When we talk about software development outsourcing, we usually hear numbers that don’t tell the full story. Most people compare a local salary with the total cost of hiring offshore. That already creates an uneven picture, because a local salary doesn’t include all the employer expenses that go with it (insurance, pension, fees).
To make a real, data-driven comparison, we need to look at total cost versus total cost - the full picture of what it takes to employ someone locally in the UK and what it costs to hire an equivalent role offshore through an Employer of Record (EOR).
That’s what Leoni explains in the video below: how these numbers play out in practice for a full-stack software engineer with about five years of experience. The following sections expand on her example with verified 2024-2025 data, including cost modeling, compliance details, and what these numbers mean for scalability and planning.
What it really costs to hire software engineers in the UK
A mid-level software engineer in the UK typically earns around £70,000 per year. That’s the base salary, but it’s not the full cost to the employer.
When you add the legally required employer contributions and standard hiring overhead, the total goes much higher. Employers pay National Insurance at 15% on earnings above the threshold and a minimum 3% pension contribution, which together add around £9,750 annually.
Recruitment costs are also significant. Agency fees for software engineers range between 15% and 25% of annual salary, which can translate to more than £15,000 per hire. Spread over a two-year tenure, that’s about £7,500 per year.
Administrative and setup costs add another layer. Payroll management averages £30 per month per employee, and onboarding equipment and software licenses typically cost around £1,500 annually.
Factoring all these in, the total cost to employ one mid-level software engineer in the UK is approximately £86,150 per year. That’s the real, fully loaded cost, and it’s the benchmark we’ll use for comparison.
What a full package looks like in the Philippines
Now let’s look at the Philippines. When you hire through an Employer of Record (EOR), you work with a local partner that handles the administrative and legal side of employment in the Philippines. This includes managing taxes, benefits, payroll, and employment documentation in line with the Labor Code of the Philippines.
They also coordinate with agencies like the Department of Labor and Employment and the Bureau of Internal Revenue to keep all requirements in order. This setup lets companies hire in the Philippines without creating a local entity and gives employees confidence that their pay and benefits are managed correctly.
For a mid-level offshore software developer with similar experience (around five years), a competitive salary is ₱150,000 per month, which converts to £25,714 per year.
Below are some of the standard employer contributions required in the Philippines:
Then there’s the EOR service fee. A fair mid-market rate is around £480 per month, or £5,760 per year.
Adding all these up gives a total annual cost of £33,600 per engineer fully loaded, with everything included.
UK vs Philippines: The Total Cost Difference
The comparison between the two markets shows a clear difference in what companies actually spend. Hiring a mid-level software engineer in the UK costs around £86,150 a year, while the same role in the Philippines through a compliant Employer of Record costs about £33,600. The gap comes to roughly £52,550 per engineer each year, which equals around 61 percent in total savings.
This difference lets startups and tech companies scale faster. A budget of £260,000 can cover three engineers in the UK or a team of seven in the Philippines through an EOR, with some room left to invest in operations or training. It also creates flexibility to plan around growth and keep delivery consistent without overspending
In 2024, around 12 out of every 100 employees in the Philippines chose to leave their jobs, which is lower than what many UK tech companies experience. In the UK, software engineers often move around more because they’re offered higher pay, new roles, or different projects. As of 2025, around 76% of UK employers reported difficulties finding skilled talent.
In contrast, employees in the Philippines tend to stay longer in their jobs. Consistent pay, reliable benefits, and compliance with labor laws make them feel secure in their jobs. When these basics are handled well, people are more likely to stay and grow with the company instead of looking for new opportunities elsewhere.
That’s also where an Employer of Record helps. It takes care of the operational and legal side of employing staff in the Philippines. When companies use an EOR to manage their Philippine team, they usually notice fewer people leaving, thus smoother progress on projects.
How to Structure Software Development Outsourcing Effectively
If you want your outsourcing setup to last, start by being clear about your costs and your plan for growth.
Know Your Current Costs
Before deciding to hire offshore, check how much it really costs to keep your software development team in the UK. Add everything: salaries, benefits, recruitment, and equipment. After that, request a full breakdown from a Philippine Employer of Record covering all required contributions and employee benefits. Comparing the two gives you a real picture of how far your budget can go.
Start Small and Build Confidence
You don’t have to move all your work offshore right away. Begin with smaller, easy-to-manage tasks like QA, testing, or technical support. Once your process is smooth and communication works well, you can slowly add more roles such as software development or AI engineering.
Grow Steadily
When your setup and costs are clear, it becomes easier to plan when and how to expand. An Employer of Record can help you hire faster and stay compliant, so you can grow your team based on project needs instead of waiting months for recruitment.
Here at LevelUp, we can help outline what your team setup could look like, including costs across software engineering, QA, and DevOps, based on your budget and growth goals.
Getting the Numbers Right
After working through the actual figures, the takeaway is simple: clarity drives better decisions. A total-to-total comparison doesn’t just show where the savings are; it also defines what’s possible with the same budget. For scaling software teams, that level of clarity is worth more than the difference itself.
