It's because contractors are capex and employees are opex. I'm on a staff augmentation contract at a rate 2x the salary cap for the most senior employees. They keep begging me to convert but can't because I would be taking a $100,000 pay cut. It's a ridiculous situation.
This is precisely why I don't have a standard contract -- which, after doing this for a number of years, still seems very odd to me. A while back, I hired a lawyer to revise and amend a contract _supplied by customer_ only to have it rejected because of the time and effort it would have taken their lawyers to review/revise/amend my changes. As I understand it, this same line of reasoning would also prevent (most) of my clients from signing a contract presented by me. This makes businesses sense, and I've since learned that it's standard practice, but I resent that I'm the one who has to make the take-it-or-leave-it decision about whether to work _for_ this client, as opposed to _with_ this client.