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There’s a perverse distaste for hiring FTE for bland, routine work or to fill roles that have year to year volatility. Microsoft was notorious for this in the 1980s and early 1990s. If you were a superstar programmer you got offered a full time job as an employee. If you were “just” a technical writer you’d go through the same recruiting process but get offered a contract through a third party.

From 1994-1999 I ran ibm.com (whatever that meant). For most of the five years it was just me, one other FTE, and a roving band of 5-10 contractors. Any time I suggested converting the contractors to FTE I got slapped down, even though it eventually meant the loss of a lot of talent.

All I can figure is that the companies want to avoid long term benefits commitments. Healthcare. Pensions or 401ks, etc. They rarely saved money, the burden rate for my team was easily 30-50% more than my burden rate (not that the individuals got that largess, it usually went to their "manager" in the contracting agency).

I guess it could be a practice that started when companies still gave out pensions.

Pensions were a massive burden (just look at the auto companies who still have massive pension liabilities), so it probably made a lot of sense back then.

But now that corporate America has eliminated pensions in favor of 401ks, the contractor/employee juggling just seems wildly inefficient for anybody who's not a janitor.

It feels like now its just a case of the sheep following the herd, for no one reason anymore.

Anybody I talk to about this gives a nebulous response that basically amounts to "Hell if I know, that's just the way everybody does it!"

My suspicion is that it’s a way to dodge labor laws.

It is not defined benefit pensions or labor laws. It is cheaper to scale up and down expenses instead of firing people due to unemployment insurance premiums increasing when you lay people off due to lack of work who are then eligible for unemployment benefits. Also, benefits can get expensive if you also have to offer them to lower paid employees if they normally would not be able to get them at a different employer, due to non discrimination testing.

The benefits are a big one. This is definitely true at Microsoft where benefits are very good even by FAANG standards. Being able to skip those costs for workers that aren’t highly paid devs is definitely a factor in choosing contractors (or “vendors” in MSFT-speak) for many roles.

It is so companies can lay off entire teams at a whim.

When I was at MSFT, one of the orgs I was in was infamous for having over 50% vendors. On more than one occasion entire teams would be laid off when budget cuts happened.

It is bad for FTE morale to regularly lay off 100 FTEs, less bad to lay off 100 vendors.

It's an interesting part of corporate culture. Large companies hate the process of firing employees for a number of reasons: staff moral, public perception, potential legal liability, etc. This applies whether it's individuals for performance reasons, or entire teams for economic reasons. To avoid this, there is often a lot of (bureaucratic and difficult) process to justify the hiring of a new FTE.

The corollary to this is that it's often a lot easier for a manager to hire a contractor or use an out-sourcing vendor, even if they don't see the requirements of the role being any different than that of a "permie" and even if it costs the company more money.

> the contractor/employee juggling just seems wildly inefficient

Not when HR has to tell an Executive how much money they saved by hiring contractors in order to justify their jobs. HR is one of the most despicable departments in every company. They are company designated Stasi. They provide no value but whatever it is they want in order to justify their paycheck.

It is known.

I think part of it is around what the HR organization is built for, construction companies that do self performed construction are used to hiring growing their workforce 10x and shrinking it down again.

I think the thinking at more knowledge based firms is that They want to Keep their W-2 employees people they perceive to be the top performers, that they want to keep retain long-term, and that have long-term potential at the firm, if the position is viewed to be more commodity ther can put them on contract with a staffing firm, and not have save marginally, but really mentally keep track of who long-term vs. temporary / commodity

The idea is that you employ for your competency and value add, and outsource the rest. So core R&D should be in house headed by a VP of engineering, janitorial services can be outsourced not headed by a VP of cleaning the offices. In the early days, outsourcing wasn’t done, so janitors were included in those earlier Microsoft millionaires.

In a way it makes sense: you want to focus your effort on producing your product, not on the best way to clean your office. The company you outsource to can focus on that, where they make their own profit serving multiple companies. Sometimes you don’t have a choice (eg foreign companies in some countries have to contract with specific firms to do their security, they can’t have it in house).

The line gets blurry for jobs that approach the core competency of the company. So rather than janitors, should people doing grunt training classification be in house or not? Cases can be made either way, I guess. The outsourcing company probably can’t specialize in that, and they are just providing bodies at that point.

There are some weird rules about benefits that companies can only offer if they offer to all employees. So one tech company that doesn’t employ lots of its own warehouse staff (I’ll let you guess) can’t offer as good as health insurance as one that doesn’t.

It's not arbitrary.

It's the difference between the players, and the guys they hire to clean the windows at the arena.

I think they should err towards hiring for anything that is ongoing, and I also think they should have 'Minimum Requirements' for vendors including oversight.

That they don't is 'very bad'.

What's odd about G is that they are not only rich and can afford it ... they also try to be a moral arbiter, claim they are helping the world, which is really quite duplicitous.

Guess what: Car Companies have a large labour force, and they tend to get paid very well with Gold Plated Health care for example. Car companies are generally not trying to signal that they are 'better than other companies' etc..

The presentations at last Google conference with the bit about the Android photo scanner / reader used by the poor illiterate lady in Hyderabad, it was just over the top.

Seriously, pay your contractors properly before you tell us about how you're occasionally helping poor women in poverty.

Blame the bean counters. What I see in FAANG today is that departments fill as many FTE roles as they can until they hit their headcount limit, and then they employ a bunch of contractors on top of that as they feel are needed on top of the approved head count.

This is allegedly why the NSA was employing Edward Snowden as a contractor.

I think that's unlikely. I visited the CIA for a network equipment manufacturer in the late 90's and they had converted a significant portion of their IT employees to contractors. It's outsourcing to benefit the outsource contract companies. People were pretty bitter about it too. The military has got a ton of this sort of thing going on as well.

With regard to its popularity with publicly traded companies, aside from the cost and liability issues that are being discussed here, I have been told that Revenue per Employee is an investment metric that senior management try to optimise by the use of vendor and agency staff.

Source: I have worked for large corporates both as a contractor and as a full time employee in mixed teams.

> My question is, if it's so advantageous to employ people via onsite staffing firms (basically half of FAANG's workforce is employed this way), why doesn't Google stop directly employing people altogether?

Because it’s the mix that is advantageous, not either one (employees only vs contractors only).

Is there any data or studies to back that up though?

My guess is, like most of the norms and practices of corporate America, the answer is "We do things that way because other companies do things that way."

Kind of like the hilarious herd-like back-and-forth of these corporate back to office policies.

CEO: "Apple's going back to the office in September? Ok we should too! Send out the press release Karen!"

Karen: "Sir, Apple just pushed back to January."

CEO: "Then we should too! Send out a new press release, STAT!"

The cost of labour is a liability. The cost of a contractor is an operating expense. The cost of employees show up on a different line in the balance sheet than the cost of contractors do. If your life consists of fudging numbers in an Excel page and projecting a PowerPoint deck to a room full of rich white men in bespoke suits as they munch on a company-catered lunch, this is an important distinction.

In France, contractors cannot work in the same way than the regular employees. They have to be hired for a well-defined mission (on-site or on the staffing firm site) and take orders from their hierarchy, not from people of the customer company (otherwise it's called "délit de marchandage"). It has been abused a lot (to get staff that can be fired quickly and legally).

It is not only public companies, and the reasons are too numerous to list

A more recent trend it so they can claim to offer good benefits but in reality that is only for the select few actual employee's

Take for example the one company the claims to have a minimum wage of 70K (or what ever it was), I bet they are not paying the janitor, or other positions like that wage no they contracted those jobs out so now they can make the PR announcement they have this extremely high Min wage

the engineers etc i’ve worked with that were contractors were far worse and way below normal google hiring bar. sorry if that’s not PC but it’s the truth. if they could get hired at actual google they would’ve done it.

hell, if they could get hired as a SWE at a comparable firm they would do that instead of taking a massive pay cut to be a contractor

That begs the question: why is Google using subpar developers? It's hard to imagine there just not being any better ones, and it probably isn't a money issue. Are they so against having good old employees?

Opinions are my own. I also make no claim on the expertise of contractors.

The common saying in engineering is you use the right tools for the job. Likewise, you place the right people to the right job. It would be a mismatch to put an L5+ to do some low impact work. That would be an inefficient use of limited resources. The SWE would also be unhappy since that affects their perf/promo. Depends on the potential impact/difficulty/urgency, it might be more appropriate to save that work for an intern, fixterm, or TVC.

It's not about "so against having good old employees". It's business.

Just speculating (I work at a FAANG) – a lot of "software engineering" at these big tech companies is just centering divs and refactoring code – you don't need a 10xer to do that stuff.

sometimes you just need someone who can write super simple scripts to help process/clean some data or do grunt work that none of the devs want to do. And sometimes this need is just temporary for 4 months etc.

I wouldn't waste a google dev's on grunt work that any coder could do.

> who can write super simple scripts to help process/clean some data

If you can figure how to make that process "super simple" you can make staff engineer. Source: am L5 SWE at Google spending most of time wrangling unclean data

It's funny how arrogant you seem to have gotten working at Google. Looking through your post history a couple of years ago you were doing grunt work you would see as below you now. The belief that all Google employees are doing hard innovative work is untrue. A large portion are centering divs and wrangling JSON.

Hey now...this is Google we're talking about.

They're wrangle protobufs.

this account has had multiple owners.. i’ve never done grunt work

Why?

Contractor SWE's at Google are very rare. In my several years there as both a SWE and EM (I'm no longer at Google), I never encountered one. My understanding from other EM's/Directors was they were only hired for non core product work, which did not overlap with the work that Google FTE SWE's did, and was very routine work. Most likely without internal code access - it was that separate.

Core product/infra work, and anything non-trivial, is always done by FTE's.

That's ironic then, because a huge percentage of the full-time employees at FAANG are actually former contractors who've been converted. So that would suggest a large chunk of their full-time employees are sub-par.

And that still doesn't answer the question--why hire anybody directly at all?

If you're so much better than the other contractors, they could just pay you higher rates. It'd be the same thing.

"huge percentage".. got any numbers to back that up? i can tell you its a single digit percent at G.

It depends heavily on the role. For SWE and SRE you're probably correct, but for a number of UX engineering roles, temp-to-hire is weirdly common.

I've been on high performing teams at MSFT where it was over 70%.

You basically get to pick and choose who to hire after a year of seeing their code. Bonus if you pay contractors really high rates to attract good talent.

I am familiar with this process at most of the companies in question. No, it is not a huge percentage; to the contrary, it's very difficult for contractors to become full-time employees.

I interviewed with the self driving car team while it was still part of google X. I was told that every single employee on the team started out as a contractor, people would be converted to full time on a first come first serve basis, usually about a year and a half in. There was no path to jumping straight to FTE according to the hiring manager.