The True Cost of Hiring Offshore Developers (Including the Hidden Costs)
What People Think It Costs vs. What It Actually Costs
When companies first look at offshore hiring, they see a monthly salary and think that's the whole number. It's not.
Here's a more complete picture.
What You Pay the Developer
Let's say you hire a senior full-stack developer from the Philippines at $5,600/month. That's $54,000/year.
Compared to a Sydney equivalent at $150,000/year, that's a $96,000 saving. Looks incredible.
The Agency or Platform Fee
If you hire through an agency like Lanex, you pay a management fee. This covers:
- HR and payroll management in the Philippines
- Benefits administration
- Performance management support
- Replacement guarantee
Typical agency fees add 20-30% to the developer's rate. So your $5,600/month developer might cost you $5,400-$5,850 total.
Still a massive saving, but worth knowing.
Onboarding Time
Your offshore developer won't be productive on day one. Budget 4-6 weeks of onboarding time where productivity is lower. This is true of local hires too, but worth accounting for.
Management Overhead
Someone at your company needs to manage this developer. At minimum: daily standups, code reviews, sprint planning. If your current leads are already stretched, offshore expansion without proper management structure creates problems.
Equipment
Offshore developers typically use their own equipment, which is a cost saving vs. local hires.
Communication Tools
Slack, Notion, Jira, GitHub — tools you probably already pay for. Marginal additional cost is minimal.
Total Cost Comparison (Annual)
| Item | Local (Sydney, Senior) | Offshore via Lanex (Senior) |
|---|---|---|
| Salary / Developer rate | $150,000 | $54,000 |
| Superannuation (11%) | $16,500 | $0 |
| Agency / Recruitment fee | $15,000–$25,000 (one-time) | Included |
| Equipment | $3,000 | $0 |
| Office space | $8,000 | $0 |
| Total Year 1 | ~$192,500 | ~$64,800 |
Year 1 saving: ~$127,700 per developer.
And from Year 2, when the one-time recruitment fee disappears for the local hire (but ongoing super and office costs continue), the offshore saving remains consistent.
Is It Worth It?
For most companies: yes, clearly.
The catch is that it requires deliberate management. Offshore developers who are properly onboarded, managed, and included in team culture perform comparably to local hires. Offshore developers who are thrown at a project with no support will underperform.
The cost is lower. The management investment required is similar. The net saving is real.
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