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

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

#1
I've changed some facts a bit. The story still stands.

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.

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

#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 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.

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

#3
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.

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

#5

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…

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.

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

#6

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…

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.

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.

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

#7

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…

> 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)

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

#9

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…

[dead]

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

#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, 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.

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