After recent discussions with leadership teams at tech companies, it's clear that many US-based software businesses continue to prioritize cost efficiency and engineering performance. If you're looking to follow this approach, consider the equation: An American software engineer earning $200k annually would only cost approximately $80k if based in Latin America.
The potential savings go beyond just base compensation. Within three years, a US-based engineering role will accrue one-time fees of $60-80k and increased operational costs of $360-450k.For small teams consisting of 5-10 individuals, this approach can save millions when managed effectively. Our organization specializes in overcoming the unique challenges of managing remote engineering teams, possessing the necessary expertise to assist you in building and maintaining exceptional engineering teams anywhere in the world.
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Here’s a breakdown of the math:
👨💻 Ongoing operating costs: in general, you can expect a 2-3x reduction in compensation for talent in Latin America (our salary guide gives a more granular view of compensation at different seniority levels). Contractor relationships (as opposed to employee relationships), provide additional savings in terms of payroll taxes. We’re advocates of contractor relationships in Latin America (via our Remotely model).
– Assuming an annual salary difference of $200k vs $80k for the same talent profile, you are looking at $10k per month in salary alone via Remotely. More when you consider payroll taxes, health insurance and other overhead costs.
🔎 Recruiting costs: recruiters charge in the vicinity of 15-20% of base salary, so you’re looking at a $30-40k one-off expense with a technical recruiter in the US. The technical recruiter is incentivized to keep the developer retained through their 3-6 month guarantee but then welcomes the opportunity to place the developer elsewhere (to earn another fee).
–With Remotely’s model, there’s no recruiter fee, giving you $30-40k in savings.
🤝 Retention costs (or lack of thereof): having built and operated teams in US, UK, and Latam, we’ve seen consistently higher loyalty and employee engagement in Latam than in the US (or UK). Retaining US developers is harder, and churn is higher–and replacement costs are more frequent. To retain your team size, you’ll need to hire more developers in the US than in Latam in order to make up for the attrition.
Want to see what these numbers could look like for your company? https://lnkd.in/eVA3Xa_8
