Ask HN: Is it better to be a consultant in a time of layoffs? | Hacker News Reader

Ask HN: Is it better to be a consultant in a time of layoffs?

82 pointsjaneerie62 comments

Considering the massive layoffs in the last week, I am curious if these companies will begin to rely more on consultants/contractors or if budgets will be cut for consultants.

Is there any historical data on this? What have you seen in your own workplaces?

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If you service big companies, not really. BigCorps will shed their permatemps before they cut employees loose, so you're really just first on the chopping block if you are in a staff augmentation situation.

Middle market, yes and no. We get more 'steady state' type labor from them, whatever it takes to get the business running day to day. However, new projects are way harder to sell. To wit, my firm is currently unable to keep up with MSP work, but the project selling side is starting to get pressured on utilization and it seems like clients are scaling security stuff down to just the barest regulatory requirements.

Also, if you are at a blingier outfit your clients are going to start price shopping. They'll be back when they realize the quality isnt as good or if it turns out you CAN put a price on tribal knowledge... or maybe you'll meet an old contact at a trade show and they'll tell you the new upstart competitor is taking your lunch after all.

tldr we are not just sitting on our hands. the firm as a whole will do well but every consultant has to prove their worth by billing and that is not guaranteed to be easier.

From experience i find the opposite to be true in the uk. Big companies first shed permanent employees then bring consultants. Less hassle for them even if it appears more expensive. Matter of fact large uk banks and corps are known to rely heavily on contractors even in good times. Usually the value they get is also higher as contractors are more experienced.

I have witnessed this too. It always felt like. The contractors are our slack variable but this cut is permanent so better to chop the employees.

> If you service big companies, not really. BigCorps will shed their permatemps before they cut employees loose, so you're really just first on the chopping block if you are in a staff augmentation situation.

Can confirm. The BigCorp I'm at is shedding contractors in a big way right now.

Though later on in the cycle when they realize they've cut too deep they'll bring back contractors well before they start hiring permanent heads.

I was an established freelancer when the bubble burst in 2000-2002. I'm too lazy to dig up my old records to get the timing, but recall that there was an initial lull in work offers, then a pretty sizable bump maybe three to six months later from companies that had realized they'd cut too deep but still had work that needed doing, then things leveled off again at pretty much the same level as before the crash (well before the crash was "over"). I had one recurring job that had used to come up twice a year that stopped coming up; other than that I wasn't much personally affected.

Later boom-and-bust cycles I barely noticed, things stayed pretty steady.

It's a very different industry than it was 20 years ago, though, so I'm not sure how much predictive value that anecdata has. This time around I expect companies to be more willing to experiment with the low-cost offshore options than they might have been last year; offshoring wasn't really a well-established option back then.

>This time around I expect companies to be more willing to experiment with the low-cost offshore options than they might have been last year; offshoring wasn't really a well-established option back then.

More likely on-shore this time around. There are tons of devs in B/C tier cities now who are equally as capable, and more than happy to make $100k as the person in $MAJOR_METRO making $300k.

Bite your tongue. I'm one of those devs and would very much prefer the $300k tyvm ;)

You would prefer, but it's not an absolute necessity for you due to real estate prices around you.

The comment(s) you're responding to were mostly tongue in cheek, but for what it's worth the cost of living in HCOL areas doesn't justify a 3x salary difference. It's not all tumbleweeds and dollar stores outside the valley.

It's pretty impossible to be paid $100k in a place where your house costs you $100k.

Which is why both of us deserve way more than that.

(But for what it's worth -- things may be different in your country but $100k for a house hasn't been a realistic possibility even in the most rural parts of the US for a very very very long time.)

Also… pay should reflect the value you add, not be a measure of your household expenses. If companies can afford to pay HCOL rates it’s because the employee is generating enough value to be worth that salary. They’d generate the same value if they lived in the boonies, and the company doesn’t magically become unable to afford it.

Let’s not let the industry trick us all into major pay cuts, eh?

There are different types of consultants. The bad rap consultants get is based on the stereotype are that they are expensive and deliver a poor-quality job. And this stereotype exists for a reason. Most consultants ARE bad, and deliver poor work.

I am a consultant. And my firm focuses on clients where we have short engagements and focus on specialty work that you can't easily hire for.

The type of work I do doesn't get you cut, because you're in and out and try to deliver a great value to your clients, and you keep them for years in repeat engagements because you do it and can prove it beyond a shadow of a doubt.

As for the former type of consultant, you'll get cut, and you'll get cut so fast your head will spin. And the reason you'll get cut is because your client wishes it could just hire employees, but sometimes they can't and they find consultants instead.

Your final statement seems a bit contradictory to me. If the client can't hire employees for certain work, doesn't that increase their reliance on consultants (and reduce the chance you'll get cut)?

Only if your work is so important they can't afford to let it go undone.

If a company has to cut costs they cut the positions they can do without, and in those positions consultants are cut out first.

Of course if you aren't easily replaceable or they actually need you then they won't cut you, but even then, if it really comes down to it consultants get cut before employees that are equally as important.

"There are two types of consultant and I'm the good type." - Every consultant I've ever met.

We're not bad at our jobs. We're bad at finding jobs. It's a fit thing. If you want the real two types: It's specialists and jacks-of-all-trades. Specialists are pointless to hire because yeah, they should just be employees. That's why I'm a jack of all trades, the good type of consultant.

The same goes for employee candidates. There are two types of candidates, and I'm the one you want to hire. :)

That's just hiring in general: most developers produce total crap.

Your experience is with companies that needed a consultant though, right? There's a selection bias there. This is part of why I'm looking for a job (and am that type of candidate!) and no longer consulting. I want to work somewhere that doesn't need to hire a consultant.

I’m very much a specialist consultant - I specialize in “cloud application modernization”. Which basically means I do application development and “DevOps” using AWS technologies. But I’ve been doing your standard enterprise app dev/architecture for decades and I’ve used every type of backend language and database imaginable. Within the context of cloud, I am considered a generalist with a few specialities.

> Specialists are pointless to hire because yeah, they should just be employees

My job as both a consultant and before that at my last two full time jobs is to “put myself out of a job”. I focus on training my coworkers (when I was working full time as a non consultant) and now my clients to not need me. I did so twice before working as a full time consultant.

I absolutely refuse to do a staff augmentation type project and focus on projects where the company needs to leverage my specific skillset. I am engaged with the customer from pre-sales, architecture proposal, SOWs, through delivery. I haven’t done a project in any of my consulting projects where I haven’t started with an empty git repo.

I’ll be the first to admit that I suck at “staff augmentation”. Either I’m good at my job, or I’ve managed to fool a very large cloud provider and our customers that I’m good enough not to get fired.

I was also a dev lead in a previous life who was forced to work with contractors. I would never do so again. I’ll work with my team. But I know without a doubt that my team knows our specialty better than anyone else in the world.

It's mostly a tongue-in-cheek comment there at the end. Of course specialist consultants are appropriate in some cases. I do like the "automating the gig out of existence" approach.

Not just automating - training. If you make yourself irreplaceable, you also can’t be promoted or transferred to new projects.

It also doesn’t look good when you get ready to talk about your achievements.

Some people thought it was heartless when Netflix laid off some of their employees who were responsible for the original migration to AWS once it was complete.

They don’t seem to realize how good it looks on your resume or at an interview to say “I was on a team in charge of the largest cloud migration in history and once it was successful. They didn’t need me.”

Yeah it sounds good but you are still moving, wasting time interviewing and currently unemployed

Have you heard about Netflix’s severance package?

I have personal experience successfully interviewing at a major cloud provider in the consulting department. That hypothetical former Netflix employee would have no problem finding a job quickly making a lot more than I make doing similar work at the same company.

I'd put the division somewhere between individual consultants and consulting firms - the former often end up creating the latter and it goes downhill from there. Much has been written on it.

I was consulting in 08-10, the last tough time. Anecdotally, it was ~fine, but you need to be okay dealing with more chaos in your life. Your budget comes out of different pools of money than the FTEs, which means you can be hired during layoffs, but those pools of money don't "recur" the same way, which means you're going to have to have several clients ready to sell/pitch to. You're always 2-3 months from being "laid off", but because of that, you have some control over what might happen.

As a follow up to my other comment here, this is also my experience. Risk increases proportional to the size of your firm, but so must your prices.

Consultants usually gets cut first, unless they're deemed absolutely essential - their manager might successfully fight for an exemption then. I'm a contractor and my client recently told me they won't be renewing in the new year and will replace me with a barely competent full-time hire instead - all because of the incoming economic downturn.

That’s also the benefit (to companies) of consultants — they can bring them on and get rid of them as needed more easily, so if you’re a consultant you might be able to find more gigs. Companies still need to get the work done, and having a more flexible workforce is desirable during times of uncertainty.

As a side note here - it sounds weird, but if you spend your remaining time making sure the barely competent full-timer is as competent as you can, the company will certainly remember you fondly and you'll be top-of-list when it comes time to consult again (and also remember that anyone you worked with at the company may bring your name with them to another company, too).

Consultants want to not only not burn bridges, but want to build as many as they can.

My experience as well, both as a consultant and as a hiring manager. If the company needed to tighten up, the consultants went first.

Anecdotal, but I started my consulting biz in 2010, when unemployment had peaked at 10% during the Great Recession. It was an incredible time to be a contractor because companies still had work to do, but were gun shy about hiring, so many of them relied on contractors to help out. I had more gig offers than I could accept.

It wasn't until a few years ago, when tech companies started their massive hiring sprees that contracting gigs really started to dry up. So while yes contractors tend to get the axe first in a downturn, at the end of the downturn it can be a lucrative business.

First let’s define what a “consultant” is. A consultant for a company can either be doing “consulting” where they are bringing in a specialize skill set and in the room who have a budget (CxOs) or they can just be doing staff augmentation where you are just another hands on keyboard coder embedded in a team.

Personally, doing staff augmentation type “consulting” is the fifth level of hell. You’re treated like crap, are easily disposable and it really does nothing for your career. You’re also not paid all that much.

On the other hand, “consulting” where you are bringing in specialized knowledge is great. You can charge and arm and leg is great.

Which is better in slow economic times is just the opposite. Companies hire staff augmentation type “consultants” because it doesn’t increase headcount and they are easy to get rid of.

Companies hire true “consultants” when they are going after new initiatives which they do less often during slow economic times.

I’ve done a couple of staff augmentation type projects early in my career. A couple of true independent consulting projects later in my career and I now work as a permanent employee as a cloud consultant at $BigTech.

Consultants often get cut first.

But they are often called in when the cuts were too deep, or to help with the cuts.

The advantage that a consultant has is that they're used to being "laid off" multiple times a year, so they should have a customer base they can use to level out.

It largely depends on if there is a project freeze or a headcount freeze.

Any negative economic blip is used as a recruitement/headcount freeze where employers can cut out the 'deadwood' without market/customer/shareholder/staff negativity. In that environment, consultants and contractors are valuable because the work needs to be done, but they can't hire the staff (hiring freeze + normal churn + "it's the economy" layoffs)

On the other hand, if projects are being canned, products aren't being developed, apps aren't being launched, that sort of thing then contactors and consultants are not in demand. It does take a lot to stop projects at that scale, and they tend to be focussed on a particular sector. I can think of 2008/2009 in finance (obviously), and 9-11 in the insurance industry (travel recovered very quickly).

There are a few variables to this. Are you a contractor or consultant (there is a difference). What you offer (warm body or solution). Location. Target companies size and industry sector. Economy status. Personal relationships with clients.

I started in '09 in the midst of the Great Recession, and did well. Companies were laying off, but still had projects needing done. Between 2010-2020, I also did well. 2020-now, I'm doing OK, but half the work, with regular (non-tech sector) clients have been worried about the economy, holding back on non-essential projects.

The biggest intangible though is how hard you're willing to go out and sell yourself. You have to have more than just knowledge, you have to have belief in what you're selling--which is yourself. If you can sell yourself, you'll do ok.

Consultants cost a lot more over the long term and aren't as productive as full-timers. Part of the rationale behind hiring a consultant is you can cut them whenever you want your books to look better and it's less admin overhead.

If you want stability, get on a project with ample funding from an org whose profits are consistent even through recessions. Whether you're a contractor or not your position is probably safe. I wouldn't want to be in a startup going through a recession.

What's really amazing, though, is that the marketing value of this flexibility to corporate managers exceeds the innate financials of the arrangement! As with so many budgetary decisions, companies would rather waste money pretending to have flexibility than save money by committing.

Whatever, I'm happy to take that delta.

Funny how in the uk its the exact opposite. Contractors are usually more productive and more experienced. Recruiters will outright refuse discussing contracts with you unless you have a certain number of years of experience. You usually need to hit the ground running in a matter of days and need to constantly be on your toes, be familiar with loads of concepts and have a good reputation. Contracting is usually seen as a badge of honour. There are of course masked employees posing as contractors for tax avoidance and those are indeed pretty weak.

I work for a Fortune 200 company. Our policy - publicly stated even - is to keep a large contingent of consultants on staff so they can be easily "adjusted" to right-size operations. That's a double-edge sword: consultants are the first to be let go but they're also the first to be hired.

I was a consultant during 9/11 and the ensuring economic meltdown, made worse by major Y2K projects wrapping up. Consultants were let go en masse. It was extremely difficult at the time to get new work because so few people were hiring either employees or consultants and for those that were there were hundreds of candidates trying to get that one job. Contrast that to a couple of years earlier where they were literally throwing around tens of thousands of dollars in sign-on bonuses.

Once you've been around this industry long enough you'll see this cycle repeat every 7 years or so (1987, 1994, 2001, 2008, 2015 - not so much, and now 2022). It's the IT boom-bust cycle.

Slightly OT:

Massive layoffs are happening for some companies, but the market is still extraordinarily great and it's currently incredibly easy to get a better job than you had when you were laid off. As long as the general environment doesn't tip over into higher unemployment, I wouldn't worry about this too much (but still make plans just in case).

Is it really? The market looks a lot different from when I started nearly 10 years ago. Burnout has become a more frequent topic among developers. Things in tech are generally less optimistic. Recruiters are not nearly as rabid. The hiring process treats even recommended senior engineers as if they have no experience but have plenty of time to sacrifice on take-home assignments. Salaries haven't kept up with inflation or the increase in complexity seen in most modern code bases. Even those with a long CV are likely to spend 4+ months applying and interviewing, which is no less time than it took for them to get their first job. Many companies have cut back on food, parties, and other benefits in favor of glorified gift cards.

Everyone's mileage will vary, but it seems to me the only thing that is still "extraordinarily great" is the low barrier to entry we maintain. The market right now comparatively not nearly as great as when I started. I think we need to be honest to each other and not just repeat that tech is a bull market.

Yeah don’t know what parent is on about. Esp if you were richly compensated through RSUs, I think it’s very hard to find that again in this environment

Data point 1: US unemployment at 3.7% is at a record low.

Data point 2: Part of my job is hiring mid or senior engineers on the west coast (or remote) with good salary/rsu/compensation packages (not quite FAANG level but not far off) and it's incredibly hard to find people and get them to sign when they have lots of competing offers.

What total annual comp are you all offering for say a promising senior Eng in the west coast with 5 yrs experience, if you don’t mind sharing?

Yeah, I also noticed this trend. Salaries and comp. are much lower as well, for instance, I see now that a very large amount of offers come with no equity (yes, even early-stage startups), when even one year ago all offers had a complementary equity or stock package.

I think the pay right now is alot lower.

How is the market great? Amazon just announced a hiring freeze. Google had some layoffs. Meta saw a 70% drop in market value. I don’t keep up with Microsoft as a whole. But they just announced the same “headwinds” in their cloud division as AWS.

Apple seems to be the only large tech company not experiencing systemic issues aside from the China lockdowns.

When the dotcom crash happened, I was working as a software contractor - I was able to keep finding contracts but: 1) My rate went down to half what it was before the crash, and I was pretty sure the employees who stayed were doing better than me (w/ benefits, et al), 2) The work got a lot less interesting, and 3) I was constantly stressed out about contracts being renewed.

Not super surprising - contracting is a feast or famine business, but after a few years into the early 2000's doldrums I ended taking W2 jobs and never looked back.

I wonder if there’s published stats on the percentage of tech workers that switch to fulltime consulting and back, and said trends over time. Very curious about it

I think that in the laying off phase, consultants + contractors are the first to let go. That's because they don't require severance and are easy to just cut for companies.

After the layoffs, I think when companies do need to increase headcount, consultants and contractors will be in huge demand, for the same reason: in a time of market uncertainty, they're just easier to let go and therefore cheaper.

When the economy comes back into full swing, I think we revert back to FTE as the default.

You can check https://www.contractrates.fyi/ to see what kind of rates people are getting these days.

Super short term, I'm bearish - I think hourly workers are going to face significant cuts. Short term, bullish - they'll be the first ones brought back. Long term, FTE will probably win out.

A lot of people here saying consultants are cut first.

I am not an expert, but my understanding is that sometimes accounting makes it so cutting headcount looks great, lower overhead, but stuff still needs to get done so consultants are brought in to actually do it.

Keep in mind that many of these tech companies are in California and the law changed a few years back to make it much harder to categorize someone as a contractor.

I’m not 100% clear on the law, but I think if you work more than 20hrs for a company or derive a large portion of your income from a single client that California might consider you to be an employee even if you have a corporate shell like an LLC.

I know that back when the law passed I was asked to share copies of invoices to other clients so I could continue to do work as a CA contractor and keep my client protected from any employment claims.

It depends on the region and the company - while contractors may be a cheaper option, in some parts of Europe there's legally mandated redundancy payments that employers need to make to full-time employees. There's also a "news factor" for companies letting FTEs go, so sacking contractors, or letting their contracts just run down can be the far cheaper, and less "bad press" option.

I guess, that some companies will want to retain their essential contractors, but might choose to shorten contracts to a rolling month-on-month or something similar.

From experience at a big aerospace company there were consultants that were hired before the last recession and I'm sure they'll still be there after the next.

From what I've seen, whether you get cut is based more upon how discretionary your specific project is rather than whether you are a contractor or an employee.

If a project is equally discretionary contractors will get cut first and without warning but I don't think that makes as much difference.

By discretionary I mean that cutting back won't cause immediate damage to the bottom line or easily visible long term damage to the company.

Being a consultant at a firm with a wide variety of clients does provide some stability, yes, more so if you are a generalist, even more so if you are willing to travel.

(Lots of firms need good engineers willing to work on (not always, but often) less sexy tech that are willing to travel. This is hard to find (see also: every thread about WFH) but pays well. Not bull-market-FAANG well, but well.)

Small companies I work for don't really use consultants. In the one case they were, it was for particular expertise, not available in house, that is central to the growth of the company. So I doubt they would be cut in this case, unless the company got into a lot of trouble (such that they would also be laying off staff).

Small sample size, so pinch and sprinkle.

Many laid-off people turn to consulting. Thus if you are a freshly minted consultant you will be facing competition from those in a similar situation.

The golden rule is to build and maintain a strong network. Easier said than done. Your client contacts could also get laid-off.

From my experience a company is more than happy to pay a lot for an external consultant that they can cut anytime, while they think long and hard about permanent costs like employees.

Not necessarily. Consultants were the first to go at my company.

At least in the Netherlands I have not noticed consultants being laid off en masse.

I think freelancers will be first to go, but also the first to get hired back.

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