When your CFO asks about the cost of your engineering team, the first number you think of is salary. But as any technology leader knows, that figure is only the beginning. The Total Cost of Ownership (TCO) for an engineer includes a host of hidden expenses — recruiting, benefits, tools, overhead, and even the cost of a slow or failed hire.
Without a clear picture of these factors, forecasts break down, budgets balloon, and scaling efforts stall. The challenge is transparency. Traditional hiring models hide costs across multiple line items, making it nearly impossible to plan with confidence.
This guide breaks down the direct, operational, and strategic costs that shape your true TCO — and shows how a nearshore partnership with Howdy.com transforms the math from unpredictable to precise.
The direct costs: the predictable expenses
These are the line items you’ll see in every budget, but they quickly drive total costs far beyond base salary:
- Base salary: The largest and most obvious component
- Benefits: Health, dental, and vision insurance (adds 15–20%)
- Payroll taxes: FICA, Medicare, unemployment (8–10%)
- Bonuses and equity: Performance pay and stock options
- 401(k) matching: Direct company contributions
A U.S.-based engineer earning $150,000 can easily reach $200,000+ in TCO once these expenses are factored in.
The operational costs: the hidden overhead
This is where complexity — and waste — often creeps in. These expenses are required to support engineers and make them productive:
- Recruitment: Agency fees (20–25%), job boards, internal recruiter time
- Onboarding and training: Manager time, peer ramp-up, training programs, software licenses
- Tools and equipment: Laptops, IDEs, Jira, cloud service accounts
- Office and facilities: Rent, utilities, and per-employee overhead
The strategic costs: the hardest to measure
These costs don’t show up on a balance sheet, but they can hit your business hardest:
- Bad hires: Productivity loss, morale damage, and replacement costs can exceed $500,000
- Slow hires (vacancy costs): Every week a critical role sits unfilled delays the roadmap and gives competitors an edge
How a partnership model simplifies TCO
With Howdy.com, the tangled costs of traditional hiring are replaced with one predictable rate.
- No recruitment fees: Eliminate the 20–25% agency tax
- No benefits or payroll overhead: All-inclusive pricing covers HR and compliance
- Reduced risk: Rigorous vetting minimizes the financial hit of a bad hire.
Conclusion
The true cost of an engineer is far greater than their salary. Hidden expenses in recruiting, benefits, overhead, and risk create unpredictability that slows growth and frustrates finance leaders.
For companies that need clarity, predictability, and speed, the nearshore model changes the equation. Howdy.com connects you with the top 1% of vetted LatAm engineers at a transparent, all-inclusive rate — so you can forecast with confidence, scale sustainably, and invest where it matters most: building great products.