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

40 points by mettamage 2y ago

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.

deleted 2y ago
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ponector 2y ago
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.
_DeadFred_ 2y ago
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.
chrismatheson 2y ago
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

paulcole 2y ago

> 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?

mvdwoord 2y ago
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.
- tasuki 2y ago
  > 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.
  - mvdwoord 2y ago
    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 ;)

andix 2y ago

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.

mettamage 2y ago
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.).
- andix 2y ago
  60k sounds like a rather bad salary for a SW engineer in the Netherlands.
  - mettamage 2y ago
    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 https://www.nationalevacaturebank.nl/salariswijzer
    - user32489318 2y ago
      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.
  - deleted 2y ago
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mejutoco 2y ago
On top of that, the freelancer might provide their own equipment. They might get paid days, or months, later too.
- andix 2y ago
  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).

bijant 2y ago

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.

mettamage 2y ago
> 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 :)

user32489318 2y ago

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.

ponector 2y ago
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.
- user32489318 2y ago
  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