whether you’re making changes to your existing team or considering a major expansion.

When hiring developers in Ukraine with Grid Dynamics, you won’t have to bother getting to know the tax system of the country. Grid Dynamics is a tech partner that helps businesses from all over the world hire Ukrainian software developers through the dedicated team model. 

1. Our experts find professionals that fit your specific requirements
2. You interview pre-selected candidates and choose the best-fitting candidates for your team
3. You manage them with the tools and methods you prefer. 
4. In the meantime, Grid Dynamics takes care of all the administrative hassles: office, workstations, paperwork, insurance, etc.

In over 20 years of commercial experience, we’ve developed a well-targeted service system to foster business growth via:

• Identifying development opportunities and solving potential risks
• Choosing the right tech stack and team composition for your project
• Managing the entire recruitment process
• Handling your team’s retention and resolving all administrative issues
• Facilitating well-organized communication between you and your extended team
• Providing comprehensive support whenever you have questions

• Identifying development opportunities and solving potential risks
• Choosing the right tech stack and team composition for your project
• Managing the entire recruitment process
• Handling your team’s retention and resolving all administrative issues
• Facilitating well-organized communication between you and your extended team
• Providing comprehensive support whenever you have questions

If you would like to learn more about the opportunities of hiring remote software developers with Grid Dynamics, fill out the contact form below, and we’ll get back to you as soon as possible. 

Grid Dynamics has compiled its own research on employee taxation systems in several countries: the UK, Germany, the Netherlands, and the US. As a result, we found out how much employers will have to pay for hiring a developer in addition to net salaries in each country under study. 

Throughout 2020 we’ve been collecting data from dozens of our clients from the above-mentioned countries regarding local software developer rates, employment conditions,  as well as open statistics to provide accurate data on each category of the total software developer cost we have analyzed. 

On top of that, we provide information on how much it costs to build a dedicated software development team in Ukraine with Grid Dynamics. 

*Having collected data on taxation systems in the countries mentioned above, we counted tax rates based on the average annual software development salaries of junior, middle, and senior developers.  

**The data presented in this research might be incomplete or require consideration of additional factors depending on the specifics of your particular business situation. 

***To compile the research, we used the data from state-run websites of each country under the study.