This was actually illegal in Norway until recently. It is legal now, though, and you're right that this is an option. For in-demand professions like software engineers, such a scheme actually requires salaries that are comparable to those of moderately high cost-of-living areas in the US.

A typical annual fee would be ~$200.000 pre-tax for a full-time consulting gig, with 25% VAT paid by the employer on top of that. Contractor pays approximately 50% tax on their fee. It's a bit strange that few companies actually do this, although many will have part of their workforce employed like this indirectly, through a contracting agency. It's popular for roles that have a weak negotiating position, such as teachers, call center employees, nurses etc. Although rarely with contract lengths as short as 3 months.

This was an approximation of Norway's rules and was not a load of bullshit. Briefly, firing someone is only allowed if their position is no longer necessary and no alternative position exists, the company needs to reduce its headcount or if the employee has significantly derelicted their duties. There are significant judicial details that usually count in the employee's favor.

Standard terms in employment agreements is three months' notice, although as little as one month may be agreed upon when employment starts. The agreed notice period can only rarely be deviated from without mutual agreement.