Microsoft learned the hard way to not treat contractors like employees. https://www.reuters.com/article/businesspropicks-us-findlaw-...
Nobody else wants to learn that same lesson.
I think some folks have this illusion of software contractors that this is somehow common, it really isn't. The norm is you-are-almost-but-not-quite an employee type work environment, and thats at the better places.
I've worked at a place where contractors were treated like they weren't human, basically. Worst equipment, forced to work in an old warehouse that barely passed code to be considered retrofitted for an office, people routine got sick out there because they were exposed to the elements. Not to mention, during fire season (this was California) they were in a building that didn't have a good enough air filtration system, so they were forced to sit in smoke all day, more or less
I quit that place pretty quickly, but it was nothing short of terrible
But no, companies like Google want to have their cake and eat it too: they want a class of workers where they can require of them more or less the exact same things that they require of their employees (and much more easily fire them), but can give them a lot less, and treat them like a second class.
That's entirely Google's choice. It does not have to be that way. But they've decided to create this two-class system for their own benefit, not for anyone else's.
Also consider that these people are probably often not contractors in the legal sense. They're likely W-2 employees of some sort of staffing agency, who are then placed at Google. Google pays the staffing agency, the staffing agency pays the "contractor" a salary (significantly less than what Google pays the staffing agency), and all is fine... legally, anyway.
The staffing agency vig is so high it is practically the same as an FTE.
It felt like being an indentured servant in many ways. The only upside was that if you hated the place you worked, you could always ask to be reassigned someplace else. But that's the only major plus I can think of.
The idea is that covers 70-80% utilization, unprofitable engagements, HR, benefits, etc. Plus profit to the company.
3 would mean your firm had sources of revenue other than services/consulting.
2 things -
1) Accenture has an EBIT of 20%.
2) The tippy top of the consulting pyramid plays on branding in a way that the average firm does not.
The VAST majority of service driven firms will not become McKinsey etc. making this a poor comparison
Finally - I doubt that the top firms have those margins, I would most definitely like to be corrected though. If you could clarify or share your source, I’d appreciate it.
Some highly profitable consulting companies that are partnerships have very high margins, if you don't include the profit sharing component of the pay of equity partners (but do include bonus and fixed salary). The primary public source I can point to is that many top law firms publish their margins to be >=50%.
As for McKinsey, according to Google, McKinsey has 10k consultants and 2700 partners. There are 30k employees, so I give you that the overhead rate is higher than law firms. But given how different pay is between partners and non-partners, and there is still a relatively large portion of partners compared to other employees, the margins, if calculated this way, is probably still pretty high.
Now is this the right way of considering profit margin? There are some good reasons to disagree with it. But in the same way people can like or dislike EBITDA. At least, it's like nobody discounts Larry and Sergey's cut from Google's profit.
In this context, I would argue it is indeed a good way, especially for the purposes of discussing the discrepancy between grunt pay and hourly charge. It tells us that a very large part of that discrepancy goes to equity partners (who aren't those doing the execution work), rather than "overhead" as it's being argued. This is very different from big-corp type public companies where, even though executive pay is a lot, the bulk of the pay goes to shareholders ans a large number of rank and file and moderately paid middle-managers, which I suspect to be closer to accenture's profile.
Leaving aside the partnership fair/unfair model, equity = access to capital.
But consulting-type businesses are essentially headcount machines, because the product is 1 person's time.
So why do you need access to capital?
Granted, it makes expansion easier (hire ahead of work), but as far as profit distributions go, what are equity holders providing in exchange for their slice of the profits?
Furthermore, a law firm is a place where your assertion - “ discrepancy goes to equity partners (who aren't those doing the execution work)…” Senior partners are pretty critical in bringing and keeping clients.
See https://finance.yahoo.com/news/why-law-firm-isn-apos-0514053... . Valuing law firms is not that straightforward, and profit margin numbers are not defensible.
I would appreciate the source you are basing your arguments on.
Getting to profit through pure people power is hard. Every next person you add doesnt double your output. It’s maybe increases it by some %. (This includes overhead costs)
This, among many other processes, has significant negative impacts on the quality of the agency that will work with Google on this sort of work - but it does help with cost control.
(Source: I ran one of these agencies, and Google was a past client.)
This is precisely what Samsung does in Austin at its fab, via Randstad. I was a supervisor, and had about 50:50 FTE and Contractor. They were treated exactly the same, including getting pizza parties and the like. The main – and largest – difference was FTE benefits were awesome, and Contractors got the bare minimum required by law (Texas, so basically nothing).
I often complained about this to management, to no avail. My main argument was that we were training people to quit and go work for Intel or GloFo as FTEs. Didn’t seem to matter.
I hate this model so much. Just pay people if you want FTEs.
And that arrangement exists solely so that the company whose work you're actually doing can fire you more easily or avoid legal liability.
Yes? Whats wrong with hiring a cook if you need to cook?
They pretty much were giving away the farm, and if they kept that up they’d be bankrupt - not an incredibly valuable company.
Anyone doing that at scale is going bankrupt quickly. Which is the point.
Ah yess, cooking food is like deepwater welding, and an average adult has no idea how to manage the risks involved.
Seriously, how can an adult write something like this?
I know people who have, and it is far from an easy or straightforward thing. If you want to stay solvent and out of jail anyway.
Most restaurants go bankrupt within a few years.
We discussing a canteen for employees, not a commercial restaurant. You don't need marketing, you don't need to turn a profit.
How many people do they need to pay to manage this contractor circus? How much effort do they waste sourcing contractors, tracking work assigned to them, treat contractors differently even interns of security processes, and dealing with higher attrition levels? So much waste.
Those kinds of regulations are a prime driver for this kind of contracting.
People that complain about the plights of contractors need to understand the above.
It might mostly exist for that reason, but not 'solely'.
Otherwise, there would be no contractors in eg Singapore.
If you are setting their hours, bossing them around and/or providing equipment they are not a contractor they are an employee. This is the law in 100% of the United States.
There are 2 different uses of "contractor":
(1) contractor : official IRS tax classification of 1099 independent contractor
(2) "contractor" : a W-2 employee of a "temp agency" or "staffing agency" or "bodyshop" that is sent to a client company (such as Google) needing contingent workers. Adecco[1] is an example of a staffing company that sends people to Google. These temp agencies with workers classified as W-2 employees act as legal cover to "avoid repeating Microsoft lawsuits". From Google's perspective, these Adecco employees are "contractors".
If the above working arrangement looks convoluted with the economic inefficiencies of paying for an extra middleman (the temp agencies), it is. But it cleverly avoids the IRS claiming, "Hey Google, your so-called contractors are misclassified and should be employees!" ... and Google can say, "They already are employees! They're Adecco employees!"
The "1099 real contractor" is not as common as "fake-contractor-but-really-somebody-elses-W2-employee" ... because the "1099 contractors" won their lawsuit against Microsoft.
In effect, this scares companies so much that it is very difficult to get hired as a 1099 contractor as a programmer/engineer. The vast majority of companies will require you to be a W-2 employee of some other company (which will be the "staffing agency" or "bodyshop" or "temp agency").
One programmer was driven to fly his aircraft into an IRS building due to this issue.
These laws do not protect workers, they protect entrenched wealthy body shops.
I get why 1099s can’t but what’s the deal with the other, now more common situation?
And the ruling makes it clear that it’s based on the actual on the ground reality, which is why vendors get pulled in the same way.
If the main company is the one giving the vendors employees their direction, managing them, setting hours explicitly, they get included in all hands, etc. then the main company is also on the hook for being their actual employer as far as benefits, taxes, etc. go.
So there needs to be a clear delineation at all times, or bad things happen to the primary company regarding costs.
Depends on the agreement. First off, probably 99% of these contractors work for a contracting company, so as a contractor you have no say: You are an employee of (another) company and they'll set the rules.
If you're truly independent, then sure - try to make whatever agreement you want with Google.
Obviously there are different policies for internals and contractors, but fruits and pizza are for everyone in the office.
Been there. Done that. The FTEs got strawberries. I didn't. I don't think I have been that pissed off in my life. If someone had wrecked my car on purpose I'd be less pissed.
The team got a new manager when I joined, and he was told that our treatment was equal despite satellite office status because we were on the same teams coordinating on the same projects, but in different timezones.
Anyway, even though I was technically a FTE at the company, I didn't have the necessary prerequisites to pay for cafeteria food at FTE discounts. I was forced to pay contractor prices. A full extra $5 per meal. My manager was initially confused, then upset. Then we tried to talk with the cafeteria contracting company. They told him it was out of their control. So, we began investigating...eventually uncovering some internal "separate but equal" undocumented employment scheme were compensation, benefits, whatnot, unraveled into a weird caste discrimination system. The people that were pulling their weight were paid pennies while senior team members who were awaiting retirement just raked in the big bucks with benefits on contracts no longer offered, or offered through some backdoor deals before the company really expanded.
In the end, the lunch situation was solved by just stating that I was a FTE because I had the same color badge. It turns out the cashiers didn't even scan badges or anything, just asked you if you were internal and to show your badge.
But out of all the bullshit we uncovered, the food situation really broke his spirit the most.
I was a "contractor" from an in practice body shop consult agency, not an actual contractor. I did every day office work for three years, being part of a normal work group going to every day meetings etc.
But I don't think that matters. If you have an actual consultant in the office, being there once a month, you give him strawberries too, if you hand out strawberries.
Also, the pay was somewhat lower. I was fresh out of uni so I didn't know better.
Notably, only bosses two layers up thought it was a good idea to skimp on the strawberries etc. The bosses that had to deal with the ensuing bad mood ensured there was no such distinction between FTEs and "contractors".
> Also, the pay was somewhat lower. I was fresh out of uni so I didn't know better.
What you describe is outsourcing, not contracting.
Not being on the Google health or retirement plan is one thing. That's something you can do maths to, see if your alternative arrangements make sense.
But witholding food is something that feels anti-human. Like it hits some primal parts of me. Eating a meal with people you work alongside is, depending on your interpretation, between a few hundred thousand and a few hundred million years old as a social act.
Denying that is... something else.
Also most of the time these people are not receiving more money, more like the same or less.
A very similar-sounding caste-system. Europe’s great and all but it isn’t Utopia.
It feels like contractors forget they are contractors...
You can’t legal away basic courtesy and explain away people’s anger at being treated like a lower social class.
Imagine if first class seats on a commercial flight were interspersed among regular class seats. First class passengers get more room, better food, more respect from attendants … right in front of people who don’t get those.
If the first class passengers get faster access to something basic like water, some people will go ballistic.
Sure people paid more for the nicer seats, but do you think that legal fact dispenses with the unhealthy social situation and bad feelings that would create?
ESA is one of the world’s leading space exploration organizations and one of the few that is international in scope, representing 22 member states. Contrary to a common misconception, ESA is not part of the European Union and not bound by European law. In fact, ESA is not bound by any real-world law, either local or national—it’s governed only by its 130-page Convention and a set of internal regulations.
This international status grants the ESA and its staff privileges that are far superior to those afforded to its bigger sister and role model, NASA, notably the ability to maintain any internal documents as confidential.
I am honetely to lazy to look up a list of ESA space missions for you, Wikipedia might have a decent overview so.
https://www.statista.com/statistics/745717/global-government...
When I lived to Austria I was appalled at how many American friends asked me about the surfing.
UN geoscheme lists it as such if you want something concrete. (Though it also puts the UK in Northern Europe, and leaves out Italy & Spain & Portugal (Southern), which I didn't mean either.)
It's a funny term. In UK use it means something like 'mainland Europe but not Russia or some former Soviet states'. It's about the bits you think of and travel to, I suppose. Although that makes it sound obvious, which it isn't, because nobody means India when they say Asia, but it's at least as much in the public psyche as anywhere else in continental Asia.
You know. "Fact" and "rigorous research".
(And I am asking this in a friendly tone, as a genuinely curious question, and not a combative one. These nuances get lost, so putting them down in words). Thanks.
Taxes in Europe are huge, but comparable with taxes in California. Just sum all federal, state, local taxes on the salary, property taxes, sales taxes, health insurance fee, college tuition fee. Don't forget to add 25% tips to that. Count also small vacation, maternity leave and sick leave.
And then compare for example with France.
And not to mention you wouldn't find anywhere in EU thousands of homeless junkies shitting on the streets.
It is financially unfeasible for most middle class households to pass down their homes to their children due to the estate tax kicking on assets over 100,000 eur.
I can guess what the reply/replies will be: "Oh, but housing is more expensive now. There is no choice but to use inheritance to give my children a head start." It would be better to ask why housing has gotten so out of control, not using inheritance to side step the issue.
It's interesting.
A country with dwindling birthrates far below replacement levels perplexed by the fact that its people are refusing to father the next generation when they can't even provide a home for them. (It wouldn't even be tax free, by the way. Because the original proprietors bought and paid taxes on the house. What you're suggesting is double taxation :))
But it's okay. France has solved that problem: Make it illegal to take statistics on ethnic origins, let the poors of the world come flood your land, let them work for lower wages, and then act surprised when their culture is fundamentally incompatible with yours. Your streets are now unfamiliar. Unsafe. Dirty. They don't share your values of cleanliness and respect. Your freedom of expression. Don't worry. Their children won't be able to inherit their homes either. That's fine with them though: because they'll send their money back to their homelands where they can build villas with it, (or comfortably live in a ghetto squalor in Paris because it's still better than the conditions back home.)
The reason why we have inheritances is people in power convinced each other that regular people will work harder throughout all their lives if they know they can give their children a better life. Meaning the economy is way better with some inheritance present than without inheritance.
Love is a powerful thing and while most people would agree with you that in theory they'd like all children to have the same opportunities, once their babies are born they will fight forever to give them the best conditions they can.
I agree with inheritance taxes, probably not 100%, but wanted to explain the perspective of people that want full untaxed inheritances.
Are you for real? Because it is not my or my children's fault other children don't have anything to inherit. This is how life works. You do whatever you can to get ahead of other through any means necessary to have a better future. You should not exepect the same outcome for people from different walks of life.
And just because not everyone can afford a house it is not my problem either.
> In my eyes, this is the path to Old World aristocracy. The purpose of inheritance taxes is to reduce this advantage.
So the world would be better if everyone was poor, right? The purpose of inheritance taxes is for the government to steal from your hard earned assets. Just because you're jealous of someone who inherits a big house or whatever will not make the world a better place.
Except its not how life works. Because we decided to make a law against it. You're trying to argue that the law is bad by... saying that it's not a natural law of the universe (no law is, murder is neutral on a cosmic scale)
> So the world would be better if everyone was poor, right
if you're arguing in this sort of bad faith its pointless discussing anything. Social mobility is demonstrably different across different nations, and policies do exist that actually affected social mobility. Social mobility correlates strongly with GDP. If you want a wealthy society, make it so hardworking people born into poor families can outcompete wealthy failsons
This is a very wrong assumption. You cannot have the same outcome even if you start from the same position - everyone poor or everyone rich.
you aren't arguing seriously. reread what I said. You're replying as though I said the complete opposite of what I actually said.
> make it so hardworking people born into poor families can outcompete wealthy failsons
I said you can't and you do not agree. Please tell me how do you see this happening and what is the barrier to this now?
I explitly talked about outcome being dramatically different. Children of wealthy people who have no motivation to contribute anything to the world, learn no skills, and are lazy, should not end up on the same level as hardworking skilled children of poor parents. They should end much lower. Barriers to this include enormous inheritances, the housing market (prices driven up enormously by hoarding and inheritance), the cost of university education, vast disparities in the quality of education available in different areas, and nepotism in the jobs market.
These factors are very different in different countries. I forget the name of the stat but looking at the percentage of people born to bottom fifth income parents ending up as top fifth income earners themselves is quite telling. If I remember right there is a dramatic difference between similarly "developed" countries. I looked and couldn't find the original data I read but here [0] is similar, showing denmark children born to bottom quintile parents reach top quintile 14% of the time (perfect unachievable meritocracy would be 20%), wheras in the US its 8%.
It goes without saying, but the reason it is important to point out that it is different between countries is to argue against vibes based arguments of people who just throw their hands up and say "oh but woe is us this is the natural way of the world why rage against nature it will always be thus" simply because they think that is the case without any data whatsoever. This is literally table stakes for even discussing the problem.
[0]: https://www.brookings.edu/wp-content/uploads/2016/07/02_econ...
My gripe is with the above. Why would they try when they don't have to? Would you? And what does it matter to you that someone just spends money they inherited? It's like winning the lottery.
And what has someone's else wealth has to do with university costs?
let me switch to a tangent. You seemed to be concerned with making a wealthy society, where at least some people have wealth, right?
In order to do that we have to ensure that its worthwhile for a talented person to work hard. When someone cannot become wealthy no matter how hard they work, why would they work to make anything in this world?
and so society suffers. The way to make people work to make things, is to reward them for doing that. This is an economic reality, and is demonstrable, there are many economics papers on the relationship between income inequality, gdp growth, and income mobility. Suffice to say, no matter who you are, its in your interest for there to be more mobility, and for inequality to be in a certain range (not too equal, for incentive, and not too unequal, it causes dramatic negative outcomes like crime, unrest, addiction, violence)
On the other hand, if you're in a industry that pays very little, then no matter how much you work, you're not going to make it. And probably you're going to make if you decide to become an entrepreneur and get a piece of the pie. But it doesn't work for all and the only thing you can do is to switch industries if you can.
And these days I think the inequalities are greater due to rampant inflation that makes everyone poorer (considering only money earned) and though in percentage terms it is the same for everyone, it hits the lowest earners the most.
The thing is that in a free market I don't know how this can be solved.
And it is just like now, I use a gun to shoot people that try to enter my house. What you're saying is that I should have people with guns in the house for the times that I'm not at home.
How is this different than today when your house gets robbed during the day?
Anecdotally to me USA even looks like it's collapsing every time I visit it. In the larger cities there are homeless everywere, and often literally next to luxury yachts and limousines. A lot of the infrastructure seems like it's literally gonna collapse, and lots of it really does. It's quite a cyberpunk vibe when compared to e.g. the nordic countries.
Of course there are similar problems in many european countries too. Especially England is quite bad w.r.t homelesness and infrastructure. But England is in many ways culturally closer to USA than most europe.
It is financially unfeasible for most middle class households to pass down their homes to their children due to the estate tax kicking on assets over 100,000 eur.
Social mobility is significantly constrained
French citizen here, I'm really surprised by what your saying as it doesn't match at all what I've seen about french higher education.
> French taxation is incredibly complex and heavy on the middle class
Yes and no. French taxation can be complex, but it's also mostly pre-filled and automatized. For most people, it's simply a matter of checking if the tax form is correct (and I've never had an incorrect one so far, as my employer automatically transmit my paycheck info to the government)
> Life grinds to a halt with some regularity due to general strikes
There are often disturbance due to strike, but "Life grinds to a halt" is also widely hyperbolic. The last real impactful strike I remember was the late 2019 month-long strike on parisian public transport, which was annoying (and was quickly followed by Covid lockdown)
But I also agree on many points you bring, there tend to be far less upward social mobility than in the USA (I'm always surprised by how fast people seem to be promoted in the USA), and generally more disposable income and opportunities. On the other hand, instead of having everyone thinking themselves as "temporary embarrassed millionaires", it's more accepted that even lower socio-economic classes should have decent working and living conditions, along with a better safety net.
On the plus side, apparently very few place in the USA are actually walk-able, even the malls seems to need a long drive instead of being part of living in a city. There also aren't any food desert, with unprocessed food cheap, tasty[1] and widely available. Also, while there certainly are a fair share of drugs and homelessness, it's quite also quite safe[2].
[1] I know how smug that will sound, but all the echo I have is that fruits and vegetable in the USA taste very bland, and are far less nutrient-rich than they used to be a few generations ago. A friend who visited the USA was shocked about it, and half-seriously though he had Covid when he tried them, and he wasn't the only one.
[2] There are however pick-pocketing targeting tourists, especially asian, but a "hot" neighborhood in France is waaaay safer than a hot neighborhood in the USA.
Government taxes 50% of that
Then add on top the lower wages.
And regardless, if you're middle income or higher, you're paying way more in taxes in Europe than those things cost in the US.
This is a cultural thing.
Just like every commun... ehem... socialist system, it achieves equality at epsilon.
(Colours from memory, I think that's right, they were certainly different anyway.)
Point is you can certainly learn not to treat contractors like employees, have badged access, etc., without having such hostility attached to it.
Edit: no! Red actually was a 'badge of shame', that was 'I forgot my badge today and had to get a spare from reception'. Anyway, it's beside the point exactly what was what. Different badges and access/treatment don't have to bleed into social treatment, they don't even have to be that visible.
They weren’t temp in the same sense as T temps - which are temporary workers hired from temp agencies.
Contractors (cleaners, catering staff, etc) got yellow ones IIRC
(I interned at ARM in Cambridge 2017 and 2018)
The Microsoft problem was *independent* contractors. I.E. treating people as self-employed.
Normal contractors are employees of a temp firm. None of these issues apply there.
Footnote: I started my career as an IC, before I had family or kids. It was great. 32 hour work weeks and time (and the legal right) to do startups on the side. Ton of flexibility relative to a real job.
A second problem was that they DID have ambiguous language in their employee handbooks, which meant that once temps were ruled employees, they became benefit-eligible, including in retroactively.
https://www.reuters.com/article/businesspropicks-us-findlaw-...
All the other stuff, too –– wanting to innovate but finding everything so slow, lots of process, feeling very pampered, etc.
The funny thing is, there was another level which was how worn out your blue badge was. The longer you had been there, the closer the badge was to white.
I'm currently doing contracting for a Polish branch of a US company you would recognise a name of and the only difference between being a contractor (other than tax stuff of course) is that I can't fill security exception requests, and I get asked if I want to work during certain national holidays or not (employees get a day off per default, I have a choice).
I have known some folks getting insurance through their partner's work who passed on going FTE because it would be a pay cut.
Yes, they are not allowed access to a lot of stuff (source, telemetry, etc.).
Real IBMers got all kinds of stuff. We had to pay full price for the GR meal.
If you took any employee benefits, the tax man could retroactively classify you as an employee and demand a huge tax bill from you.
So many contractors would refuse any such benefits even if they were offered. Some didn't care of course and took them anyway, but they were potentially setting themselves up for a huge legal and tax problem.
Who won out, HR or treating contractors humanely? Or did they come correct without firing required?