Ask HN: Why is my F500 employer okay with paying 5x to freelancers?
95 comments
There’s a whole world of unintuitive reasons for this kind of thing. Non-exhaustive list:
- Freelancers are OpEx, FTEs are CapEx. They are usually separate budgets so departments split.
- They want to maintain good relationships with the freelance companies in case they need to spin up staffing quickly with top talent in the future.
- They don’t have to pay some benefits and taxes on freelancers.
- Freelancers and consultants are often used to get tabs on ‘industry best practices’, i.e. what your competition is doing.
- Despite what you might think, they might actually be better than the FTEs, or at least perceived to be so.
- It’s easier to fire them when times get tough without as many rules and regulations.
- Freelancers are OpEx, FTEs are CapEx. They are usually separate budgets so departments split.
- They want to maintain good relationships with the freelance companies in case they need to spin up staffing quickly with top talent in the future.
- They don’t have to pay some benefits and taxes on freelancers.
- Freelancers and consultants are often used to get tabs on ‘industry best practices’, i.e. what your competition is doing.
- Despite what you might think, they might actually be better than the FTEs, or at least perceived to be so.
- It’s easier to fire them when times get tough without as many rules and regulations.
That last is especially important.. it is option value. Same reason a one month lease costs more than a one year lease.
I work as a contractor and am managing a small team. I easily do the work at least two people in my team, in addition to managing ("babysitting") the team. While my pay is not 5 times their pay, it is most certainly higher than theirs.
But my most attractive trait is not that I work harder, it is that they can fire me at any point, without giving any reason or any notice. On top of it, they don't have to deal with any personnel issues - if I misbehave, they'd just fire me on the spot or complain to the agency and let me be their problem. No matter how hard I work, I rarely get a word of appreciation. They also don't have to do performance reviews, "rankings", pay discussions etc. Yes, it all comes at a higher cost, but it also removes all the pesky things that nobody wants to deal with.
Think of it like hiring a plumber even though the plumbing issue is small enough for you to fix yourself. You just don't want to do it
But my most attractive trait is not that I work harder, it is that they can fire me at any point, without giving any reason or any notice. On top of it, they don't have to deal with any personnel issues - if I misbehave, they'd just fire me on the spot or complain to the agency and let me be their problem. No matter how hard I work, I rarely get a word of appreciation. They also don't have to do performance reviews, "rankings", pay discussions etc. Yes, it all comes at a higher cost, but it also removes all the pesky things that nobody wants to deal with.
Think of it like hiring a plumber even though the plumbing issue is small enough for you to fix yourself. You just don't want to do it
> it is that they can fire me at any point, without giving any reason or any notice.
Isn't this true for an US non-union employee?
Isn't this true for an US non-union employee?
If they live in an at-will employment state, yes.
Who's talking about USA?
When times get tough they shouldnt hire freelancers in the first place... If they have ongoing hires they pay 3 times as much on a freelancer as they do on an employee... this logic doesn't check out at all
No, the logic is right.
If you have full-time employees you have to fire them when times get tough. In some countries it’s very hard to fire people and it requires months of notice. These laws encourage companies to choose contractors so they don’t get stuck with employees they can’t fire during tough times.
If you have freelancers you can more flexibly pause, delay, or reduce hours and then resume them again when you need them.
You can also scale freelancers to your workload or ability. With each FTE you’re committing to an extra 40 hours of pay every single week, no exceptions. With a freelancer you could have them do 5 hours one week, 0 hours the next, 40 hours after that. Even at 3-5X the rate it could come out to be less costly if the workload is intermittent.
If you have full-time employees you have to fire them when times get tough. In some countries it’s very hard to fire people and it requires months of notice. These laws encourage companies to choose contractors so they don’t get stuck with employees they can’t fire during tough times.
If you have freelancers you can more flexibly pause, delay, or reduce hours and then resume them again when you need them.
You can also scale freelancers to your workload or ability. With each FTE you’re committing to an extra 40 hours of pay every single week, no exceptions. With a freelancer you could have them do 5 hours one week, 0 hours the next, 40 hours after that. Even at 3-5X the rate it could come out to be less costly if the workload is intermittent.
> In some countries it’s very hard to fire people and it requires months of notice
This is, of course, true. I want to add that a company in Europe can still tell you not to come back tomorrow. They would just have to pay for those months of notice as if you were employed. In other words, it is expensive, but it is only a money issue.
This is, of course, true. I want to add that a company in Europe can still tell you not to come back tomorrow. They would just have to pay for those months of notice as if you were employed. In other words, it is expensive, but it is only a money issue.
> In other words, it is expensive, but it is only a money issue.
Bingo. That's all that matters.
Bingo. That's all that matters.
Where's the difference in employing a freelancer for 1 month for 20k vs paying an employee for 3 months for less?
It doesn't make any sense.
It doesn't make any sense.
In some EU countries like Portugal you are also required to pay quite handsome severance based on years worked. Between 15 and 45 days of base salary for each year of service, with a minimum of three months’ salary.
You don't hire the freelancers _when_ the time gets tough, you hire them when you're fine. But _if_ you need to downsize, you can cut them easily.
In a country with strong labor laws, you can't do that with FTEs, you're stuck with them unless they make major missteps.
In a country with strong labor laws, you can't do that with FTEs, you're stuck with them unless they make major missteps.
In some cases you can do layoffs, but that is larger process that takes time. And there are some regulations that mean you must try to find other work inside company for them or offer them job if such comes available. Ofc, you can pay them off if they agree to.
Easy to fire so they can be relied upon to toe the line. Outside the org chain so little risk of becoming a competitor to management. Additionally freelancer orgs are often a vector for mutual back scratching / kickbacks.
I think FTEs are often promised security, a career with promotions, a work family etc. These are expected out of a tradition of norms. Belief in such promises can be exploited to extract more value for less.
Management optimizing for self interest will exploit FTEs as much as they will allow and divert as much revenue to peer owned freelancers as the company will allow.
I think FTEs are often promised security, a career with promotions, a work family etc. These are expected out of a tradition of norms. Belief in such promises can be exploited to extract more value for less.
Management optimizing for self interest will exploit FTEs as much as they will allow and divert as much revenue to peer owned freelancers as the company will allow.
This is a helpful list, thanks :)
Do you happen to have an idea on how to hit companies up and offer myself as a freelancer?
It seems there are non-IT departments that I could help out with getting their AI innovation in order.
Do you happen to have an idea on how to hit companies up and offer myself as a freelancer?
It seems there are non-IT departments that I could help out with getting their AI innovation in order.
Ask the freelancers at your company how they got the job. It's probably through some agency, probably more than one, if your company hires a few freelancers.
Then contact those agencies. Don't ask the freelancers at your company to get a direct contact, they probably have clause in their contract that forbids them to poach employees of their customers.
Then contact those agencies. Don't ask the freelancers at your company to get a direct contact, they probably have clause in their contract that forbids them to poach employees of their customers.
> Do you happen to have an idea on how to hit companies up and offer myself as a freelancer?
You can do cold outreach. Identify a contact and send a message.
Leveraging your personal network is more effective if you can. Freelancers who come through references are more trusted.
Note that if you go through a freelancing agency you won’t be getting the hourly amount they bill your company nor anywhere near it. The amount you get could range from around 80% of what they bill down to 20% depending on the arrangement.
You can do cold outreach. Identify a contact and send a message.
Leveraging your personal network is more effective if you can. Freelancers who come through references are more trusted.
Note that if you go through a freelancing agency you won’t be getting the hourly amount they bill your company nor anywhere near it. The amount you get could range from around 80% of what they bill down to 20% depending on the arrangement.
You’re welcome!
Hit up the freelancing firms staffing your company, they probably work for others in different industries too. Note they’ll take their cut, but you’ll probably still get paid more than your current hourly.
Hit up the freelancing firms staffing your company, they probably work for others in different industries too. Note they’ll take their cut, but you’ll probably still get paid more than your current hourly.
The OpEx vs CapEx thing is huge, by the way.
I've been in the position where I couldn't hire for long stretches of time, but was given ample budget for operating expenses. Of course we hired contractors and agencies, even if the rates seemed absurd compared to direct employees.
I've been in the position where I couldn't hire for long stretches of time, but was given ample budget for operating expenses. Of course we hired contractors and agencies, even if the rates seemed absurd compared to direct employees.
A few more...
- They sometimes provide specialized skills the company has difficulty hiring for.
- They sometimes provide specialized skills that the company only needs for a short period of time. The goto example here is audio programming on a video game.
- They sometimes provide specialized skills the company has difficulty hiring for.
- They sometimes provide specialized skills that the company only needs for a short period of time. The goto example here is audio programming on a video game.
> - They don’t have to pay some benefits and taxes on freelancers.
The employer-paid taxes and benefits on full time employees can be very large, depending on the country.
Even in the United States people are surprised to learn that their employers pay taxes for employing them. You pay some taxes on your income and your employer also pays some taxes for employing you!
The employer-paid taxes and benefits on full time employees can be very large, depending on the country.
Even in the United States people are surprised to learn that their employers pay taxes for employing them. You pay some taxes on your income and your employer also pays some taxes for employing you!
OP is in the Netherlands so payroll cost is going to be around 1.5x their gross income / 3x net income. Total cost per FTE is even higher but also depends on the organizational overheads. So the gap between 30 € net/hour that OP gets and 150 € total cost/hour that the freelancers take is really not nearly as big as it sounds.
I explained to someone I supervise yesterday during a conversation that the company pays roughly equal taxes on our income as to what we ourselves pay on it, it blew her mind. The only reason I know about it is because I researched self employment taxes for my SO last year and was curious why hers were so high.
It’s not roughly equal at all.
Let’s round up and say the employer pays 10% and the employee pays 10%. For self employment that goes to 20%
But, in the US, you can pay yourself whatever wages you want and take the rest as a distribution which is not subject to employment taxes.
So if you make 100K as an employee, then quit to freelance, you just pay yourself 40K in wages (or whatever you deem a reasonable salary) take the rest as a distribution and come out ahead.
The other comments about PTO and employees costing more are similarly “wrong” in that there’s a simple bottom line and the other costs beyond wages simply aren’t that significant, especially at the higher end. Insurance costs don’t scale with wages. 401k is easily obtained inexpensively as a freelancer, etc. Time off is easily handled with monthly or weekly rates instead of hourly.
All in all it simply comes down to if you can convince someone with a budget to get a SOW signed and a PO issued. Everything else is just fungible numbers business move around on a PnL report.
The real bottom line is they offered to pay you 30 EUR and you accepted it. The freelancers did not.
Let’s round up and say the employer pays 10% and the employee pays 10%. For self employment that goes to 20%
But, in the US, you can pay yourself whatever wages you want and take the rest as a distribution which is not subject to employment taxes.
So if you make 100K as an employee, then quit to freelance, you just pay yourself 40K in wages (or whatever you deem a reasonable salary) take the rest as a distribution and come out ahead.
The other comments about PTO and employees costing more are similarly “wrong” in that there’s a simple bottom line and the other costs beyond wages simply aren’t that significant, especially at the higher end. Insurance costs don’t scale with wages. 401k is easily obtained inexpensively as a freelancer, etc. Time off is easily handled with monthly or weekly rates instead of hourly.
All in all it simply comes down to if you can convince someone with a budget to get a SOW signed and a PO issued. Everything else is just fungible numbers business move around on a PnL report.
The real bottom line is they offered to pay you 30 EUR and you accepted it. The freelancers did not.
I think it surprises 80% of the people I talk to about it.
Many people don’t believe me or assume I’m wrong.
This is why payroll taxes are popular with politicians: They hide the real tax rate out of sight of the employee.
Many people don’t believe me or assume I’m wrong.
This is why payroll taxes are popular with politicians: They hide the real tax rate out of sight of the employee.
They’re not hidden at all. Every pay stub you receive has a line item stating exactly what the employer paid and a separate line of what you paid.
Well, and the employees often have to pay those taxes and benefits themselves, so that’s rolled into the amount the company needs to pay them.
Full-time employees do not pay those taxes and benefits themselves. It’s called a payroll tax because the company pays it for people on their payroll.
If someone is paying those taxes themself they are not an employee, they are a contractor.
This is one reason why contractor hourly rates are so much higher than salaried FTEs: They are paying higher taxes on the money that reaches their account.
If someone is paying those taxes themself they are not an employee, they are a contractor.
This is one reason why contractor hourly rates are so much higher than salaried FTEs: They are paying higher taxes on the money that reaches their account.
Sorry, yes I meant contractors not employees. But employees are actually paying them also, it’s just the company pays it for the employ before the employee sees it.
> Freelancers are OpEx, FTEs are CapEx
I don’t think this is true unless simply make up your own definition of CapEx.
“Examples of OpEx include employee salaries, rent, utilities, and property taxes.”
https://www.investopedia.com/ask/answers/112814/whats-differ...
(Yes there are some times when you may be able to capitalize some labor, but that would apply to freelancers as well and is very much the exception, not the rule)
I don’t think this is true unless simply make up your own definition of CapEx.
“Examples of OpEx include employee salaries, rent, utilities, and property taxes.”
https://www.investopedia.com/ask/answers/112814/whats-differ...
(Yes there are some times when you may be able to capitalize some labor, but that would apply to freelancers as well and is very much the exception, not the rule)
In Netherlands you can't simply fire a FTE. It's different from US where people have "at will" employment. In NL FTEs are more like CapEx than the OpEx
I'll add: often the freelancer is a former employee with expertise that's easier to pay for than train into new employees.
FTE’s are not capital expenses.
I feel your frustration, but please read up on Dutch corporate taxation.
Basically put, your 30€/h (I assume came from 60.000€/year salary), is factually 110,000-140,000 €/year cost for your employer. It does not take into the account the financial risks you pose to the company (long time sickness, social financial obligations, ..). Second thing, the 150€/h you quote, is not going into the pocket of the freelancer. Unlike you, they’re taxed similarly to your employer, hence -21% VAT, corporate taxation, - business costs and expenses (from office rent, lawyer and accountant fees to the public transport that your employer reimburses you, simple insurances will add up to ~1-2k/month..), - social security tax and lastly the income tax. As a self employed, you are in a different pension system (read: minimal). You’d need to save that money yourself. You’re not always employed, nor paid when you’re ill, and government won’t pay you a dime if you get laid off.
If you do the math right a 70k/year salary translates to a 100€/h (excl VAT) zzp position and 130-ish €/H BV construction. Yes, it seems unfair to you, but that’s a choice you can make for yourself.
Basically put, your 30€/h (I assume came from 60.000€/year salary), is factually 110,000-140,000 €/year cost for your employer. It does not take into the account the financial risks you pose to the company (long time sickness, social financial obligations, ..). Second thing, the 150€/h you quote, is not going into the pocket of the freelancer. Unlike you, they’re taxed similarly to your employer, hence -21% VAT, corporate taxation, - business costs and expenses (from office rent, lawyer and accountant fees to the public transport that your employer reimburses you, simple insurances will add up to ~1-2k/month..), - social security tax and lastly the income tax. As a self employed, you are in a different pension system (read: minimal). You’d need to save that money yourself. You’re not always employed, nor paid when you’re ill, and government won’t pay you a dime if you get laid off.
If you do the math right a 70k/year salary translates to a 100€/h (excl VAT) zzp position and 130-ish €/H BV construction. Yes, it seems unfair to you, but that’s a choice you can make for yourself.
VAT is out of equation as it is goes down the flow and is actually paid by end customer only, not the business, not the contractor.
Also there are multiple ways to decrease taxation, to write down expenses as cost of business, etc.
To be contractor is much better, unless you don't want to do any work, just to attend the office.
Also there are multiple ways to decrease taxation, to write down expenses as cost of business, etc.
To be contractor is much better, unless you don't want to do any work, just to attend the office.
The contractor is at the end of the chain, hence is the one paying the VAT.
You’re right that there’re measures to reduce the tax load. At the end of the day, any company expense will also cut into the profit/ margin of the contractor. There’re various laws in place to tax anything company acquired that can be used personally. Great example is the car and real estate taxation.
The largest component of the equation is the pension/retirement finances. This is tricky to get right
You’re right that there’re measures to reduce the tax load. At the end of the day, any company expense will also cut into the profit/ margin of the contractor. There’re various laws in place to tax anything company acquired that can be used personally. Great example is the car and real estate taxation.
The largest component of the equation is the pension/retirement finances. This is tricky to get right
If you’re upset, quit and become a freelancer. You’ll figure it out pretty quickly, I suspect. As a general life rule, if it ever seems like somebody else is doing better than you, instead of bitching about it, do what they are doing.
I fully agree with that statement.
But keep in mind that the grass is always greener on the other side. Freelancing has it's own challenges. Especially in economically uncertain times, freelancers are the first ones who lose their jobs, if the company needs to save money.
But keep in mind that the grass is always greener on the other side. Freelancing has it's own challenges. Especially in economically uncertain times, freelancers are the first ones who lose their jobs, if the company needs to save money.
> But keep in mind that the grass is always greener on the other side.
I think you meant "isn't"?
I think you meant "isn't"?
Not GP, but that is the correct saying. Basically, it'll always look greener from where you're at but that isn't always true necessarily.
No, this is the commonly used phrase.
AI explanation:
The correct proverb is “the grass is always greener on the other side.”. It means we tend to idealize other people’s situations, seeing only their positives and overlooking their hidden challenges. It warns that every circumstance has its own drawbacks and reminds us to appreciate and cultivate what we already have.
AI explanation:
The correct proverb is “the grass is always greener on the other side.”. It means we tend to idealize other people’s situations, seeing only their positives and overlooking their hidden challenges. It warns that every circumstance has its own drawbacks and reminds us to appreciate and cultivate what we already have.
Yep, that’s exactly my point. There are very few free lunches in the world. Sometimes, you’ll find one, but typically you’ll just find a trade off, with some segment of the population valuing something more than the rest of the population. In this case freedom to choose jobs vs job security in a downturn.
When you have a full-time employee, from the perspective of the company you're entering into a contract where you have a fixed cost to buy fixed amount of hours per week of said employee work. To get the tasks completed efficiently is the employee manager's job (set goals, create an environment, give specs & etc...)
When you hire a contractor/freelancer you can pay for output, not time. You can specify the work, split into deliverables and tie the payment to delivered work. This might be more efficient for some types of tasks.
This is on top of all the usual big company politics, planning & budgeting reasons.
When you hire a contractor/freelancer you can pay for output, not time. You can specify the work, split into deliverables and tie the payment to delivered work. This might be more efficient for some types of tasks.
This is on top of all the usual big company politics, planning & budgeting reasons.
> When you hire a contractor/freelancer you can pay for output, not time.
This is not true, at least in my experience, and definitely in the Netherlands. You pay for time, not output.
This is not true, at least in my experience, and definitely in the Netherlands. You pay for time, not output.
That's why I said "may", not "will".
I hire a lot of contractors and if we can't specify the work sufficiently then we don't hire them. Or hire on a fixed budget to get the correct deliverables specified (if possible).
When you pay for "hours worked" the incentive is to "work more hours", not deliver the result. I've seen many employees spending their employers money for such "contracts", but they will not have done that with their own money.
When the task is so hard to define/specify/design, it's not a good fit for contractor's work.
BTW, the building industry has been working with contractors for ages and their practices are very efficient and the IT sector will learn from them sooner or later.
When you pay for "hours worked" the incentive is to "work more hours", not deliver the result. I've seen many employees spending their employers money for such "contracts", but they will not have done that with their own money.
When the task is so hard to define/specify/design, it's not a good fit for contractor's work.
BTW, the building industry has been working with contractors for ages and their practices are very efficient and the IT sector will learn from them sooner or later.
There are two different types of contract. But it's hard for most companies to do 'pay for output' because they aren't capable of specifying the output. And contractors don't want to do it because then they are taking most of the risk.
I had the same conversation with a colleague who managed an engineering department, his answer was that he can take on new freelancers quickly and fire them just as quickly.
There are also patterns where freelancers are more desirable early on in an economic recovery, e.g. the company thinks it might be safe to start hiring again but is not feeling quite confident enough to take on full time staff (cost of firing etc.)
There are also patterns where freelancers are more desirable early on in an economic recovery, e.g. the company thinks it might be safe to start hiring again but is not feeling quite confident enough to take on full time staff (cost of firing etc.)
How did you calculate the 30 EUR per hour? Does this include paid holidays, sick leave, training, etc? Is it paid 12 times per year, or even 13, 14 or 15 times?
A freelancer can actually only work around 10 months per year. 1-2 weeks are national holidays, 4-6 weeks is holiday, 1-2 weeks sick leave.
Freelancers also only get paid when there is work to be done. There are gaps between projects that need to be included in the hourly rate. Training is done unpaid. Freelancers usually also provide some flexibility to the customer: the project is cancelled by the end of next week, the freelancer doesn't have to be paid anymore. Terminating a regular employee probably comes with a severance package of 2-6 monthly salaries, and maybe even a legal dispute.
Edit: Also hiring freelancers is much easier. Just hire them and fire them if they don't do their job as good as expected at any time. With employees it's more difficult to fire them if they don't perform as well as expected, but don't behave in bad faith.
A freelancer can actually only work around 10 months per year. 1-2 weeks are national holidays, 4-6 weeks is holiday, 1-2 weeks sick leave.
Freelancers also only get paid when there is work to be done. There are gaps between projects that need to be included in the hourly rate. Training is done unpaid. Freelancers usually also provide some flexibility to the customer: the project is cancelled by the end of next week, the freelancer doesn't have to be paid anymore. Terminating a regular employee probably comes with a severance package of 2-6 monthly salaries, and maybe even a legal dispute.
Edit: Also hiring freelancers is much easier. Just hire them and fire them if they don't do their job as good as expected at any time. With employees it's more difficult to fire them if they don't perform as well as expected, but don't behave in bad faith.
I get about 60K per year including a bonus, so that's an estimate. What I didn't factor in is vacation and sick leave. Vacation is 6 weeks. Sick leave, well it's the Netherlands so one could be sick for 2 years. If a freelancer would pay for an equivalent insurrance would cost about 500 euro's or a bit lower (so 6K per year).
So to make it more equivalent, I'm assuming 2 weeks of being ill, 6 weeks of vacation, so 10 months of actual work which is 1680 hours (168 hours per month). 1680 hours at 150 euro's is 252000 euro's. Deduct the 6000 euro's insurrance off of it and you get 246000 euro's.
So eyeballing this if I want to steelman, it'd be: 200K for the freelancers, and an employee costs 100K.
As another comment mentioned: it's fair and/or makes sense when a freelancer doesn't have work all the time, but when the work keeps rolling in it's at the very least a 2x, of which you get to keep more as well as I haven't spoken about deducting all kinds of stuff (laptop, phone, etc.).
So to make it more equivalent, I'm assuming 2 weeks of being ill, 6 weeks of vacation, so 10 months of actual work which is 1680 hours (168 hours per month). 1680 hours at 150 euro's is 252000 euro's. Deduct the 6000 euro's insurrance off of it and you get 246000 euro's.
So eyeballing this if I want to steelman, it'd be: 200K for the freelancers, and an employee costs 100K.
As another comment mentioned: it's fair and/or makes sense when a freelancer doesn't have work all the time, but when the work keeps rolling in it's at the very least a 2x, of which you get to keep more as well as I haven't spoken about deducting all kinds of stuff (laptop, phone, etc.).
60k sounds like a rather bad salary for a SW engineer in the Netherlands.
According to [1] it sounds about right actually. I actually make a bit above of what I should be making with 4 years of experience and a computer science master.
[1] https://www.nationalevacaturebank.nl/salariswijzer
[1] https://www.nationalevacaturebank.nl/salariswijzer
You’re making very rooking mistake of thinking that your salary = expense to the employer. Employer already pays at least 40% over your salary for “social” taxes. Excluding all the stuff you mentioned earlier, you can safely assume that you cost 60€/h excluding all the benefits, holidays, extra pension contributions etc.
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On top of that, the freelancer might provide their own equipment. They might get paid days, or months, later too.
I've never got paid time off as a freelancer. Sometimes I was allowed to join company paid trainings on my free time. But it's also a plus for the company, they hire a trainer and give the extra spots to their freelancers. No cost, just benefits (better trained freelancers).
Not addressing your question in any way, but I wanted to comment on;
> I know that as an employee my 30 euro's is actually "more" due to vacation and pension, etc. but it's nowhere near 150 euro's
You're likely wrong there ;)
It is not "more" in quotes, it is _more_ with italics. Take the income tax you pay on your salary, the same amount (roughly) is paid by your employer (yes! the government gets that tax twice!). Then there's the 13th month / holiday pay. Then all the sick days they're still paying you to work (remember, those contractors are not getting paid for sick days). Then the random non-holiday days off (dentist, that kind of thing). The insurance they pay for you (presumably, though I'm not sure. Contractors need to insure themselves for millions in IT roles). There's more, but this is getting long and you get the idea.
> I know that as an employee my 30 euro's is actually "more" due to vacation and pension, etc. but it's nowhere near 150 euro's
You're likely wrong there ;)
It is not "more" in quotes, it is _more_ with italics. Take the income tax you pay on your salary, the same amount (roughly) is paid by your employer (yes! the government gets that tax twice!). Then there's the 13th month / holiday pay. Then all the sick days they're still paying you to work (remember, those contractors are not getting paid for sick days). Then the random non-holiday days off (dentist, that kind of thing). The insurance they pay for you (presumably, though I'm not sure. Contractors need to insure themselves for millions in IT roles). There's more, but this is getting long and you get the idea.
I use quotes for when I use words in a hand wavy way as I find the word more not really the right word but it's close. But yea, I should rethink how to write that. Not everyone agrees on using quotes to use words in a hand wavy way in a "you get what I mean" sense.
> Then there's the 13th month / holiday pay.
I factored that one in already
> Then there's the 13th month / holiday pay.
I factored that one in already
It is often some kind of cental control of headcount that causes some of this behaviour. Head Office obsess over keeping headcount low, and labour costs low, but think nothing about consultancy. The modern business world has a perverse view that labour is bad, yet consultancy improves efficiency
From what I've seen and heard from others, budget shenanigans and office politics are both common reasons for hiring contractors/freelancers.
If it's September and your budget expires in April (new tax year here in UK), hire a few contractors to make sure you spend all that money. After all, you don't know what next year's budget will look like. And not using your budget might be taken as proof you don't need as much money next year. So hire contractors and do that project now, rather than waiting and taking the risk you can't do it all.
For even more budget shenanigans and org politics, imagine you're a product/project/whatever manager in charge of an exciting new project with a big budget. You do not control any of the dev teams. For some reason the dev leads are not excited by your new project and are reluctant to assign people to the project. They tell you it will be next year and you wonder if they mean never. Luckily, you have a big budget for the project! So you hire contractors and now your project has a dev team. The company doesn't have to keep on the temporary team and the project is delivered. Success!
This scenario kicks several massive cans of worms down the road. But for a while everyone's happy while progress is made on the project. Later the dev teams will be annoyed when they have to maintain code they didn't want in the first place. And whatever organisational problem meant the dev teams didn't want to get involved will still exist. But, by hiring contractors, everyone gets to ignore those problems for a while longer.
If it's September and your budget expires in April (new tax year here in UK), hire a few contractors to make sure you spend all that money. After all, you don't know what next year's budget will look like. And not using your budget might be taken as proof you don't need as much money next year. So hire contractors and do that project now, rather than waiting and taking the risk you can't do it all.
For even more budget shenanigans and org politics, imagine you're a product/project/whatever manager in charge of an exciting new project with a big budget. You do not control any of the dev teams. For some reason the dev leads are not excited by your new project and are reluctant to assign people to the project. They tell you it will be next year and you wonder if they mean never. Luckily, you have a big budget for the project! So you hire contractors and now your project has a dev team. The company doesn't have to keep on the temporary team and the project is delivered. Success!
This scenario kicks several massive cans of worms down the road. But for a while everyone's happy while progress is made on the project. Later the dev teams will be annoyed when they have to maintain code they didn't want in the first place. And whatever organisational problem meant the dev teams didn't want to get involved will still exist. But, by hiring contractors, everyone gets to ignore those problems for a while longer.
Risk.
Contractors get paid for the time they're not in work.
I've been on both sides and have always been lucky in that I've gone from contract to contract but that is certainly not guaranteed.
Contractors get paid for the time they're not in work.
I've been on both sides and have always been lucky in that I've gone from contract to contract but that is certainly not guaranteed.
lots of the comments here focus on freelancing vs perm.
Organisations of all shapes and sizes make irrational choices like this all the time.
RTO - overwhelmingly unpopular with the workforce, with seemingly no tangible upside, being enforced all over the place "just because" (my pet theory is that those paying like to see the bums on seats, to look out over their empire, but just cant bring themselves to admit it).
startups looking for senior engineers and cant compete on price ... why not offer a pro-rata 4-day week? the "big boys" aren't doing that, and once you have a 4 day week its very hard to give up. "oh no we cant possible we have far too much to do". yes becuase 4 out of 5 days is worse than 0 out of 5....
im sure there are millions of such "irational" things which pretty much boils down to the fact that no one actually made a choice. Its all product of circumstance, how its always been done, what everyone else is doing, mixed with a bit of "well why should they get it if I didn't for all my previous 25 years of working"
</rant>
update: typos
Organisations of all shapes and sizes make irrational choices like this all the time.
RTO - overwhelmingly unpopular with the workforce, with seemingly no tangible upside, being enforced all over the place "just because" (my pet theory is that those paying like to see the bums on seats, to look out over their empire, but just cant bring themselves to admit it).
startups looking for senior engineers and cant compete on price ... why not offer a pro-rata 4-day week? the "big boys" aren't doing that, and once you have a 4 day week its very hard to give up. "oh no we cant possible we have far too much to do". yes becuase 4 out of 5 days is worse than 0 out of 5....
im sure there are millions of such "irational" things which pretty much boils down to the fact that no one actually made a choice. Its all product of circumstance, how its always been done, what everyone else is doing, mixed with a bit of "well why should they get it if I didn't for all my previous 25 years of working"
</rant>
update: typos
What I found crazy is the worker is screwed anyway. Fee years ago there was a choose to be a direct employee of the bank or through the famous body-leasing company. From my perspective both offered employment contract covered by labor law, both offered the same workplace (office of the bank) and both offered similar salary (average for the location).
However, bank paid to lease engineers roughly double of the costs of keeping them as internals.
At that time it was like this: $8000 bank paid to the body shop. $1000 body shop paid in payroll taxes. $3000 was a salary in employment contract. $2000 employee received after all taxes, social contributions and fees.
However, bank paid to lease engineers roughly double of the costs of keeping them as internals.
At that time it was like this: $8000 bank paid to the body shop. $1000 body shop paid in payroll taxes. $3000 was a salary in employment contract. $2000 employee received after all taxes, social contributions and fees.
When I was in management they hated temporary income bumps to employees because when the income bump went away the employees tended to look for a different job at the income level they became accustomed to/dependant on. It's not they don't want to give you more income, it's they know they will be hosed when/if they cut your income later.
Edit: This was also an issue with year end bonuses. We did well a few years and bonuses were given and it made things difficult when the good years ended. I doubt they gave bonuses after that, good or bad year.
Edit: This was also an issue with year end bonuses. We did well a few years and bonuses were given and it made things difficult when the good years ended. I doubt they gave bonuses after that, good or bad year.
I used to freelance full-time. Having freelancers on full-time indefinitely is usually just bad management, but the economics make a lot more sense for temporary and part-time work. If you only need someone for a few months of labor out of the year, then hiring them full-time is going to be way more expensive than contracting-even with a substantially higher hourly rate. Also, at least in the US, freelancers need to charge more to just break even with full-time employment rates due to taxation and benefits.
> I know that as an employee my 30 euro's is actually "more" due to vacation and pension, etc. but it's nowhere near 150 euro's
How big is the difference?
How much does it cost to fire you?
How big is the difference?
How much does it cost to fire you?
I have heard this so many times indeed, and as a contractor myself, it is so tiresome. Taxes, pensions, insurance, reservations for sitting without a contract, courses etc etc etc. Those "30 Euro p hour" People actually easily cost around 100 for the company at least, and that is without factoring in sick leave, severance pay etc.
Is there still a difference? yes, that is the risk contractors take. I agree that it can be weird for companies to have contractors in the same role for years on end, but I have also seen one or two contractors effectively doing 80% of all the relevant work in a 15 man team. Major incident? Contractors in the warroom. Coming up with a new architecture? Contractors. etc. etc.
Do not get me wrong I have also seen it the other way around, that definitely happens, but I have also talked with tons of employees, and 9 out of 10, when pressed, do not become a contractor. They value the "stability" of the employment too much, or are simply too risk averse or afraid of running a small business by themselves. The ones that did make the jump are often very happy once they settle in and of course, financial security varies a ton between people. Parents, kids, nest egg, health, it all plays a role.
But employees complaining about contractors, and the difference between their salary and a contractors invoice... what is holding you back? I also find it funny that OP mentions he would like to freelance extra hours at his current employer. Just make those extra hours (or all your hours) somewhere else. You are not married to a company, especially not an F500 one. Those will lay you off without hesitance when deemed necessary, and typically find the limits of the law to do so.
Is there still a difference? yes, that is the risk contractors take. I agree that it can be weird for companies to have contractors in the same role for years on end, but I have also seen one or two contractors effectively doing 80% of all the relevant work in a 15 man team. Major incident? Contractors in the warroom. Coming up with a new architecture? Contractors. etc. etc.
Do not get me wrong I have also seen it the other way around, that definitely happens, but I have also talked with tons of employees, and 9 out of 10, when pressed, do not become a contractor. They value the "stability" of the employment too much, or are simply too risk averse or afraid of running a small business by themselves. The ones that did make the jump are often very happy once they settle in and of course, financial security varies a ton between people. Parents, kids, nest egg, health, it all plays a role.
But employees complaining about contractors, and the difference between their salary and a contractors invoice... what is holding you back? I also find it funny that OP mentions he would like to freelance extra hours at his current employer. Just make those extra hours (or all your hours) somewhere else. You are not married to a company, especially not an F500 one. Those will lay you off without hesitance when deemed necessary, and typically find the limits of the law to do so.
> I have also seen one or two contractors effectively doing 80% of all the relevant work in a 15 man team. Major incident? Contractors in the warroom. Coming up with a new architecture? Contractors. etc. etc.
I have also seen the opposite (as one of the contractors): the employees knew their system well, while the contractors were really missing all the intricacies of the architecture. It would take five years to learn, and contractors wouldn't stick for that long.
I have also seen the opposite (as one of the contractors): the employees knew their system well, while the contractors were really missing all the intricacies of the architecture. It would take five years to learn, and contractors wouldn't stick for that long.
Most definitely, like I also mentioned. Actually at my current gig there is one engineer in the networking who is basically the load bearing wall of the department. Internal, will never even think about going external (or ask for a raise even...).
One of my old managers always kept roughly 70-30 fixed/temp in his department, just for the scaling down quickly options, as well as occasionally pushing the contractors for the slightly shittier tasks every now and then.
I have had two 5-7 year streaks now as a contractor with a large institution, at which point something funny happens, the internals on large struggling projects tend to move on to greener pastures, and it comes to me and a couple of other externals to keep things moving and effectively trade some extra money for the lack of inspiration at work.
Lastly, sometimes, managers simply have a job which is a 200-300k a year job, but due to the HR policies, the position has a salary cap of e.g. 75k. Bringing in an external means they are able to spend more, and get more experience / higher quality people onboard.
In any case, the market is open, so anyone who thinks that the contractors are unfairly advantaged, either put in your resignation and go for it, or enjoy your stability but accept the deal you made. Corporate does not owe you anything, and certainly not rationality in what they do ;)
One of my old managers always kept roughly 70-30 fixed/temp in his department, just for the scaling down quickly options, as well as occasionally pushing the contractors for the slightly shittier tasks every now and then.
I have had two 5-7 year streaks now as a contractor with a large institution, at which point something funny happens, the internals on large struggling projects tend to move on to greener pastures, and it comes to me and a couple of other externals to keep things moving and effectively trade some extra money for the lack of inspiration at work.
Lastly, sometimes, managers simply have a job which is a 200-300k a year job, but due to the HR policies, the position has a salary cap of e.g. 75k. Bringing in an external means they are able to spend more, and get more experience / higher quality people onboard.
In any case, the market is open, so anyone who thinks that the contractors are unfairly advantaged, either put in your resignation and go for it, or enjoy your stability but accept the deal you made. Corporate does not owe you anything, and certainly not rationality in what they do ;)
Depending on the juristiction (I'm not familiar with the Netherlands), there are many ways what you describe can become a very large legal liability for your employer. Most of these have to do with tax fraud, worker misclassification, etc, and no sane company needs that legal risk. They could easily face fines larger than what they could ever hope to gain from this arrangement.
Very likely this, as the Netherlands recently had some laws changed to put a stop to "contractors" (with giant quotation marks).
[deleted]
> I asked them: "why don't you simply see if you can ask your current staff to work 20 hours more for 75 euro's per hour on a freelance basis?"
Working 20 hours more for a lot more money? You're on the verge of inventing the U.S. labor market, think carefully about your next decision.
Working 20 hours more for a lot more money? You're on the verge of inventing the U.S. labor market, think carefully about your next decision.
Because why would you pay more as long as you find people dumb enough to do it for little?
[deleted]
Other people have already answered about budgeting reasons, but there's also other possible reasons.
Regardless how good you are at coding, if your personality doesn't mesh with your manager, if other people think you're an asshole, well, management would rather someone who knows how to talk pretty and sugar-coat things but can only code okay over someone who's an asshole and confronts them, but is a superstar coder.
I obviously can't really know, I don't know you, but the fact that you're getting "frustrated and confused" over this, your boss isn't trying to placate you, and you use hacker news really makes it sound like you're not super mature, and not exactly a people person.
I don't actually know your situation, but from how you write it's at least possible soft-skills are a factor.
Regardless how good you are at coding, if your personality doesn't mesh with your manager, if other people think you're an asshole, well, management would rather someone who knows how to talk pretty and sugar-coat things but can only code okay over someone who's an asshole and confronts them, but is a superstar coder.
I obviously can't really know, I don't know you, but the fact that you're getting "frustrated and confused" over this, your boss isn't trying to placate you, and you use hacker news really makes it sound like you're not super mature, and not exactly a people person.
I don't actually know your situation, but from how you write it's at least possible soft-skills are a factor.
You’re not crazy; the math really is lopsided. I know the feeling all too well. My own autism diagnosis put a label on that jarring moment when logic collides with a corporate system that runs on something else entirely—risk management, optics, and a reflexive fear of precedent. Years of nose‑first landings and therapy taught me an uncomfortable truth: asking “Why isn’t this rational?” is read not as curiosity but as confrontation, because someone up the chain would have to admit the rules are incoherent. You don’t need to change the way you think, only the angle of attack.
So let’s talk about angles. Since January the Dutch tax office has been fining companies for blurring payroll and freelance status under Wet DBA, which makes your manager twice as jumpy about letting an employee invoice on the side. Fine—don’t fight the hedgehog head‑on. Two work‑arounds turn that absurdity into leverage.
First, the low‑friction hack. Find a trusted friend or cousin—ideally in a friendlier tax jurisdiction or a lower bracket—who fronts the freelance contract while you quietly deliver the work. Your firm still gets the only AI engineer who already knows the codebase, HR gets a clean vendor file, and you earn something far closer to the market rate without triggering an audit. It feels like sleight of hand, but it’s legal and, frankly, no shadier than paying a staffing agency to skim thirty percent for forwarding e‑mails.
Second, the bigger‑canvas fix. Recruit a handful of HN types stuck in the same trap and build a tiny marketplace—call it the YC play if you want venture upside or the Vim play if you’d rather tithe a slice to open‑source. Members post internal gigs they’re barred from taking; peers at other firms take the work at the full €150. Next month the favour reverses. Ten or fifteen percent goes to keep the lights on—or to kids in Uganda, your call—and suddenly the premium everyone was happy to pay a middleman flows to the people doing the work. Bureaucracy can’t object: every invoice still bears the magic words “external vendor,” and the talent free‑market gets a blood supply.
Both routes shift incentives instead of pleading with logic, and that’s the only language the system understands. Arguments rarely move a corporate wall. Action reroutes the plumbing so the money follows you anyway.
End of argument.
So let’s talk about angles. Since January the Dutch tax office has been fining companies for blurring payroll and freelance status under Wet DBA, which makes your manager twice as jumpy about letting an employee invoice on the side. Fine—don’t fight the hedgehog head‑on. Two work‑arounds turn that absurdity into leverage.
First, the low‑friction hack. Find a trusted friend or cousin—ideally in a friendlier tax jurisdiction or a lower bracket—who fronts the freelance contract while you quietly deliver the work. Your firm still gets the only AI engineer who already knows the codebase, HR gets a clean vendor file, and you earn something far closer to the market rate without triggering an audit. It feels like sleight of hand, but it’s legal and, frankly, no shadier than paying a staffing agency to skim thirty percent for forwarding e‑mails.
Second, the bigger‑canvas fix. Recruit a handful of HN types stuck in the same trap and build a tiny marketplace—call it the YC play if you want venture upside or the Vim play if you’d rather tithe a slice to open‑source. Members post internal gigs they’re barred from taking; peers at other firms take the work at the full €150. Next month the favour reverses. Ten or fifteen percent goes to keep the lights on—or to kids in Uganda, your call—and suddenly the premium everyone was happy to pay a middleman flows to the people doing the work. Bureaucracy can’t object: every invoice still bears the magic words “external vendor,” and the talent free‑market gets a blood supply.
Both routes shift incentives instead of pleading with logic, and that’s the only language the system understands. Arguments rarely move a corporate wall. Action reroutes the plumbing so the money follows you anyway.
End of argument.
> My own autism diagnosis put a label on that jarring moment when logic collides with a corporate system
We have similar symptoms in this regard. Thanks for the explanation. I get it :)
We have similar symptoms in this regard. Thanks for the explanation. I get it :)
Freelance labor costs go into a different accounting column than full time payroll.
The dipshits who fixate on KPI's and measured results set random, useless objectives for each other and then celebrate with bonuses and steak dinners when the line for XYZ moves in the intended direction. They don't care about the other lines at all.
I once led a team where the staff made $X/hour in OT and freelancers made $X*3 per hour. My team wanted OT badly, so I gladly gave them as much as they wanted.
In a single conversation, my director told me I lead the region in profits, but I need to get my OT costs down if I ever want to be promoted.
In the end, I was wrong, not him.
They were busy doing a bunch of financial engineering bullshit to convince a different group of dipshits to acquire the company, which they eventually did, and all those guys got payouts, while the teams mostly got cuts.
If you run your own business, especially if it's small/medium, focus on the bottom line and make smart calls.
If you're working for someone else, try to figure out what they value most and try to focus on that.
In the OP's case, it looks like a great time to either:
A) Switch to full time freelance to get the full $150/hr while you can
B) Take the blue pill and pretend as if the lies about job security and stability are real
The dipshits who fixate on KPI's and measured results set random, useless objectives for each other and then celebrate with bonuses and steak dinners when the line for XYZ moves in the intended direction. They don't care about the other lines at all.
I once led a team where the staff made $X/hour in OT and freelancers made $X*3 per hour. My team wanted OT badly, so I gladly gave them as much as they wanted.
In a single conversation, my director told me I lead the region in profits, but I need to get my OT costs down if I ever want to be promoted.
In the end, I was wrong, not him.
They were busy doing a bunch of financial engineering bullshit to convince a different group of dipshits to acquire the company, which they eventually did, and all those guys got payouts, while the teams mostly got cuts.
If you run your own business, especially if it's small/medium, focus on the bottom line and make smart calls.
If you're working for someone else, try to figure out what they value most and try to focus on that.
In the OP's case, it looks like a great time to either:
A) Switch to full time freelance to get the full $150/hr while you can
B) Take the blue pill and pretend as if the lies about job security and stability are real
The thing that “doesn’t work” about converting an existing full-time employee to a contractor, and why there wouldn’t be a process for doing so, is that it can make it look like the company is trying to dodge taxes associated with employing someone by “misclassifying” them as a contractor [1], or otherwise skirt around laws associated with employment - even laws considering layoffs: he might trust you individually but if you convert 20 employees to contractors then let them go later probably there’s going to be at least one who says that the contractor conversion was just a ploy to lay people off without notice or severance.
If you really think the market is saying you can make $150 freelancing, you can do what your manager is suggesting (which is actually pretty gracious, not sweating you about freelancing elsewhere affecting your work there), eventually quit the job and see if they’d hire you back as a freelancer in a few months.
[1] https://remote.com/blog/employee-to-contractor-risks#what-ar...
If you really think the market is saying you can make $150 freelancing, you can do what your manager is suggesting (which is actually pretty gracious, not sweating you about freelancing elsewhere affecting your work there), eventually quit the job and see if they’d hire you back as a freelancer in a few months.
[1] https://remote.com/blog/employee-to-contractor-risks#what-ar...
Any big companies or organisation ends up alike with bureaucracy. It is the same thing with Government.
They are happy to pay 2 -3 times the wages to external or contractors / non civil or public servant parties. But they cant pay the fare wage for the same job within the government.
For those who have problems with Cvivl servant or government, it really isn't their fault. They are not incentives to do anything beyond their pay. And they are not well paid. Especially those in UK.
Ultimately it is because firing / letting go of freelancer is far easier than higher wages or additional headcount. Which come with its own set of political battle within the system.
They are happy to pay 2 -3 times the wages to external or contractors / non civil or public servant parties. But they cant pay the fare wage for the same job within the government.
For those who have problems with Cvivl servant or government, it really isn't their fault. They are not incentives to do anything beyond their pay. And they are not well paid. Especially those in UK.
Ultimately it is because firing / letting go of freelancer is far easier than higher wages or additional headcount. Which come with its own set of political battle within the system.
In addition to the answer from curious, you can't be in theposition of commissioning freelance work to yourself.
You can create and grow a dept as a salaried employee, but as soon as you start commissioning yourself you could be creating work to pay for the mortgage oft the bigger house you can suddenly afford.
Like approving your own expenses, or having a colleague friend do so and returning the favour. Stinks of fraud.
You can create and grow a dept as a salaried employee, but as soon as you start commissioning yourself you could be creating work to pay for the mortgage oft the bigger house you can suddenly afford.
Like approving your own expenses, or having a colleague friend do so and returning the favour. Stinks of fraud.
Quit and become a freelancer.
Line up a freelancing job elsewhere
Quit here
They might see freelancers as more flexible workforce. Easier to fire.
Line up a freelancing job elsewhere
Quit here
They might see freelancers as more flexible workforce. Easier to fire.
Freealncers do not compete with internals in the career games.
Quit and set your rate to €100.
You’re giving them a great discount.
That’s how it works.
You’re giving them a great discount.
That’s how it works.
[deleted]
To keep you poor as they can manage so you are reliant on them.
This is definitely one of those times where I'm breaking my brain because something isn't logical and I haven't yet understand the cultural side of things, or hidden reasons I haven't identified yet. In almost all aspects of life, I don't have this issue anymore, but corporate life is new to me.
So could you please help me out?
I work in the Netherlands in a marketing department where we have a dire need for more IT skills. I happen to have been a software engineer currently turned data analyst which is why we're capable of launching technical projects fast. IT people are being hired as freelancers around 150 euro's per hour. I'm making 30 euro's per hour as an employee. I know that as an employee my 30 euro's is actually "more" due to vacation and pension, etc. but it's nowhere near 150 euro's. Also, these freelancers have been working here for years on a per hour basis.
They were asking me, among others, how we should manage our budget of half a million euro's. I asked them: "why don't you simply see if you can ask your current staff to work 20 hours more for 75 euro's per hour on a freelance basis?"
Manager: "We can't do that."
Me: "but you're cutting costs by 50% plus you minimize overhead because their freelance tasks are adjacent to their actual roles but given it's not their actual role, a freelance assignment is warranted."
Manager: "yea but then everyone wants to freelance in this department like that."
Me: "So you're telling me that I can go out and freelance for an additional 20 hours but just not with this company?"
Manager: "Yea sure as long as it's not a company in the same industry."
Me: "But that would create all kinds of overhead. Why don't I just freelance for you guys? You told me you want innovation and a strong focus on AI and I'm currently the only person in your department who can make good on that promise."
Manager: "That's just not how it works."
Can anyone tell me why not? It frustrates me that marketing managers from high up talking about AI and innovation. I actually listen, use my software engineering skills to use AI in novel ways by automating LLMs, new things do actually get done but then when it comes to doubling down on it, and I'm asking to work 20 hours more, they don't want to do that. But they would be totally fine to go to an external company and pay hundreds of thousands of euro's for something that I created in a month.
I feel frustrated and confused. If someone has some clarity on this and can tell me "how the business world works" that would be really nice. Because it doesn't make sense.