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Ask HN: Why is my F500 employer okay with paying 5x to freelancers?

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Re: Ask HN: Why is my F500 employer okay with paying 5x to freelancers?

#41

Post by mejutoco »

Aurornis wrote: post #31
zwnow wrote: post #22

Earlier quoted context omitted.

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 yo…

> 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.

Re: Ask HN: Why is my F500 employer okay with paying 5x to freelancers?

#42

Post by mettamage »

andix wrote: post #18

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…

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.).

Re: Ask HN: Why is my F500 employer okay with paying 5x to freelancers?

#43

Post by Etheryte »

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.

Re: Ask HN: Why is my F500 employer okay with paying 5x to freelancers?

#44

Post by techjamie »

Aurornis wrote: post #28
curious_curios wrote: post #2

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 co…

> - 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!

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.

Re: Ask HN: Why is my F500 employer okay with paying 5x to freelancers?

#45

Post by mejutoco »

andix wrote: post #18

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…

On top of that, the freelancer might provide their own equipment. They might get paid days, or months, later too.

Re: Ask HN: Why is my F500 employer okay with paying 5x to freelancers?

#46

Post by analyte123 »

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...

Re: Ask HN: Why is my F500 employer okay with paying 5x to freelancers?

#47

Post by formerly_proven »

Aurornis wrote: post #28
curious_curios wrote: post #2

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 co…

> - 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!

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.

Re: Ask HN: Why is my F500 employer okay with paying 5x to freelancers?

#48

Post by ghusto »

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.

Re: Ask HN: Why is my F500 employer okay with paying 5x to freelancers?

#49

Post by MrDarcy »

curious_curios wrote: post #2

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 co…

FTE’s are not capital expenses.

Re: Ask HN: Why is my F500 employer okay with paying 5x to freelancers?

#50

Post by ghusto »

freefaler wrote: post #10

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, spli…

> 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.

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