Ask HN: Why do large companies work with IT work-force providers? | Hacker News Reader

Ask HN: Why do large companies work with IT work-force providers?

1 pointevoneutron2 comments

So I was contacted by a recruiter from an IT service provider firm about potential SWE position for a large public company (client). The terms of that employment would be - W2 with the recruiting company that then 'contracts' me out to the client.

I get the part where the recruiting company is interested in such relationship because they will get the delta between the $ client pays them and $ they pay me, but what is the benefit for the client? I never really understood that.

In this case the hourly rate would be ~$80/hr which is similar to what a client would pay their employees for a Sr SWE position.

So if I get paid $80/hr per contract that means the client has to pay more to the recruiting firm for them to justify employing me.

So the client may end up paying more for a contractor than a full-time employee?

Or is there a catch that Im missing? I've also never been employed like that, so would like to know what are the pros/cons of such employment terms?

It depends to some extent on the arrangement but some benefits include:

+ rapid on boarding - if the service provider has a bench then it can be much quicker than hiring a significant number of people

+ flexibility - the client can ramp up and down relatively quickly without the hiring/firing overhead

+ legal - there is a fair amount of red tape associated with a full time employee that is expensive. A lot of jurisdictions have similar rules with direct contractors.

And others along similar lines. Effectively what the service provider is doing is moving some dev staff from a fixed cost to a variable cost. So from the client's pov it's not just the direct cost for the work you're doing that's important, it's also the cost that they won't incur by not employing directly.

And that flexibilty/responsiveness can be very, very valuable. If you can cut my ramp up time by 3-6 months, in my line of work, that can easily translate to millions. I'm willing to pay for that.

Source, run multiple programmes that use a mix of FTEs, contractors and service providers.

I always suspected that "contractors" are a way of skirting labor laws about trial periods. Real, ethical reasons for contract employees may exist (you only need a very specialized skill for a small time), but there's far too many contract employees in less specialized roles for this to be the real reason.

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