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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 bud
by curious_curios 1y ago
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.
- mettamage 1y agoThis 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.
- curious_curios 1y agoYou’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.
- andix 1y agoAsk the freelancers at your company how they got the job. It's probably through some agency, probably more than one, if your company hires a few freelancers. 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.
- Aurornis 1y ago> Do you happen to have an idea on how to hit companies up and offer myself as a freelancer? 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.
- paulcole 1y ago> 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-difference-between-capital-expenditures-capex-and-operational-expenditures-opex.asp?utm_source=perplexity 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)
- tolidano 1y agoThis may be different per country and all sorts of fun things apply like “is this R&D” which definitely changes the calculus.
- paulcole 1y agoSorry which countries is this different in? And other than R&D, which other fun things apply that definitely change the calculus?
- zihotki 1y agoIn Netherlands you can't simply fire a FTE. It's different from US where people have "at will" employment. In NL FTEs are more like CapEx than the OpEx
- FreebasingLLMs 1y ago[dead]
- brookst 1y agoThat last is especially important.. it is option value. Same reason a one month lease costs more than a one year lease.
- zwnow 1y agoWhen 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
- luckylion 1y agoYou don't hire the freelancers _when_ the time gets tough, you hire them when you're fine. But _if_ you need to downsize, you can cut them easily. In a country with strong labor laws, you can't do that with FTEs, you're stuck with them unless they make major missteps.
- Ekaros 1y agoIn some cases you can do layoffs, but that is larger process that takes time. And there are some regulations that mean you must try to find other work inside company for them or offer them job if such comes available. Ofc, you can pay them off if they agree to.
- Aurornis 1y agoNo, 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 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.
- Aurornis 1y ago> - 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!
- drob518 1y agoWell, and the employees often have to pay those taxes and benefits themselves, so that’s rolled into the amount the company needs to pay them.
- Aurornis 1y agoFull-time employees do not pay those taxes and benefits themselves. It’s called a payroll tax because the company pays it for people on their payroll. 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.
- drob518 1y agoSorry, yes I meant contractors not employees. But employees are actually paying them also, it’s just the company pays it for the employ before the employee sees it.
- techjamie 1y agoI 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.
- Aurornis 1y ago
- lylejantzi3rd 1y agoA few more... - 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.
- cjbgkagh 1y agoEasy to fire so they can be relied upon to toe the line. Outside the org chain so little risk of becoming a competitor to management. Additionally freelancer orgs are often a vector for mutual back scratching / kickbacks. 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.
- MrDarcy 1y agoFTE’s are not capital expenses.
- anticorporate 1y agoThe OpEx vs CapEx thing is huge, by the way. 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.
- disambiguation 1y agoI'll add: often the freelancer is a former employee with expertise that's easier to pay for than train into new employees.