🔍 Read the full analysis: The Break-Even Rate Can Help You Choose Between IT Hiring Models on ThorstenMeyerAI.com
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TL;DR
A November 6 analysis by Thorsten Meyer sets out a repeatable way to compare IT hiring with staff augmentation: calculate the employer cost per hour actually worked, then account for recruiting and how much work the hire will have. Using the article’s assumptions, a U.S. developer’s break-even rate is about $98 an hour at full utilization, rising to about $197 when only half of available hours are needed. The figures are estimates, not market-rate quotes.
Thorsten Meyer published a break-even calculation for IT hiring on November 6, arguing that employers should compare a specialist’s hourly rate with the cost of a full-time employee’s hours actually worked—not salary alone. Using public U.S. and German labor-cost data, the analysis estimates a U.S. developer break-even rate of about $98 an hour after recruiting costs, before adjusting for how fully the employee would be used.
The calculation starts with total employer cost and divides it by productive hours. For the United States, Meyer uses the Bureau of Labor Statistics’ May 2025 median software developer wage of $135,980, along with employer-cost data for professional occupations. Applying an estimated 1.28 cost factor and about 1,830 hours worked per year produces an estimated cost of roughly $95 per hour. These are the source’s calculations from published figures, not a BLS-published developer hourly rate.
Meyer then adds SHRM’s 2025 average cost-per-hire figure of $5,475 for non-executive roles. Assuming the employee stays for one year, that adds about $3 per hour, bringing the estimated break-even point to approximately $98 an hour. Spread across three years, the recruiting cost has less effect, and the estimate is about $96 an hour. SHRM’s figure covers roles generally, not technology positions specifically; its reported median was $1,200.
For Germany, the article 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 figure, not a developer-only rate. Meyer says readers should use these estimates as starting points and substitute their own costs, expected tenure, and supplier quotes rather than treat them as universal benchmarks.
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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Utilization Changes the Comparison
The central point is that an employee’s cost per useful hour rises when the employer has less work for them. Meyer’s example says that if a new hire is needed for only half of their available hours, the cost assigned to each useful hour doubles. On that basis, the U.S. break-even estimate rises from about $98 to roughly $197 per useful hour.
That can change which arrangement appears less expensive. A contractor or augmentation specialist may cost more per billed hour but be economical for a short, uncertain assignment, or for skills needed only intermittently. A full-time hire may compare favorably when demand is steady enough to keep the person productive. The calculation does not decide the choice by itself: continuity, management, access to expertise, and the value of retaining organizational knowledge also matter.
For readers making a budget decision, the framework offers a way to test actual proposals without relying on a broad claim that one staffing model is always cheaper. The relevant comparison is the outside rate against a company-specific break-even figure, with assumptions made explicit.
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The Cost Inputs Behind the Estimate
The article draws on several measures with different scopes. BLS employer-cost data for June 2026 put total private-industry compensation at $46.89 per hour worked, including wages and benefits. For the broader management, professional, and related occupational group, the reported total was $78.88 per hour, including $54.06 in wages. Meyer uses the latter data to estimate a cost load and the share of paid hours spent on leave.
Those figures are combined with the BLS’s separate median wage for software developers, recorded in May 2025. The resulting $95 estimate is therefore a constructed comparison, not a directly measured average cost for a software developer. Germany’s €58.50 figure also has a different scope: it covers the information and communication sector, including jobs beyond software development. The currencies and underlying populations are not directly interchangeable.
Meyer says the article does not use vendor rates because he found no published rate survey with a clear methodology and provider rates vary. Instead, it is designed for readers to insert the quotes they have received. The article also notes that AI may change the type and amount of specialist work, while saying evidence about coding agents’ productivity effects remains unsettled.
“The break-even rate, the highest hourly rate an outside specialist can cost before hiring becomes the cheaper option.”
— Thorsten Meyer, in the November 6 article
Assumptions Still Drive the Result
The estimates depend on assumptions that differ by employer, including actual compensation, benefits, paid leave, recruiting expense, employee tenure, and the number of hours of useful work. The article’s U.S. estimate combines data from different periods and populations; the German figure is a sector average rather than a developer-specific measure. Neither figure establishes what a particular company will pay.
The source does not provide supplier-rate data or a single break-even rate applicable across companies. It also does not quantify the effects of management time, onboarding, turnover, project delays, or the cost of losing internal knowledge. The article says evidence on how much coding agents increase developer speed remains unsettled, so it does not establish a specific AI productivity adjustment.
Apply the Formula to Actual Quotes
The next step for an employer is to replace the article’s general inputs with its own payroll and benefits costs, realistic productive hours, expected tenure, recruiting costs, and outside bids. It can then compare the resulting break-even rate with the quoted hourly rate, while checking whether the work is continuous enough to support a full-time role.
No follow-up data or market-rate survey is announced in the source. The comparison remains a planning method rather than a verdict on a particular staffing decision. Meyer also says the article is not legal, tax, or financial advice.
Key Questions
What does the break-even rate mean?
It is the maximum hourly rate for an outside specialist at which the source’s modeled cost of hiring would still be no higher, given the selected assumptions. The rate changes with compensation, recruiting costs, tenure, and utilization.
How did the article estimate about $98 per hour for a U.S. developer?
Meyer estimates about $95 per hour worked from a BLS median software developer wage and employer-cost assumptions, then adds about $3 per hour by spreading SHRM’s average non-executive hiring cost over one year. It is a calculation, not a published BLS hourly figure.
Why does utilization affect the result?
If a hire has fewer hours of needed work, the employer’s annual cost is spread across fewer useful hours. In Meyer’s example, using only half of available hours raises the estimated break-even rate from about $98 to $197.
Are the U.S. and German figures directly comparable?
No. The U.S. estimate combines a developer median wage with broader professional-group employer-cost data. Germany’s €58.50 per hour is an average for the information and communication sector across occupations, so the figures serve as different starting points.
Does the article show that augmentation is always cheaper?
No. It says outside specialists may suit short, uncertain, or specialist work, while full-time hiring may make more sense for sustained work and knowledge that needs to remain in-house. The result depends on company-specific costs and needs.
Source: ThorstenMeyerAI.com
