Building an engineering budget for the first time is one of those tasks that looks simpler than it is. It's not just a salary spreadsheet — a real engineering budget accounts for every cost associated with building and running a software team, and is structured in a way that survives contact with your CFO or investors.
What does an engineering budget actually cover?
A complete engineering budget typically encompasses:
- People costs: Salaries, employer contributions, benefits, equity, bonuses
- Recruiting costs: Agency fees, job board subscriptions, referral bonuses
- Infrastructure and hosting: Cloud computing, CDN, monitoring, databases
- Developer tooling: IDEs, version control, CI/CD, security scanning, project management
- Contractors and outsourcing: Staff augmentation, specialist contractors, offshore teams
- Learning and development: Conferences, training, certifications
- Hardware: Laptops, monitors, peripherals
- Team events: Offsites, team socials, morale budget
People costs typically represent 70–85% of a tech company's engineering budget. Infrastructure is usually 5–15%. Everything else fills the remainder.
How do I calculate the headcount budget for my engineering team?
Salaries
Start with your current team and planned hires. Use current market benchmark data — not what you paid last year. Salary benchmarks drift meaningfully year-over-year in engineering.
Employer On-Costs
UK employers:
- Employer NIC: ~13.8% on earnings above the secondary threshold
- Pension contributions: minimum 3%, typically 4–6% at competitive startups
- Private medical insurance: £1,500–£3,000 per person
A rough UK on-cost multiplier is 1.25–1.40x base salary.
US employers:
- FICA (Social Security + Medicare): ~7.65%
- Health, dental, vision: £12,000–£20,000 per employee for comprehensive coverage
- 401k match: typically 3–6%
A rough US on-cost multiplier is 1.30–1.55x base salary.
How do I budget for cloud infrastructure as an engineering team?
Cloud infrastructure is often the second-largest engineering cost after people. Useful benchmarks:
| Service | Typical Cost | |---|---| | Managed databases (RDS, Cloud SQL) | £200–£2,000/month depending on tier | | Monitoring (Datadog, New Relic) | £30–£50 per host per month | | Security tooling (Snyk, GitHub Advanced Security) | £20–£100 per developer per month |
Best practice is to model infrastructure as a percentage of revenue — efficient companies run 8–15% of revenue on cloud infrastructure at scale.
What does the engineering tooling stack cost per developer?
| Tool Category | Annual Cost per Developer | |---|---| | Version control (GitHub Enterprise) | £150–£250 | | CI/CD (GitHub Actions, CircleCI) | £100–£400 | | Project management (Jira, Linear) | £80–£150 | | Incident management (PagerDuty) | £100–£200 | | Documentation (Confluence, Notion) | £80–£120 | | Communication (Slack) | £80–£150 | | Total tooling per developer | £700–£1,500 |
How much should I budget for engineering recruiting?
Recruiting is expensive and often underbudgeted:
- Agency fees: 15–25% of first-year base salary per placement. For a £90k senior engineer, that's £13,500–£22,500 per hire.
- LinkedIn Recruiter: £8,000–£12,000/year
- Referral bonuses: Many companies offer £1,000–£3,000 per successful referral hire
As a rough rule of thumb, budget 10–20% of your annual new hire salary cost for recruiting expenses.
What do investors and boards want to see in an engineering budget?
When presenting your engineering budget, they're looking for:
1. Headcount plan with timing — a month-by-month hiring plan showing when capacity comes online.
2. Fully-loaded cost, not just base salary — sophisticated investors will remodel your numbers with on-costs anyway. Get ahead of it.
3. Efficiency metrics — revenue per engineer, infrastructure cost as % of revenue, and engineering cost as % of total OpEx.
4. The ROI case for headcount — which hires are tied to which revenue or product milestones?
5. Scenario modelling — what does the budget look like if you grow headcount 50% faster? 30% slower?
What are the most common engineering budget mistakes?
Budgeting in base salary only: Finance will remodel in fully-loaded costs. Presenting base-only figures creates a credibility gap.
Ignoring ramp time: A hire in October contributes roughly 2.5 months of capacity in-year, not 12.
Forgetting attrition backfill: 10–15% annual attrition is typical. Your "growth" budget needs to include replacement hires, not just net new.
No contingency: Engineering budgets should carry a 10–15% contingency line. Unexpected outages, security incidents, or urgent hires happen.
How TeamCalc Helps You Build the People Budget
The people budget is where most of the complexity — and most of the money — lives. TeamCalc handles the headcount modelling, on-cost calculation, salary benchmarking, and scenario comparison automatically.