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.
- 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.
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
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.
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 a country with strong labor laws, you can't do that with FTEs, you're stuck with them unless they make major missteps.
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.
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.
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.
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.
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.
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.
- 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.
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!
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.
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.
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.
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)
And other than R&D, which other fun things apply that definitely change the calculus?
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.
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.
This is not true, at least in my experience, and definitely in the Netherlands. You pay for time, not output.
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.
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.)
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.
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.).
[1] https://www.nationalevacaturebank.nl/salariswijzer
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.
> 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.
> Then there's the 13th month / holiday pay.
I factored that one in already
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.
We have similar symptoms in this regard. Thanks for the explanation. I get it :)
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.
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.
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...
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
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.
You’re giving them a great discount.
That’s how it works.
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.
Line up a freelancing job elsewhere
Quit here
They might see freelancers as more flexible workforce. Easier to fire.
How big is the difference?
How much does it cost to fire you?
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 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.