How Does Ukrainian R&D Staff Augmentation Work?

Quick Summary - Staff augmentation is an attractive option for companies wishing to expand the size of their team without the fully-loaded costs associated with in-house employees. Here we examine in some detail the costs associated with staff augmentation in opening an R&D center in Ukraine

How Does Ukrainian R&D Staff Augmentation Work?

Augmenting your R&D team

Within the staff augmentation program, the average rate for a mid-level software developer is a nearly all-inclusive $50,000 per year. For junior developers, rates may drop by 35%; for more senior developers rates can increase by 70%, possibly more. Ukraine has one of the largest tech talent pools in the world, so you can find the full spectrum of IT job titles and experience ranges to suit your requirements.

We have to say “nearly” as for all non-salaried personnel, work is charged by the hour – and corresponds to an annual wage but that can increase with overtime work. Costs like specialized training, travel, and per diem travel expenses are not included. Providing your augmented team members additional benefits, bonuses, and gifts, are also not included.

Nevertheless, the range and quality of technical skills offered by Ukrainian IT specialists come with a significant cost advantage over hiring internal employees in most other countries. Depending on your location, you can have between 2 to 4 Ukrainian developers or engineers working on your project for the cost of hiring 1 local developer.

Health Insurance

It may be surprising to many, but Ukraine generally doesn’t have health insurance requirements like most countries. Medical care is officially provided for “free” to all Ukrainian citizens. Technically, this can be debated. It’s customary for everyone to “tip” the doctor when making a visit to a public hospital or clinic and/or pay for the costs of medical supplies. There are private for-profit medical clinics, but in most cases, the costs associated with their services are extremely mild compared to what you would pay in the United States.

For a few comparisons:

  • An EKG at an emergency room in the US could easily cost $5k, but was provided for free by Ukrainian paramedics responding to an emergency call… on a Saturday night.
  • A minor surgery to remove a cyst at Into-Sana, a private clinic, cost all of $135 to include a follow-up visit.
  • A trip to a dentist to fill a cavity typically runs about $35.

Health insurance costs for single employees in the United States is $7200 per year (and rising). They may pay 80% of hospital bills with employees paying the other 20% as deductibles, up to their yearly out of pocket maximums. In Ukraine, one American Expat attests to paying a grand total of less than $2,000 over the course of 15 years for medical, dental, and prescriptions. Major medical expenses can be an issue, thus it’s worth expanding on this discussion separately.

Employee Benefits

When using PerceptionBox for staff augmentation, the primary benefits provided to your team members include 3 weeks of paid vacation and sick time per year, plus 11 state-recognized holidays. If you would like to offer additional perks to your team, we’re happy to assist. These are variable expenses.

Few companies offer stock options, though some occasionally offer bonuses or prizes. More commonly, companies may host pizza days, annual dinners and awards ceremonies, club memberships, and company paraphernalia (t-shirts, coffee mugs, tote bags, etc.). Incidentally, in addition to local pizzerias, Ukraine does have Domino’s Pizza outlets – and large pepperoni pizzas for just $5… delivered in 30 minutes or less.

Office space as needed

Kyiv, as Ukraine’s capital and economic center, is more expensive than Ukraine’s other tech hubs of Kharkiv, Lviv, Dnipro, and Odesa. The median rate for office space in Kyiv is $25 per square meter. Office space rates in other tech hubs are closer to the $15 per square meter rate in Odessa. Based on the US average of 150 square feet (13.94 square meters), yearly costs range around $4200 and $2500, respectively. In comparison, this is 10 to 50% lower than cities like Tel Aviv, but 65-80% lower than San Francisco.

Infrastructure

High-speed Internet access is readily available in all major cities and most outlying areas. Unlimited home services offered by most ISP’s run $10 or less for up to 100 Mbps download speeds for broadband and WiFi connections or about $15 monthly for superfast 1 Gbps lines. Corporate options can run to $50 per month per VLAN user with 80 Mbps upload/download speeds, with additional options available. Requirements may vary, like with Big Data companies requiring several Terabytes of data daily.

Equipment and furnishings

If you are setting up a new, fully furnished R&D center, it will be necessary to procure the hardware your R&D team will use. This includes computers, laptops, workstations, servers, scanners, printers, other peripherals, and possibly inter-office phones. Some hardware like high-end AR/VR/XR glasses, gloves, and highly specialized equipment for engineering, measuring, and testing R&D activities may also be required. Also, you’ll need desks, chairs, filing cabinets, and other sundries.

Nearly all of these are one-time expenses that can be amortized over time. The cost is highly variable, but can be divided into:

  • common equipment that every developer needs
  • specialized equipment based upon a ratio of developers
  • unique equipment requiring only 1 or 2 per office

Perception Box provides a PC/Laptop/Macbook/Workstation, desk and chair for each engineer you hire to take care of your basic requirements. It will be necessary for you to provide any specialized equipment your team may need. For example, if you plan to engage in Extended Reality projects and need an MS Hololens 2, that will add around $3,500 and possibly another $1,000 annually for a Dynamics 365 Remote Assist subscription. It’s not likely every developer will need their own set. Mid-range sets like Oculus Rift or Wireless Quest are available for $400-500.

These costs are paltry compared to specialized lab equipment. Many companies have medical R&D labs in Ukraine. In the field of medical imaging, MRI scanners start at about $1 million. In surgical robotics, a da Vinci XI costs around $2 million.

So, equipment costs are best left to your chief technical or procurement officer to define.

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Accounting and legal support for employees

Working with PerceptionBox for staff augmentation is the closest thing you can get to a turnkey office solution in Ukraine. The costs for legal support, payroll, tax reporting, and accounting are included in the costs of our staffing services. Your R&D Team will be employed in Ukraine by PerceptionBox so you don’t have to register your business. In all other respects, the R&D Team will work for you as if they are your employees.

However, if you do want to register your business in Ukraine, PerceptionBox is happy to assist you. In the increasingly distant past, doing business in Ukraine was beset by quite a few difficulties. According to the WorldBank, Ukraine now ranks 64th out of 190 countries in its Ease of Doing Business reports. While that may seem just slightly better than average, Ukraine’s advanced almost 90 positions in just ten years.

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Travel support

Ukraine doesn’t require a travel or tourist visa from citizens of most countries, including the USA, EU, UK, Israel, and select other nations for visits of up to 90 days within any 180-day period. Visas for longer stays in Ukraine are readily issued by Ukrainian consulates and PerceptionBox can assist you with securing Work Visas if needed.

All capital cities in Europe have direct flights to Kyiv. In North America, Toronto and New York City have direct flights to Kyiv, with Asia having direct flights from as far away as New Delhi and Dubai.

Office utilities and snacks

Office utilities – for a team of 30 with some employees working from home about $80 per month for water, electricity, and/or gas. You’re pretty safe assessing an average of $3 per month per employee. Some R&D activities could cause your electric bill to run higher.

Coffee, snacks, and a purified water dispenser – for a team of 30, runs about $65 per month. Obviously, if you go all “Silicon Valley” and offer free lunches, it’ll be more.

There are some other costs like office insurance to also consider that we didn’t have time to include before publishing this post. However, we will add them as details come in.

Estimated annual cost for an R&D Office with 30 Employees

To put everything together in a simple fashion, the annual costs for an R&D office in Ukraine, located in Kyiv amount to $1.63 million. Hardware costs are non-trivial, but again they are usually one-time costs that can be amortized. As noted though, some hardware may require subscriptions or increase your utility bills.

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Summing up R&D in Ukraine

We understand that the #1 most important factor to any companies R&D effort is Quality:

  • According to SkillValue, Where to Find the Best Developers in 2019, US software developers ranked #27 globally with a technical rating of 84.59% on 550 technical assessments. In contrast, Ukrainian software developers ranked #5 globally with a rating of 93.17. Indeed, most of Eastern Europe has very high technical proficiency ratings. Ukraine’s been consistent in this regard, ranking 4th in the European IT Outsourcing Intelligence Report 2010.

Here, we have emphasized the cost advantage, as for many tech startups it is the #2 most important issue to maximize their funding runway. All companies, SMBs to Enterprises, are concerned with value. One key to understanding value is that the Value of the Dollar (or any other currency) is not the same everywhere. The more you investigate, the more you are likely to find your way to Ukraine. We look forward to meeting you!

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