Ok but then contractors have the freedom to work whatever hours they want, not show up to the office, and subcontract out their work - right? If so that might be more appealing than being an employee
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
And that arrangement exists solely so that the company whose work you're actually doing can fire you more easily or avoid legal liability.
People that complain about the plights of contractors need to understand the above.
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.
Yes? Whats wrong with hiring a cook if you need to cook?
Anyone doing that at scale is going bankrupt quickly. Which is the point.
They pretty much were giving away the farm, and if they kept that up they’d be bankrupt - not an incredibly valuable company.
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.
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.
These laws do not protect workers, they protect entrenched wealthy body shops.
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.
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.
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.
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)
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.
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.
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.