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Comment by vbezhenar | Hacker News Reader

I don't live in USA. I'm getting paid around $2500/month and that's good salary for developers here, plenty of folks are getting below that number.

So this pricing is just completely outside of our economics and nobody I know would pay that, no company will justify spending $20k/month when they can hire 10 more developers instead.

It is very interesting unfolding of events. Can't wrap my head around it completely.

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I'll add a concrete example from a not-too-cheap-anymore EU country: Estonia.

* Average software dev salary in Q12026: 4945€ / month [1]

* Total cost for the employer: 6616.41€ [2]

For $20k/month, you'd get 2 x full time mid-level developers + 1x junior dev or QA.

So the calculation becomes: which option can produce better results for your specific use-case, "you + Fable" or "you + 2x mid-level developers + 1x QA". (and from personal experience, mid-level in Estonia = senior dev in the US, in terms of skillset and experience.. but YMMV)

(Of course that's simplified. Your full time devs need _some_ level of AI subscription as well + hardware so add a couple of hundred to their salary per month etc so you might only be able to afford 2x mid level devs, instead of 2.5)

[1]: https://palgad.stat.ee/en

[2]: https://www.palgakalkulaator.ee/en

I'm currently working for an Estonian startup and we pay quite a bit more than that. We hire remote (primarily across Europe) and our biggest issue is finding the right people. You need to consider AI can be "hired" or "fired" instantly too, so it's better to compare it to contractor rates, which start at around €350/day or €7000/mo (20 working days) in Europe.

(Our team spend on AI devtools comes out to around $1500/person/mo)

Sure, we pay above market rate as well :) Doesn't change the fact that the average across Estonia is as stated :)

- Total cost for the employer: 6616.41€ [2]

This is a good start, but the calculation doesn't include office space and overhead (for every 100 developers there is maybe 5-10 support staff to cover the additional legal / administrative, and don't forget the extra cost in supervisor time to manage them)

Exactly, that's why I wrote that it's simplified and the actual full cost to the company depends on your company size and setup (fully remote vs in office, management heavy vs lean-flat etc). One point though, from personal experience, I'm spending an order (or two) of magnitude more time in "managing" an agent than I spend in managing employees - so that part might come out cheaper in the end for having actual employees ;)

Well you can just scale your AI employees up and down as much as you want. Companies already pay a large premium for freelancers just to be able to fire them on a whim, so spending 5-10k a month on something that more than doubles the productivity of a senior developer might be well worth it as you can just adapt spending based on your business needs. If you can deliver a feature that lets you write a 100k invoice with 10-20k of tokens within a month or have a senior dev crunch that out in 6 months instead I think it's clear who wins. It's all about money and the AI companies know that, they have their pricing down exactly to sit in the sweetspot where it hurts just enough that companies can still afford it but not enough that they would look for cheaper alternatives.

Not justifying AI expenses, but $2500/mo could easily cost employer close to 5000$/mo depending on country.

In Sweden I always heard the figure to double the income of the person to get what the company actually pays, including taxes and "employers fee". I know this has gone down a lot in recent years, also not sure if it was ever exactly true, but likely very close anyway.

Hitting the first calculator I found gave me 50 kSEK costs 69 kSEK. So far from double nowadays.

Not doubting this at all but could you (or someone else) break this down for the sake of my curiosity?

I understand pension contributions, but what are the other "hidden" costs that could equal the net salary?

In the UK, a £45k/yr employee pays their own tax and gets a take-home of £35k.

The employer pays £6k for National Insurance (atop the employee's NI contributions). Pension: 2-3k. Apprenticeship levy is £300. 3yr-amortised recruitment fee is £4000. Hardware costs: £1000. Office space £5000. Software/tools: £2500. Benefits: £1500. Training: £1000. Other admin overheads £500.

You pay that person for ~250 working-days, but they only attend for ~220, due to annual leave and sick pay, so you get around £62k worth of attendance out of that person in exchange for £70k, of which the employee sees £35k.

a more honest way to look at it would be that the government gets 50% of the employees total expense to the company, so it is basically 50% income tax

Example from Germany: Employer also pays a share of health insurance, unemployment insurance, public pension and elder care insurance.

This is not visible on your payslip, i.e. if you earn 5k€ brutto, the employer has to pay these shares on top of that.

But that is 20% not 100%. And in most non retarded countries brutto is actually brutto, because there is no need to lie to people about how much the government takes away

The 100% figure is coming from the comment above mine, actually. As for the rest of your comment, your assessment is noted.

Historically, this has nothing to do with lying, but is all about the founding idea of the social security system that all parties (workers, employers, state) carry part of the burden. Employers were supposed to pay their fair share because they also benefitted from the system (a sick or injured employee is not a productive one). Or saying it differently: the employer pays an insurance premium to reduce the effects of sickness. That premium is tied to the „value“ of the employee as measured by their salary.

There is plenty to improve with the system but to call it „retarded“ considering how much good it has brought to the world seems quite wrong to me. I don’t want to work in the pre-Bismarck era

In the US, over and above salary, payroll taxes add 7.65%, pension contributions might be up to 5%, and employer healthcare and other insurance contributions can be in the thousands, plus other benefits, equity compensation, and per-employee software licensing, and lots of people just estimate 2x salary as the “total cost” of an employee, although that probably overstates it a bit.

In the UK, employers pay a stealth tax of 15% (recently increased from 13.8%) on top of the quoted salary minus the first £5k (recently decreased from £9,100.)

So your "£50k" salary actually costs your employer £56,750, and that's before all the other expenses mentioned elsewhere in this thread such as hardware, office rent etc.

A quick google tells me that software devs usually count for 20% to 40% of the total workforce in a software company. The rest is overhead that increases with every added dev.

And if one were to compare cost of a dev vs cost of an LLM, the dev comes with the cost of workspace, computers, sick pay, summer party, conferences and etc etc.

> no company will justify spending $20k/month when they can hire 10 more developers instead.

one big enough to license the model and self host on existing infra.

Hiring 10 more developers comes with its own set of difficulties and additional overhead

now if only onboarding people was as easy as onboarding the bots is getting

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