Outsourcing in the U.S.: Are Developers Being Underpaid?

Outsourcing promises companies reduced costs, increased efficiency, and access to a global talent pool. However, despite its perceived benefits, this outdated method has been criticized for issues like control challenges, hidden costs, and other drawbacks (as explored in our article "Exposed and Outpaced: Why Outsourcing is Dead in 2024").

While we often discuss the downsides for companies, one question remains unanswered: What about the developers who make it happen? Are they being fairly compensated for their work? The answer may be more complex than you think.

In this article, we will discuss why outsourced developers are underpaid and explore the consequences of this social injustice.

Untransparent salaries?

Clients often have a skewed perception of developer salaries due to a lack of transparency in outsourcing. Companies might advertise low hourly rates without disclosing potential markups or developer compensation.

For example, a client seeks a senior developer for a complex project. Based on a general sense of "programmer" salaries, they expect to pay around $50,000 annually.

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In reality, the actual market rate for a developer with the required skills could be closer to $100,000. This gap leads to confusion and potential project breakdown. According to a recent survey, the average salary for a software developer in the U.S. is $132,000 per year.

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However, developers who work for outsourcing companies often earn significantly lower salaries. In some cases, developers may only earn $81,000 annually, even though outsourcing companies charge their clients much higher rates.

Unreasonable high fees?

Some outsourcing companies take a significant cut of their developers' earnings – sometimes as high as 50%. While some companies may charge less, others might push the upper limit. This can lead to:

• Reduced motivation. Developers who feel undervalued due to low take-home pay may become less engaged and less motivated. This can lead to decreased productivity and lower-quality deliverables.

• Diminished job satisfaction. Feeling unfairly treated can make developers look for greener pastures. This constant turnover can disrupt projects and cost the outsourcing company a lot of money.

• Talent drain. As talented developers realize the limited earning potential within the outsourcing model, they may choose alternative career paths, such as working with an augmentation company, where they can have decent earnings and ways to show their potential. Otherwise, such limitations may lead to a shortage of skilled professionals in the outsourcing industry.

High fees also affect the entire outsourcing industry. When developers aren't paid well, they can't invest in learning new skills. This can lead to outdated knowledge and lower-quality services overall. That's why it's important to explore other models, such as augmentation, which can provide developers with decent conditions.

Engagement question

Despite their significant contributions to projects, underpaid outsourced developers often feel undervalued and underappreciated by their employers.?

They may become less invested in the project and less willing to go the extra mile to ensure its success.

A lack of recognition can diminish developers' attention to detail, resulting in more bugs and errors in their code.

Ethical concerns

When developers are paid so little, it can have a devastating impact on their lives and their families. It can make it difficult for them to afford basic necessities like food, housing, and healthcare.?

Such realities may also lead developers to stress and anxiety, which can negatively impact their mental and physical health.

Companies that retain a significant portion of developer earnings may create an environment that can lead to negative consequences.

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If developers feel their compensation is not fair, it can quickly erode morale. This dissatisfaction can manifest in various ways, such as decreased productivity, increased turnover, and a negative impact on company culture.

For example, a company charges a client $200 per hour for a developer's time. However, the developer only receives $50 per hour of their billable rate. This creates a sense of unfairness and ethical ambiguity.

Rage difference?

It's common in the tech industry: a serious gap often exists between a project's total cost and the portion that directly benefits the developers who bring it to life.?

For example, a client might pay a substantial sum for a custom software sol. At the same time, the developers, who are the driving force behind its creation, may receive a relatively minor portion of the total fee. This disparity can raise questions about fairness and value.

Wrapping up

The outsourcing model clearly does not work for developers. This practice is not only unfair but also harmful to the economy.?

When developers are paid low wages, they are less likely to spend money on goods and services, which can slow economic growth.

It is time for businesses to examine this issue more closely and find ways to ensure developers are paid fairly.?

For example, our augmentation model guarantees that developers always receive decent salaries that reflect their skill level and readiness to complete any of your projects.

Collaborative. Transparent. Guaranteed. UNITEDCODE

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