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

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.

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.

If you’re upset, quit and become a freelancer. You’ll figure it out pretty quickly, I suspect. As a general life rule, if it ever seems like somebody else is doing better than you, instead of bitching about it, do what they are doing.

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.

I had the same conversation with a colleague who managed an engineering department, his answer was that he can take on new freelancers quickly and fire them just as quickly.

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.)

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.

Not addressing your question in any way, but I wanted to comment on;

> 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.

It is often some kind of cental control of headcount that causes some of this behaviour. Head Office obsess over keeping headcount low, and labour costs low, but think nothing about consultancy. The modern business world has a perverse view that labour is bad, yet consultancy improves efficiency

From what I've seen and heard from others, budget shenanigans and office politics are both common reasons for hiring contractors/freelancers.

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.

Risk.

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.

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"

update: typos

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.

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.

I used to freelance full-time. Having freelancers on full-time indefinitely is usually just bad management, but the economics make a lot more sense for temporary and part-time work. If you only need someone for a few months of labor out of the year, then hiring them full-time is going to be way more expensive than contracting-even with a substantially higher hourly rate. Also, at least in the US, freelancers need to charge more to just break even with full-time employment rates due to taxation and benefits.

> 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?

Depending on the juristiction (I'm not familiar with the Netherlands), there are many ways what you describe can become a very large legal liability for your employer. Most of these have to do with tax fraud, worker misclassification, etc, and no sane company needs that legal risk. They could easily face fines larger than what they could ever hope to gain from this arrangement.

> 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?"

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.

Because why would you pay more as long as you find people dumb enough to do it for little?

Other people have already answered about budgeting reasons, but there's also other possible reasons.

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.

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.

Freelance labor costs go into a different accounting column than full time payroll.

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

The thing that “doesn’t work” about converting an existing full-time employee to a contractor, and why there wouldn’t be a process for doing so, is that it can make it look like the company is trying to dodge taxes associated with employing someone by “misclassifying” them as a contractor [1], or otherwise skirt around laws associated with employment - even laws considering layoffs: he might trust you individually but if you convert 20 employees to contractors then let them go later probably there’s going to be at least one who says that the contractor conversion was just a ploy to lay people off without notice or severance.

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...

Any big companies or organisation ends up alike with bureaucracy. It is the same thing with Government.

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.

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.

Quit and become a freelancer.

Line up a freelancing job elsewhere

Quit here

They might see freelancers as more flexible workforce. Easier to fire.

Freealncers do not compete with internals in the career games.

Quit and set your rate to €100.

You’re giving them a great discount.

That’s how it works.

To keep you poor as they can manage so you are reliant on them.