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> cheaper, contractor rates. Are contractors cheaper than permanent employees? I always thought it was the opposite - that's why so many positions are "contra

> cheaper, contractor rates. Are contractors cheaper than permanent employees? I always thought it was the opposite - that's why so many positions are "contract to hire". They'd rather have a perm employee, but they want to deal with contracting for a few months just to be on the safe side.

mc32 6y ago
It depends... if you need someone for a year a contractor is cheaper even at a higher prorated rate. You can terminate them at will as well.
hellisothers 6y ago
The literal dollars per hour worked is often higher For a contract employee but the company isn’t paying into PTO or other benefits especially healthcare and I think (?) an employer has to pay higher costs in healthcare is their workers are expected to cost more (or older). So hiring older workers back as contractors can save $$$
crmd 6y ago
What IBM really cares about is limiting the older employees’ defined-benefit pension liabilities. That is why it was so important to IBM that these folks were made to no longer be IBM employees. Lower salary was icing on the cake.
- lotsofpulp 6y ago
  The wrong assumptions behind those defined benefit pension liabilities ended up being quite costly, this zero interest rate environment for the previous decade and foreseeable future will wreak havoc on them. I'm surprised they didn't freeze and terminate the plan years ago.
josho 6y ago
Many companies hire contractors because they are seen as a capital expenditure on the finances. While employees are classified as an operational expense. This has several accounting benefits, and in some jurisdictions makes it easier to dismiss the employee/contractor.
x87678r 6y ago
Roles I've seen pay the same, but FTs benefits of healthcare/401k/vacation are worth 50k/yr.
- Consultant32452 6y ago
  I found this helpful rule of thumb to estimate the cost of benefits: https://beebole.com/blog/how-to-calculate-the-real-cost-of-an-employee/ https://beebole.com/blog/how-to-calculate-the-real-cost-of-a... >...the real salary of an employee ends up “being 18% to 26% more than a worker’s base salary.
  - greenyoda 6y ago
    Also, for an on-site employee, the company would need to add the cost of office space, equipment, IT support services, etc.
xienze 6y ago
> Are contractors cheaper than permanent employees? I always thought it was the opposite Absolutely. Consider that the average salaried employee’s real cost per hour is around 2 * (annual_salary / hours_in_work_year). So if you get a contractor for less than that per hour, you win. > that's why so many positions are "contract to hire". They'd rather have a perm employee, but they want to deal with contracting for a few months just to be on the safe side. Ah, generally speaking no. Yes, contract to full time conversions happen but not terribly often. “Contract to hire” is most of the time just baiting someone to hop into a less desirable circumstance (contract versus full time), with the “promise” of being converted. After six months, oh dear, we couldn’t get funding for that full time position. Would you like to renew your contract? Not saying there are companies that do a true “probation period” via contract to hire, but most of the time it’s BS.
JoeAltmaier 6y ago
I've taken a cut each time I sign on vs contracting. Only done it when equity or length of engagement make it attractive.
johnward 6y ago
I left IBM by choice to become an IBM sub-contractor. I was paid better and had better benefits. I don't really see how IBM is saving money here.
- kls 6y ago
  If you are still subbing for them, raise you rate. IBM was one of my best paying contracts, but I hated the work. I kept raising my rate to make them go away, Finally I had to say you guys are eating up all my consultancy time, I can't take contracts from you, because I am becoming too dependent financially on a single source of revenue. It was a hard financial pill to swallow, given that I was making 4x my rate of any other contracts. We parted ways amicably but I had to make the break, as I was just becoming a satellite around IBM.
Avicebron 6y ago
I think it depends on the nature of the work, in biotech, contractors are generally seen as extendible, cheap, and easy to find. "consultants" are usually more expensive and they come on with more experience and more options, so they are more expensive. I think for both roles the flexibility works in different ways.
dyeje 6y ago
No, contractors are significantly cheaper because no payroll taxes, benefits, time off, etc. Contract to hire is typically through staffing agencies. The company can go through various contractors and hire the ones they like full time.

mc32 6y ago

It depends... if you need someone for a year a contractor is cheaper even at a higher prorated rate. You can terminate them at will as well.

hellisothers 6y ago

The literal dollars per hour worked is often higher For a contract employee but the company isn’t paying into PTO or other benefits especially healthcare and I think (?) an employer has to pay higher costs in healthcare is their workers are expected to cost more (or older). So hiring older workers back as contractors can save $$$

crmd 6y ago

What IBM really cares about is limiting the older employees’ defined-benefit pension liabilities. That is why it was so important to IBM that these folks were made to no longer be IBM employees. Lower salary was icing on the cake.

lotsofpulp 6y ago
The wrong assumptions behind those defined benefit pension liabilities ended up being quite costly, this zero interest rate environment for the previous decade and foreseeable future will wreak havoc on them. I'm surprised they didn't freeze and terminate the plan years ago.

josho 6y ago

Many companies hire contractors because they are seen as a capital expenditure on the finances. While employees are classified as an operational expense. This has several accounting benefits, and in some jurisdictions makes it easier to dismiss the employee/contractor.

x87678r 6y ago

Roles I've seen pay the same, but FTs benefits of healthcare/401k/vacation are worth 50k/yr.

Consultant32452 6y ago
I found this helpful rule of thumb to estimate the cost of benefits: https://beebole.com/blog/how-to-calculate-the-real-cost-of-an-employee/ https://beebole.com/blog/how-to-calculate-the-real-cost-of-a... >...the real salary of an employee ends up “being 18% to 26% more than a worker’s base salary.
- greenyoda 6y ago
  Also, for an on-site employee, the company would need to add the cost of office space, equipment, IT support services, etc.

xienze 6y ago

> Are contractors cheaper than permanent employees? I always thought it was the opposite Absolutely. Consider that the average salaried employee’s real cost per hour is around 2 * (annual_salary / hours_in_work_year). So if you get a contractor for less than that per hour, you win. > that's why so many positions are "contract to hire". They'd rather have a perm employee, but they want to deal with contracting for a few months just to be on the safe side. Ah, generally speaking no. Yes, contract to full time conversions happen but not terribly often. “Contract to hire” is most of the time just baiting someone to hop into a less desirable circumstance (contract versus full time), with the “promise” of being converted. After six months, oh dear, we couldn’t get funding for that full time position. Would you like to renew your contract? Not saying there are companies that do a true “probation period” via contract to hire, but most of the time it’s BS.

JoeAltmaier 6y ago

I've taken a cut each time I sign on vs contracting. Only done it when equity or length of engagement make it attractive.

johnward 6y ago

I left IBM by choice to become an IBM sub-contractor. I was paid better and had better benefits. I don't really see how IBM is saving money here.

kls 6y ago
If you are still subbing for them, raise you rate. IBM was one of my best paying contracts, but I hated the work. I kept raising my rate to make them go away, Finally I had to say you guys are eating up all my consultancy time, I can't take contracts from you, because I am becoming too dependent financially on a single source of revenue. It was a hard financial pill to swallow, given that I was making 4x my rate of any other contracts. We parted ways amicably but I had to make the break, as I was just becoming a satellite around IBM.

Avicebron 6y ago

I think it depends on the nature of the work, in biotech, contractors are generally seen as extendible, cheap, and easy to find. "consultants" are usually more expensive and they come on with more experience and more options, so they are more expensive. I think for both roles the flexibility works in different ways.

dyeje 6y ago

No, contractors are significantly cheaper because no payroll taxes, benefits, time off, etc. Contract to hire is typically through staffing agencies. The company can go through various contractors and hire the ones they like full time.