Engineering budget after a raise: what one engineer costs, and the other lines

After a raise, one of the first spending decisions is who to hire. The salaries are public, and so are most of the other costs of an employee. This page puts the figures together for one engineer in the United States, then sets out the rest of the engineering budget for a product that uses AI. It is part of the guide on building your AI product after you raise.

What a software developer earns

The US Bureau of Labor Statistics (BLS) publishes wages by occupation. Its handbook page for software developers says: "The median annual wage for software developers was $135,980 in May 2025" [1]. The BLS defines the median wage as "the wage at which half the workers in an occupation earned more than that amount and half earned less" [1].

The range is wide. The BLS reports that "The lowest 10 percent earned less than $82,460, and the highest 10 percent earned more than $214,670" [1]. Wages also differ by industry. The same page lists a median of $164,550 for software developers working for software publishers and $132,050 for those in computer systems design and related services, both for May 2025 [1]. For comparison, the median annual wage for all workers in the United States was $50,980 in May 2025 [1].

The BLS expects the number of these jobs to grow. It projects that employment of software developers, quality assurance analysts and testers will grow 10 percent from 2025 to 2035, which it calls "much faster than the average for all occupations", and projects 106,100 openings a year on average over that decade [1].

What an employee costs on top of the wage

A US employer pays taxes on each employee's wages, and on average it also pays for benefits, as the BLS survey below shows. The IRS publishes the tax rates.

• Social Security tax. "The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee" [3]. The employer's share applies to wages up to a limit, called the wage base. "For earnings in 2026, this base limit is $184,500" [3].
• Medicare tax. The rate is 1.45% for the employer and 1.45% for the employee, and "There's no wage base limit for Medicare tax" [3]. An Additional Medicare Tax of 0.9% applies to an employee's wages above $200,000 a year. The employer withholds it from the employee's pay, and "There's no employer match for Additional Medicare tax" [3].
• Federal unemployment tax (FUTA). "The FUTA tax rate is 6.0%. The tax applies to the first $7,000 you paid to each employee as wages during the year" [4]. Employers who pay into state unemployment funds may get a credit of up to 5.4%, and the IRS says the full credit requires paying the state tax in full, on time and on the same wages, in a state that is not a credit reduction state: "If you're entitled to the maximum 5.4% credit, the FUTA tax rate after credit is 0.6%" [4].

State unemployment tax, workers' compensation insurance and health insurance come on top, and they vary by state and by plan. This page gives no figure for them.

The table below is this guide's own calculation for one engineer paid the BLS median of $135,980, using the rates above.

Line	Rate	Applies to	Cost per year
Salary			$135,980.00
Social Security, employer share	6.2%	$135,980 (below the $184,500 base)	$8,430.76
Medicare, employer share	1.45%	$135,980	$1,971.71
Federal unemployment tax, after full credit	0.6%	First $7,000	$42.00
Total before benefits and state taxes			$146,424.47

The three federal taxes add $10,444.47 to the salary. At a salary above $184,500 the Social Security line stops growing, because the wage base caps it.

Benefits, from the BLS employer cost survey

The BLS also measures what employers spend on benefits. Its release for June 2026 says total employer compensation costs for full-time private industry workers "averaged $54.00 per hour", and that wages and salaries "accounted for 68.5 percent of employer costs, while benefit costs averaged $17.03 and accounted for the remaining 31.5 percent" [2]. Legally required benefits were $3.76 an hour, or 7.0 percent of total compensation [2]. For all private industry workers, full-time and part-time together, benefits were 30.0 percent [2].

Those figures cover all occupations. No BLS figure for software developers alone was found for this guide, so the next step is an illustration built on the all-occupation share. If wages are 68.5% of total cost, then total cost is the wage divided by 0.685.

Salary	Total cost if salary is 68.5% of it	Per month
$82,460 (BLS 10th percentile)	$120,379.56	$10,031.63
$135,980 (BLS median)	$198,510.95	$16,542.58
$164,550 (BLS median at software publishers)	$240,218.98	$20,018.25

For the median engineer, the difference between salary and total cost is $62,530.95 a year. Use your own benefit plan and state taxes once you have them. The BLS plans its next release, with data for September 2026, on December 16, 2026, and says that from its December 2026 data it will remove workers' compensation costs from the survey [2]. Check the share again when those releases appear.

Y Combinator's 2016 figure, set against 2025 wages

A Y Combinator guide to seed fundraising, written by Geoff Ralston in January 2016, gave founders a planning figure: an engineer "costs all-in about $15k per month" [5]. Its example was five engineers for 18 months, which comes to $1.35 million: 15,000 times 5 times 18 [5].

That figure is ten years old. The illustration above, from May 2025 wages and the June 2026 benefit share, puts a median engineer at $16,542.58 a month, before any equity. At that figure, the same five engineers for 18 months cost $1,488,832.12. Plan with current figures, and with salaries from the city where you hire.

How many engineers, for how long

The team size and the time to the next round set the engineering budget. Using the median total cost of $198,510.95 a year, as an illustration:

Team	Months	Engineering cost
2 engineers	24	$794,043.80
3 engineers	24	$1,191,065.69
5 engineers	18	$1,488,832.12

Carta's report for the first quarter of 2026 gives a median of two years from seed to Series A [6]. A seed company that hires three median engineers on day one and keeps them for that time spends $1,191,065.69 on them alone. Compare that with your round size before you sign the offers.

The other budget lines for an AI product

An AI product adds costs of its own. List each one in the budget from the start.

• Model fees. Every request to a hosted model is billed by the amount of text in and out. The page what an AI feature costs to run shows how to estimate it per user. Set a monthly spending limit at each provider.
• Hosting and data storage. The servers and databases the product runs on. These grow with users.
• Evals. An eval suite is a set of written, repeatable tests of the product's answers, and someone has to write, run and keep it current. The guide what AI evals cost and who should own them breaks this cost into parts.
• Security and legal work. A large customer may ask for a SOC 2 report, and contracts need a lawyer. See security questions from your first large customer.
• Tools for the team. Code hosting, error tracking and AI coding tools, each priced per seat or per use.

AI companies, valuations and small teams

Carta's figures show investors paying a higher price for some AI companies. Carta's summary of the first quarter of 2026 says "An AI foundational model startup at Series A might be raising at a $300 million median valuation. A non-AI startup at the same stage is at $55 million" [7]. Those are Carta's words, including "might". A foundation model startup is one that trains its own large model. Carta's full report also says "The average round size at Series A is growing" [6].

With a higher valuation, the founders sell a smaller share of the company to pay for the same engineers. David Cahn of Sequoia Capital wrote in December 2025 that AI startups "are themselves using AI agents for functions like legal, recruiting, and sales" [8]. He wrote it about today's founders in general, and he gives no measured share. For the budget, plan headcount and tools together, with each tool's monthly cost listed.

Reveneau's view on the engineering budget

Reveneau's view is that a seed-stage AI company should keep its permanent team small, spend first on the work that reaches the next milestone, and treat every hire as a cost for every remaining month of runway, the number of months the money lasts. Compare hiring with the alternatives using the full cost per month, which for a median engineer is $16,542.58 in this page's illustration. The guide in-house vs outsourcing cost sets out that comparison.

Reveneau is an AI software development consultancy with offices in San Francisco and Vancouver. Reveneau says it uses AI instead of hiring more engineers, so the same build takes a small team, and that it puts that saving into clients' prices. It says AI writes all of its code, every change must pass an eval suite written from the specification, and it takes responsibility for the whole project through production and after release. To compare a build with your hiring plan, see AI development at Reveneau or contact Reveneau. The page how long a seed or Series A round lasts shows how the result turns into months of runway.