Comment by yonran | Hacker News Reader

Comment by yonran | Hacker News Reader

Parent Full thread

What is the value that Google derives from third-party contractor middlemen (vs. hiring directly)? Is it the ability to give workers the choice of more pay but fewer benefits? Is it the ability to have on-demand workers that can be laid off without damaging Google’s brand name? What laws, if repealed, would encourage Google to hire the employees directly?

Edit: To clarify, I’m wondering about workers who contribute to Google’s own core competency of creating software, not bus drivers, janitors, etc. for which Google’s benefits would be a larger fraction of their pay.

The Tech Equity Collaborative has a report giving some reasons (https://techequitycollaborative.org/download-the-contract-wo...), but they seem to boil down to big companies are so inefficient at hiring (e.g. “adding full-time, direct employees requires multiple levels of sign-off, budgetary allocations, and often numerous reviews and approvals”) that they are leaving money on the table (“tech companies often pay contracting agencies enough for the agencies to offer family-supporting wages”). I’m not sure I buy that.

Hiring directly is a lot of work, especially in domains that you don't have expertise. The article cited workers helping to train Bard- this task is nothing like hiring Software Engineers, you know it won't last forever, and it will never be a strategic core competency to build up at your company.

So, you sub out the work to another company that has more focus on sourcing employees and keeping enough hired/productive so you can focus on developing the algorithms instead of those managerial tasks. This model is extremely common in all industries that aren't 100% vertically integrated. The only difference is that in the physical world it's easier to point to products being sold than in this knowledge work where the deliverables aren't as concrete.

In the end, these moves by a small group of people just ends up ruining the perks for the rest of the contractors. The current argument of "We work in the same office, drink the same coffee, eat the same food, and work on the same projects" has one very obvious remedy, which is to take away those perks.

> Hiring directly is a lot of work, especially in domains that you don't have expertise

Seriously? "Google had the expertise to design and develop Bard, but they lacked the expertise to train Bard, so they had to go to outside contracters"?

My understanding is the benefits. You can't discriminate on benefits so anything offered to a group of employees must be offered to all. It doesn't make business sense for contractors who I've heard can make as low as $15/hour even in the Bay Area (the amount Google pays to the contracting company would obviously be more)

There is no federal law that requires all employees to have the same benefits.

It’s very common at large companies with different tiers of employees (corporate, warehouse, headquarters) to have different benefits contributions

Unless California has a different state law, I don’t think this has anything to do with contracting. Even at Google’s scale, they could create a separate subsidiary company to hire the employees on different plans if they wanted.

There are a pelethora of federal laws limiting difference in benefits.

For example, I have a corporation and have explored 401k plan. I can not set up a 401k plan that includes myself, but not other employees, and there are a plethora of requirements around the allowable differences once everyone is in a plan. If I want to give plans to myself and half my employees, the only way to do so is to fire half and bring them back as contractors.

My understanding is it is basically the same for most other benefits (e.g. healthcare)

> My understanding is it is basically the same for most other benefits (e.g. healthcare)

It does not.

Quick Google search will show pages and pages of results explaining that it is not illegal to give different health care benefits to different employees.

That can’t be true. How do the executives get better health insurance, 401ks, etc than the serfs?

Typically, they don't in literal terms. IANAL, but AIUI they may receive specific supplemental health insurance policies (that work on top of the ones they receive the same as any other employee) based on risk-to-business etc. Some of them choose to deposit a larger portion of their salary into their 401k, matched by the same rule the company uses for all employees (usually a X:Y match up to Z% of your specific salary).

I can't speak to insurance, but for 401k:

They basically don't. In fact if the company fails fairness testing on the 401k plan, executive contributions to 401k can be clawed back (actually the bar is much lower - "highly compensated employee" above like $130k. So if Google directly employed all of its contractors, it would likely fail fairness testing on the 415 contributions to after-tax 401k, and all the Software Engineers pushing $70k or whatever a year into their 401k would have half of that disallowed by the government).

That was my experience when I looked into setting up a 401k plan for my company. You can set them as a % of salary but it has to be the same for all employees. If you only want to give it to some, you have to fire the rest and bring them on as contractors.

You definitely can discriminate on benefits. Companies do it all the time. To answer parents question, the reason they outsource is to make collective bargaining impossible and to fire easily and without cause.

Usually, you do that when:

- you want to get a readily available trained workforce

- you want a temporary workforce

- you want to be able to swap vendors

- you want to maintain agility in the rest of the org, I.e. not depending on this workforce existing

Classic example is events (you don’t want to hire ushers, you want them present fully capable; you aren’t keeping them on forever; you’ll change your events people if you’re unhappy)

> What laws, if repealed, would encourage Google to hire the employees directly?

Do you mean: what prevents Google hiring short-term workers directly? (instead of via Cognizant, etc)

Or do you mean: why doesn't Google hire permanent workers with lower-benefits*?

Or do you simply mean: why does Google hire contracts at all?

Reply on news.ycombinator.com