Breaking Down the Cost of a Full-Time Employee
The true price for in-house development
You have faced the problem of the unpredictable workflow in the web and mobile development industry. You are not alone. Many web shops ride the month-to-month roller coaster of productivity. Your web company needs to be ready to take on more projects during an influx, but also hold on to valuable employees during slow months. Just hire, right. First, count the cost of a full-time employee.
How do you decide whether to hire full-time staff or find an outside partner to help out? The reality is that it’s expensive to hire full-time, in-house staff. As a business owner, you may have calculated the cost of a full-time employee. Here I have listed a few line items to consider when you’re making the choice to hire an in-house employee.
Cost of a Full-Time Employee: Computer and Office Supplies
- According to a few different sources, this number is about $200 per year for each employee*. Tack on the developer-worthy laptop, and you’re looking at close to $2,000 in the first year. Also, who doesn’t want a few t-shirts, mugs, and other gear when they join a new team? This might be the one small expense that is always justifiable.
Cost of a Full-Time Employee: Software Licenses
- Software and tools are always being developed and being updated. To stay relevant, web companies have to use the latest and greatest. For commonly used development and design tools like PhpStorm and Sketch, it will be several hundred dollars a year per user. It is safe to say that the number of tools hitting the market will not be decreasing, so business owners can prepare for their top developers to keep asking for the next best one.
Cost of a Full-Time Employee: Market Rate Salary
- PayScale recently published that the median salary for a PHP developer in the United States is just over $61k*. Of course, this can change from city-to-city depending on the cost of living and the demand for developers. Also, some technologies warrant a higher-paid developer, so take this into account as you’re thinking about expanding your tech expertise to include mobile apps, progressive web apps, etc.
Cost of a Full-Time Employee: Health Insurance
- A rule of thumb to obtain this amount is by multiplying the base salary by 1.25 to 1.4 to determine the cost of healthcare over a year*. Yes, it’s expensive. This has become an ever-increasing recruiting tool as well, so more than likely you are not going to get by with the cheapest group plan.
Cost of a Full-Time Employee: Human Resources
- With more employees, you have to consider the need to hire an HR professional who can handle internal policies, implement initiatives, and process employee suggestions and concerns. This is another salary to factor in once you have several employees under your roof.
Here are a few other costs to consider: office space, recruiting, and training new employees. Anything else come to mind?
Don’t get me wrong, there is a ton of value in building your team internally when the time is right. As Jim Collins says in Good to Great, you have to get the right people on the bus to advance your business. Before you make the final decision to hire internally versus finding an outsource partner, make sure you take a comprehensive look at the total cost. I meet with business owners all of the time who have learned the negative side of high overhead the hard way. They bit off more than they could chew.
Also, don’t forget to take a look at the other side of the coin. If you’re considering moving to an outsourced model, onshore or offshore, it is well worth it to invest the time and resources at the beginning to find the right partner. It’s helpful to go into this process with patience. Try not to make these decisions when you are trying to hit an upcoming deadline or a huge project just walked in the door.
Once you do find the right partner, the benefits can be endless. You can build a remote team who is eager to do great work for you, while you focus on gaining new clients and keeping your existing clients happy.
IT Hands has been working with web companies since 2001. We bring quality development and affordable rates to businesses balancing an influx of projects and a few in-house employees. Our co-founder published a blog recently explaining the value of hiring a Full-Time Equivalent (FTE) with an outsourced team. Learn more what an FTE Model looks like.
Contact us with any questions at firstname.lastname@example.org.