We have the majority of our s/w developer hired as contractors. They have their own company, often a sole trader (one man company) in the country they live in.

We treat everyone as equal as we are able to. Contractors or employees. The way we define this: if you do the same job and have similar experience, the cost to the organisation will be the same. Salary+taxes+benefits costs are the same. This works quite well.

We have four s/w developers hired in the organization as employees. The other dozen are hired as contractors, including me as CTO & co-director.