On this page · 12 sections
- What changed for 2027 budgets
- US onshore: what a developer really costs
- UK onshore: NICs, pension and IR35
- Nearshore and India pay: what published data shows
- Hidden costs that decide the real rate
- The tax lines: Section 174 and UK R&D relief
- The formula and a worked example
- Four options side by side
- Decision table: choose X if
- Implementation checklist
- How eCorpIT can help
- References
Summary. For a US company, an in-house software developer at the Bureau of Labor Statistics median of $135,980 (May 2025) costs about $173,500 a year once employer benefits and payroll taxes are added, or $94.50 per productive hour. A UK developer at the provisional ONS median of £59,863 (April 2026) costs £69,413 with 15% employer National Insurance and the 3% minimum pension, or £39.89 per productive hour, about $53. Those figures set the price any offshore or nearshore quote has to beat. On our labelled assumptions for oversight, time-zone drag, attrition and travel, an India team is cheaper for a US buyer at any all-in rate below about $65 an hour, and a Mexico or Colombia team below about $73, after the 15-year amortisation Section 174 imposes on foreign software research (about 8.5% of vendor spend in present-value terms). For a UK buyer the break-even is about £29.50 for India and £32.70 for Poland, a much thinner margin. The $100,000 H-1B payment, now extended to 21 September 2027, is not being collected because courts have vacated the agency policies behind it; appeals are pending. Get three quotes, run them through the formula, and weigh overlap and control as heavily as the rate.
About this article. Written for CTOs, finance leads and founders in the US and UK comparing an in-house hire with an offshore or nearshore team. We checked pay, tax, immigration and policy figures against BLS, ONS, HMRC, HM Treasury, the Social Security Administration, the White House, USCIS, federal court orders, Statistics Poland, the US Code and Indian statute texts on 12 November 2026. The worked example rests on our own labelled assumptions; replace them with yours. This is general information, not tax, legal or immigration advice, and no vendor paid for inclusion. Researched with AI assistance and reviewed by our editorial team.
What changed for 2027 budgets
Four dated changes move the maths this year. The tax treatment of foreign research hits US buyers whether the team sits in Gurugram or Guadalajara.
| Anchor | What it says | Dates | Who it affects |
|---|---|---|---|
| H-1B Proclamation 11069, 18 September 2026 | Extends the $100,000 payment for H-1B petitions for workers outside the US; courts have vacated the agency policies that collect it | To 21 September 2027; appeals pending | US employers hiring developers from abroad |
| Sections 174 and 174A (Pub. L. 119-21, 4 July 2025) | Domestic research spending, including software, deductible at once; foreign research amortised over 15 years | Tax years beginning after 31 December 2024 | US taxpayers paying for work done abroad |
| UK employer Class 1 NICs | 15% above the £5,000 secondary threshold; Employment Allowance £10,500 | 2026-27, unchanged for 2027-28 | UK employers |
| UK umbrella company PAYE rules | Agency or end client liable for PAYE when an umbrella employs the worker | Payments from 6 April 2026 | UK clients using contractors |
The table draws on the proclamation, the USCIS alert, the two Code sections, HMRC's 2026-27 rates, the Budget 2026 rates annex and HMRC's umbrella guidance.
The proclamation records that the largest IT staffing and outsourcing firms cut their combined H-1B registrations from 24,946 to 2,055, a 92% fall, and asks the agencies to recommend within 30 days of the next H-1B lottery whether to extend again. Treat 21 September 2027 as a review date, not a guaranteed end.
US onshore: what a developer really costs
Which BLS median to use
Two BLS medians circulate, and both are correct. They describe different groups from the same May 2025 Occupational Employment and Wage Statistics data, shown on the Occupational Outlook Handbook page last modified on 27 August 2026.
| BLS figure (May 2025 OEWS) | Occupation code | Median annual wage |
|---|---|---|
| Software developers | SOC 15-1252 | $135,980 |
| Software developers, QA analysts and testers (combined OOH group) | 15-1252 and 15-1253 | $134,040 |
| Software quality assurance analysts and testers | SOC 15-1253 | $104,300 |
| All occupations | All | $50,980 |
This guide uses $135,980, because the comparison is with developers, not testers. The spread matters: the lowest 10% earned under $82,460 and the top 10% over $214,670, and across the top employing industries BLS lists, medians ran from $132,050 in computer systems design to $164,550 at software publishers.
Employer on-costs from ECEC
The BLS Employer Costs for Employee Compensation release for June 2026, published on 9 September 2026, gives these private-industry costs per hour worked for professional and related occupations: wages $50.98, paid leave $6.78, supplemental pay $2.90, insurance $5.47, retirement $2.75 and legally required benefits $4.81.
An annual salary already pays for leave days, so only non-leave items go on top: $15.93 against $57.76 of cash pay, or 27.6%. Applied to the median, $135,980 plus $37,503 gives an employment cost of about $173,500. The information industry's richer package gives 33.6%, or about $181,700. The payroll-tax piece checks out: Social Security and Medicare at 7.65% on $135,980 come to $10,402, and the whole salary sits below the 2027 Social Security wage base of $192,300.
Paid leave is 11.7% of cash pay, so a 2,080-hour paid year yields about 1,836 hours worked. That gives $94.50 per productive hour before laptops, software seats and recruiting fees.
The H-1B route
Proclamation 11069 extends the 2025 entry restriction, and its $100,000 payment for H-1B petitions covering workers outside the US, for 12 months to 21 September 2027. For now the agencies cannot collect it. A federal court in Massachusetts vacated the DHS and State Department guidance on 8 June 2026, the First Circuit refused to pause that ruling on 24 July 2026, and the USCIS alert says DHS will comply while it considers next steps but will collect the payment if the order is lifted. On 30 September 2026 a federal court in California also vacated the agency policies and barred their enforcement under both the original proclamation and the extension until notice-and-comment rulemaking is done; it noted that a Washington, DC court had upheld the proclamation in 2025 and that the case is on appeal. Separately, DHS proposed a $103,265 fee on all cap-subject H-1B petitions on 25 August 2026; comments closed on 24 September 2026 and no final rule has been published.
Budget for the payment as a live risk, not a settled cost. If it returns, it adds $100,000 per petition. Spread over the initial H-1B admission period of up to three years, that is $33,333 a year, or 19% on top of the employment cost, before legal fees. It never applies to offshore or nearshore teams working from their own countries.
UK onshore: NICs, pension and IR35
The ONS Annual Survey of Hours and Earnings, released on 22 October 2026, puts the April 2026 median gross annual pay of full-time programmers and software development professionals (SOC 2134) at £59,863, against £40,911 for all full-time employees; both figures cover employees in the same job for at least a year. The figures are provisional and will be revised in October 2027.
Statutory employer costs for 2026-27:
- Employer Class 1 NICs: 15% of £54,863 (pay above £5,000) = £8,229
- Minimum auto-enrolment pension: 3% of qualifying earnings between £6,240 and £50,270 = £1,321
- Employment cost: £69,413, or 16% above salary
- Apprenticeship Levy: a further £299 (0.5%) if your total pay bill exceeds £3 million
Budget 2026, published on 28 October 2026, keeps the £96-a-week secondary threshold, the 15% rate and the £10,500 Employment Allowance for 2027-28; the allowance helps only if your payroll has not already used it.
The statutory minimum holiday is 5.6 weeks. On a 37.5-hour week (our assumption) that leaves 1,740 hours, so £39.89 per productive hour, about $53.08. Treat it as a floor: many tech employers pay above the 3% pension minimum. Per productive hour, a UK developer at the median costs about 56% of a US one in dollar terms, and that ratio explains most of what follows.
IR35, briefly. The off-payroll rules make public-sector and medium or large private-sector clients decide the tax status of contractors who work through their own companies. HMRC says a client receiving contracted-out services from a third party, such as an outsourcing company, does not apply the rules, and warns against relabelling contracts to avoid them. From 6 April 2026, when an umbrella company employs a contractor, the agency or end client is responsible for PAYE being operated correctly. Our staff augmentation guide covers the detail.
Nearshore and India pay: what published data shows
Conversions use ECB reference rates for 11 November 2026: $1.3307 per pound and PLN 3.958 per dollar. The figures come from Statistics Poland, the Stack Overflow survey, ONS and BLS.
| Country | Source and date | Published figure | Annualised in USD | Share of US median | Share of UK median |
|---|---|---|---|---|---|
| Poland | Statistics Poland, October 2024 data, published 10 February 2026 | PLN 13,900 a month, median, software and applications developers and analysts | $42,145 | 31% | 53% |
| India (reported) | Stack Overflow 2025 Developer Survey | Median total pay: back-end developer $22,086; full-stack $13,949 | $22,086 (back-end) | 16% | 28% |
| UK | ONS ASHE, April 2026 | £59,863 median | $79,659 | 59% | 100% |
| US | BLS OEWS, May 2025 | $135,980 median | $135,980 | 100% | 171% |
Read the caveats first. The Polish figure is the median for employers with 10 or more staff and is two years old; the average was higher, at PLN 15,629.51 a month. The Indian figure is self-reported: 1,093 India respondents gave pay, 205 of them back-end developers, and the same survey puts the US back-end median at $175,000, well above BLS. Within the survey, Indian back-end pay is 12.6% of the US median and 20.3% of the UK one ($108,913). Mexico's government Data México platform shows an average of about MXN 11,000 a month for occupation 2271 in the first quarter of 2026, but it warns that its salary data have low statistical precision, so we leave it out. We found no verified occupation-level figure for Colombia.
Local pay is not a vendor rate. A quote is roughly:
Vendor rate = [Local pay x (1 + local on-costs) + vendor overhead per head] x (1 + margin) / billable hours
Ask each vendor to show that build-up for the named people on your account. A rate far below what local pay implies usually means junior staff or hours you will pay for twice in rework. Our guide to dedicated offshore product teams explains why per-hour comparisons alone mislead.
Hidden costs that decide the real rate
Management overhead
Someone on your side writes requirements, reviews pull requests and owns acceptance. That time exists in-house too, but it grows with distance and vendor turnover. We assume an extra 10% of vendor spend for nearshore and 15% for India; measure your own for a month.
Time-zone overlap
The table assumes 9:00 to 17:30 local hours at both ends and no shifted schedules. Mexico City has stayed on UTC-6 all year since Mexico's time zone law took effect on 30 October 2022 and limited seasonal clock changes to the northern border.
| City pair | Offset (winter / summer) | Shared hours of a standard day |
|---|---|---|
| New York and Mexico City | 1 h / 2 h | 7.5 h / 6.5 h |
| New York and Bogotá | 0 h / 1 h | 8.5 h / 7.5 h |
| New York and Warsaw | 6 h | 2.5 h |
| New York and Gurugram | 10.5 h / 9.5 h | 0 h |
| San Francisco and Gurugram | 13.5 h / 12.5 h | 0 h |
| London and Warsaw | 1 h | 7.5 h |
| London and Gurugram | 5.5 h / 4.5 h | 3 h / 4 h |
| London and Mexico City | 6 h / 7 h | 2.5 h / 1.5 h |
India teams serving US clients usually run shifted hours, which can carry shift allowances and add to turnover risk. We charge a productivity drag of 8% for US-India, 5% for UK-India and 2% for same-zone nearshore pairs.
Attrition
Every replacement costs ramp-up time. We assume vendor-side turnover of 15% a year and a quarter-year of lost output per replacement, removing 3.75% of useful hours. Ask for trailing 12-month attrition on comparable accounts and named-resource replacement terms.
Legal and IP
India's Copyright Act makes the employer the first owner of work its staff create under a contract of service, absent an agreement to the contrary (section 17(c)), so the vendor owns the code until it assigns it to you. Section 19 punishes loose contracts: an assignment must be written and name the work, rights, duration and territory; with no period stated it is deemed to last five years; with no territory stated it is presumed to cover India only; and rights not exercised within a year lapse unless the assignment says otherwise. Insist on a written, worldwide, full-term assignment and repository ownership from day one.
Security and data protection
The controls are the same in any country: repositories and cloud accounts in your name, single sign-on through your identity provider, managed or virtual devices, least-privilege access, readable logs, and offboarding within a day. Put them in a security schedule with audit rights. India's DPDP Act exempts an Indian vendor from most of its duties when it processes data about people outside India under a contract with a foreign client, but the duty to keep reasonable security safeguards still applies, and your UK GDPR or US state-law duties travel with the data (section 17(1)(d)). If the vendor also handles data about people in India, see our DPDP Rules checklist.
We put travel, legal review and security tooling at $6,000 (£4,500) a head per year for India and $4,000 (£3,000) for nearshore.
The tax lines: Section 174 and UK R&D relief
US: Section 174. Software development counts as research or experimental spending under both sections. Domestic spending is deductible in the year paid under Section 174A. Foreign research, meaning research conducted outside the US, Puerto Rico and US possessions, is amortised over 15 years from the midpoint of the tax year, so only 1/30 is deductible in year one. Mexico, Colombia and Poland are as foreign as India. How vendor fees are treated depends on the contract, so have a tax adviser review it.
Take $600,000 of offshore development in 2027. The year-one deduction is $20,000 instead of $600,000, so at the 21% federal corporate rate a profitable C corporation pays $121,800 more tax in year one, recovered over the next 15 years. At an 8% discount rate (our assumption), the present-value cost is about $51,200, or 8.5% of the spend.
UK: R&D relief. The merged R&D expenditure credit pays a taxable 20% on qualifying spend, about 15% net for a company paying the 25% main rate of Corporation Tax. HMRC notes restrictions on claiming some expenditure incurred overseas. If half your in-house developers' time qualifies, the credit cuts their effective cost by about 7.5%, to roughly £36.90 an hour, a benefit that can disappear when the work moves abroad.
The formula and a worked example
The test is simple: what does one useful hour cost, after everything?
Offshore cost per useful hour = [R x B x (1 + o + s) + F] / [B x (1 - d)]
Break-even rate R* = [C x B x (1 - d) - F] / [B x (1 + o + s)]
R = all-in vendor rate per billed hour (your quote)
B = billed hours per person per year
o = extra oversight on your side, as a share of vendor spend
s = Section 174 present-value cost (US buyers only)
F = travel, legal and security costs per person per year
d = productivity lost to time-zone drag plus attrition ramp
C = your in-house cost per productive hour
Labelled assumptions used below (eCorpIT editorial assumptions for illustration, not measured data):
| Input | US-India | US-Mexico or Colombia | UK-India | UK-Poland |
|---|---|---|---|---|
| In-house cost per hour, C | $94.50 | $94.50 | £39.89 | £39.89 |
| Billed hours, B | 1,800 | 1,800 | 1,800 | 1,800 |
| Extra oversight, o | 15% | 10% | 15% | 10% |
| Section 174, s | 8.5% | 8.5% | 0% | 0% |
| Time-zone drag plus attrition, d | 11.75% | 5.75% | 8.75% | 5.75% |
| Fixed costs, F | $6,000 | $4,000 | £4,500 | £3,000 |
| Break-even rate, R* | $64.81 | $73.26 | £29.48 (about $39) | £32.67 (about $43) |
Without Section 174 the US break-evens would be $69.62 and $78.95. With the UK R&D adjustment above, the UK break-evens fall to about £27.10 for India and £30.10 for Poland.
Worked example: a software company adding six developers in 2027. In the US, six in-house developers at the median cost about $1,040,900 a year and deliver about 11,015 productive hours; if the H-1B payment returns, hiring all six from abroad would add $600,000. In the UK, six cost £416,480 for 10,440 productive hours. The quotes in the left column are test inputs, not market prices.
| If your all-in quote is | US-India cost per useful hour | US-nearshore cost per useful hour | Annual cost to match six US hires (India / nearshore) |
|---|---|---|---|
| $35 | $52.77 | $46.38 | $581,300 / $510,800 |
| $45 | $66.77 | $58.95 | $735,500 / $649,400 |
| $55 | $80.77 | $71.53 | $889,700 / $787,900 |
| If your all-in quote is | UK-India cost per useful hour | UK-Poland cost per useful hour | Annual cost to match six UK hires (India / Poland) |
|---|---|---|---|
| £20 | £27.95 | £25.11 | £291,700 / £262,200 |
| £25 | £34.25 | £30.95 | £357,500 / £323,100 |
| £30 | £40.55 | £36.78 | £423,300 / £384,000 |
The pattern is the point. A US buyer saves about 29% at a $45 India quote even after oversight, drag and Section 174. A UK buyer at a £30 India quote pays about 2% more than in-house, because UK in-house pay is so much lower to begin with.
The model assumes equal seniority on both sides and ignores AI coding tools, which change output per engineer everywhere; see our coding model cost comparison.
Four options side by side
| Measure | US in-house | UK in-house | Nearshore (Mexico or Colombia for US; Poland for UK) | India offshore |
|---|---|---|---|---|
| Cost per productive hour or break-even | $94.50 | £39.89 | Under $73.26 (US) or £32.67 (UK) | Under $64.81 (US) or £29.48 (UK) |
| Shared hours, standard day | Full | Full | 6.5 to 8.5 h (US); 7.5 h (UK) | 0 h (US); 3 to 4 h (UK) |
| Tax treatment | Deductible at once | RDEC can apply | US: 15-year amortisation; UK: overseas restrictions | Same as nearshore |
| 2027 policy exposure | $100,000 H-1B payment for hires from abroad if courts reinstate it | IR35 and umbrella PAYE for contractors | Contract terms | IP assignment under Indian law; DPDP security duty |
Decision table: choose X if
| Choose | If |
|---|---|
| US in-house hire | The work is core IP, needs real-time collaboration, or quotes exceed about $65 (India) or $73 (nearshore) |
| H-1B hire from abroad | The skill is scarce in the US and still worth it if a $100,000 payment returns, about 19% of three years' employment cost |
| Mexico or Colombia nearshore (US) | You need same-day collaboration in US hours and quotes sit well below $73 |
| India offshore (US) | Work can be specified ahead, handoffs can run overnight, and quotes sit well below $65 |
| UK in-house hire | India quotes exceed about £29.50, or R&D relief on in-house staff matters to you |
| Poland nearshore (UK) | You want near-full overlap with London and quotes come in below about £32.70 |
| India offshore (UK) | Quotes sit clearly below £29.50 and the work tolerates a 3 to 4 hour overlap |
Implementation checklist
- Recalculate C with your own salaries, benefits and hours.
- Collect three all-in quotes with named people, seniority and billable hours.
- Run each through the formula with your own o, d, F and, for US buyers, s.
- Have a tax adviser confirm Section 174 (US) or R&D relief (UK) treatment.
- Put a worldwide, full-term IP assignment and repository ownership in the master agreement.
- Attach a security schedule with access, device and offboarding controls.
- Pilot for 6 to 8 weeks on real backlog items and measure output, not hours billed.
- If any plan relies on H-1B hires, track the appeals, the proposed $103,265 fee rule and the 21 September 2027 expiry.
How eCorpIT can help
eCorpIT is a Gurugram-based technology organisation, founded in 2021, assessed at CMMI Level 5 and MSME certified, with senior-led engineering teams working across AWS, Microsoft and Google platforms. If you are weighing an India team against an onshore hire, our application development services team can walk your quotes through the formula above, line by line, including the assumptions you should change. Talk to us at /contact-us/.
Last updated: 12 November 2026.
