I show up differently in their accounting ledger, and because investors scrutinise that, management will optimise for it. Instead of employee cost (which is usually tightly controlled) I now show up as an external service next to extortionate cloud bills (where nobody knows or cares what they pay for anyway) somewhere 2 levels deep in COGS. Being the cheapest service provider looks a lot better on paper than being the most expensive employee.

Also depending on country there is tax and social security payments which companies dont have pay when they are buying consulting.

And in Europe consultants are much, much easier to fire (especially if the minimum standard of performance is "more capable than our existing staff" or the problem is for an indeterminate amount of time)

Guess it's different over in the states, but my boss said the cost to the company is roughly 2x the salary. This includes taxes (not income tax), pension and such.

So 1.5x would be a steal in comparison.

2x sounds like it includes non-billable employees like assistants, HR, accounting etc. A 100% overhead is probably quite common.

Pure employee costs are more in the 1.2 - 1.3x range (Europe). That is 30% on top of the gross salary for employer taxes, health insurances etc.

I am in Portugal. Here your real wages are tiny compared to the company expenses.

To start: everyone pays 34.75% of mandatory social contribution, even if you are on minimum wage. Government tricks people saying the contribution is "only" 11% but charges the other 23.75% from the employer.

So if a company pays 1000 eur to "you" (remember a chunk goes straight to government and skips you, but they are still spending that to pay you) you get 652.5 euro. Or 65% roughly. And that is only the social contribution part.

The average income tax for a tech worker is around 20%. Thus you get instead 500 euro flat.

Thus a Portuguese company to hire a tech worker would literally spend the double of your taxless wages just to hire you and pay the income taxes and social contribution. Then if you factor all other potential expenses things get even sillier.

So, Portugal is pretty much in my 1.2-1.3 range?

So a company to pay 500 euro in wages, spends 1000. Thus 1000/500 = 1.2 to 1.3. I don't get it.

I am purely looking at gross salary. As that’s the only measure of interest for the company. How much of that you loose to the state, that’s your problem. /s

Contractors can be billed to a project, it’s much easier to pass with the finance dept than justifying why one new hire should get 4x what someone else with the same job title gets.

> get 4x what someone else with the same job title gets.

some enterprising manager realizes this, makes up a new job title (that sound important) to justify the 4x salary, and thus lead to job title inflation as other people sees such a title earning high.

It's justifying why the new hire gets more than their manager that is really hard.

It's also easier to book a high fixed cost than a high ongoing cost.

Contractors are easier to hire and much easier to fire than permanent employees. I've had both good and absolutely terrible experience with QoR of contractors, but IMO the biggest problem is the loss of institutional knowledge when the contract ends. No amount of reports makes up for the warm body in the room that can say, "actually, the reason for this is ...".

Companies are full of weird cargo cult like that.

Having a ssalary cap on certain positions, but paying top dollar for external consultants doing the same is very very common.

Most companies are status-based, not value-based. The primary goal is to maintain status differentials. Pay is one of many tools used to enforce status hierarchies.

As an external consultant you are - to some extent - outside the hierarchy, so the usual rules don't apply.

When companies get really big and dysunctional they start to treat their customers as if they're the bottom of the hierarchy. Which is how you get all finds of corporate outrages.

Because it's temporary.

That is, if the company hires you, they hire you (in theory) forever. But if they contract with you, that's usually for the duration of the contract - a few months. A higher rate but for a short time is easier to justify than a slightly lower, but still high, rate forever.

> how they'd justify the 1.5x expense.

Because of lack of benefits, don't have to go through unions to fire ect.

Same reason you pay higher on a short term apartmentlease.