A layoff fundamentally changed how I perceive work

A former employer decided to freeze pay for a few years and later later start laying off people. During the pay freeze a colleague suggested that we might save a significant amount of money by hiring staff, rather than paying the large number of consultants we had hired. I think the ration was something like getting rid of two consultants would free enough money to hire three developers.

Managements take was that we should keep the consultants, because they where much easier to fire, two weeks notice, compared to four. So it was "better" to have consultants. My colleague pointed out that the majority of our consultants had been with us for 5+ years at that point and any cancelling of their contracts was probably more than 4 weeks out anyway. The subject was then promptly changed.

In fairness to management large scale layoffs did start 18 months later.

Hire an extra dev for the same money looks good on paper, but employment being the trapdoor function that it is in some jurisdictions does muddy the water.

(I do understand that there's a historical context to keep in mind, and that the relationship is often asymmetric in the other direction as well)

Absolutely, I should have clarified, this was in Denmark. Laying off someone is pretty easy, unless they happen to be pregnant, a union representative or work-place-safety representative.

And I should know, I was laid off from a job after two months because they decided that they didn't have the budget anyway.

This distinction is even more relevant for earnings. So companies will optimize this for taxation and accounting to win shareholder brownie points.

[1] is a PDF that tax advisers and lawyers distribute to employers to check if freelancers are only ostensibly self-employed. The checklist at the end of the PDF is all you need if you are an employer. If you are a freelancer you must also check if you are employee-like and possibly file an application to be exempt. The PDF tells you when. Watch the 5/6 distribution of income (not law, but established judicature)!

[1] https://www.sup-kanzlei.de/fileadmin/user_upload/Scheinselbs...

It's not necessarily up to them.

"We spent 1B in one-off costs for increased future growth" is a much happier story to investors than "we have recurring costs of 1B", put simply, even if the actual recurring cost number is worse.

(There's also some complexities in some industries around money from, say, grants, which you can only spend on certain types of expenditures...)

This strategy cannot work long term unless there is growth happening elsewhere in the company to make up for the excess money burned on contractors and reduced number of employees. But it can definitely work short term if the growth numbers for the quarter are going to look bad, and it has the benefit of giving management someone else to blame when the project work doesn’t get done.

If your company starts replacing employees with contractors, that’s a bad sign.

You know, operational expenses are the ones that get an immediate tax break, and capital expenditure the ones with a depreciation period.

Changing the expenses that way can only increase the company's tax payments. The only reason one could possibly want to make that change is if they want to fraudulently show the money paid for the contractors as earnings.

AFAIK in Germany the model of using temporary agency staff (AÜG or "staff leasing") is now tightly regulated. It works for a limited time period and tries to guarantee some equitable conditions for temporary workers like fair treatment, equitable wages, and benefits, aligning with the protections afforded to permanent employees.

Consultancy has no such protections.

I have never heard of any laws that prohibit internal employees from socializing with the externals (consultants or AÜG), or eat together. Bonding can happen equally at the desk or the lunch table. And I haven't heard of any company or institution enforcing this. Legislating who one is allowed to eat with sounds crazy.

What many companies probably enforce is "no internal benefits for consultants", so the free company coffee, parking, canteen, or maybe even a desk/office are not available for the externals, and they have to look elsewhere. Or maybe some unwritten internal rules to discourage bonding.

Why would anyone stay at a company that had pay freezes for a few years. I would have been looking for another job the moment they announced them.

Then at the stoke of 5pm, as we permies were discussing which pub to move on to, the contractor stood up, mumbled his thanks, and left. Billable hours over for the day.

A company may make more in revenue than strictly expenses but stock-based compensation is often not considered an expense so if you add those into the expense side it could change profitability.

- a contractor provides a "service" that improves your money-machine output.

(or so it's said).

I understand the contractual and financial logic but from the human perspective excluding the people who are otherwise just as much part of the team as anyone else is definitely eyebrow raising.

How does one do it freelance? I also would prefer contract work or consulting work, I like that no feelings are hurt when I leave having done a good job, leave em better than you found ‘em.

That said, when the no raise hit I made my boss aware of my displeasure in that (As a senior engineer at the top of the pay scale I expect my raises should just match inflation, but no raise is a clear pay cut). I did find a transfer position in the company that resulted in a nice level promotion and thus raise, which is sometimes the best option.

Though your mileage will vary.

I have worked for third party consulting companies for 5 years. Companies hire my company to do a job or issue guidance and then leave. If I am on the bench, I still get paid. I report status to the client company and they are ultimately responsible for signing off on work. But they don’t manage my work.

I’m not embedded into their team, we might embed them into our team. But at the end of the day, we are leading the projects.

Then you have staff augmentation “consultants” like you are referring to.

I saw both sides a few years ago when I was the dev lead for a company. We hired both staff augmentation “consultants” where we paid the contracting agency $90/hour and the end consultant got $60-$65 and we also paid the AWS consulting companies $160/hour and I have no idea what they got paid. But it was a lot more.

That’s what made me work on pivoting to cloud consulting in 2018. I didn’t know AWS when we hired the consultants.

If I was a manager of that team, I'd worry about the effect of treating part of my team differently.

If I was an employee on a team like that, I'd feel really bad about my team mates not being allowed to participate.

Many times you cannot get called as a 1099 as some places won't work with you. however most of the big consulting companies have others working for them on a 1099 and will be happy to deal with you. However the amount they pay you doesn't change so you have to really understand how to make tax law work for you to make it worth out. (perhaps you can give yourself a 401k with a match - check with the lawyers/accountants above to see if that is legal and if so what the rules are. If not there are other loopholes that work similar)

If the client company owns the project and you are just coming in as a warm body, that’s staff augmentation.

But if the client company is putting out Requests for Comments to different companies and they sign a Statement of Work and your consulting company comes in and does the work, that’s “consulting”. In the latter case, you don’t usually get let go as soon as there is no work for you - ie when you are “on the bench”.

Even if you are a more junior employee at the latter company where you are more hands on keyboard than flying out to meet customers and sometimes you might even be doing staff augmentation for the client, it still feels differently.

My consulting company has internal employee events, is responsible for my pay, performance, etc - not the client.

But when you calculate the the present value of the pension (ie discounted future cash flows), is the difference between staying and going and making more money elsewhere worth it? (serious question, not trying to be combative)

This comes off as rather reductionist and absolute to me; tech is a massive industry, do you know every sector within and adjacent to tech to have reached this conclusion?

Bingo. That's the main reason to shift opex to capex.

This may vary due to region. For example in the U.S where you can fire people quickly the contractor benefit is less apparent, but in EU where after a short period you may have to spend a long time to fire someone it may be beneficial to hire a contractor rather than going through a lengthy hiring process only to find out you want to fire them.

Contractors in such an environment often are a reasonable investment for a project that has a particular dedicated timeline. Like we expect 1 year for project to finish. We hire for 1 year, and opportunity to extend for 3 months 2 times in case it goes bad.

Otherwise you have to hire for project and then do these layoffs everybody here is complaining about.

Furthermore in EU if you are paying 10000 for an employee, you probably have extra fees on top of that so you are paying 14000 (estimation) then for contractor you are not paying 28000, but 20000. The pricing is not great, but there are lots of factors that can make it seem more attractive than it might appear on its face.

Finally, Contractors tend not to do any of this quiet quitting or whatever, probably because for them it is more a business and they are also earning significantly more that makes it an interesting business to be in and to maintain.

Employees were getting a bit too uppity.

Do an exercise, go to any job board and put in filters to match the types of jobs you are qualified for. How many of those do you think are going to be profitable, private, lifestyle companies?

That change had been planned to be canceled before coming into force, but it was not canceled on time.

Hence the wave of layoffs in 2022, as companies were urgently trying to improve their balance sheets, as investors and the Wall Street requested, AFAICT.

[1]: https://www.corumgroup.com/insights/major-tax-changes-us-sof...

Human decency is human decency, nothing more to that.

Companies that make a shit ton of money generally don't like changes.

They're just looking for the next fool to squeeze.

My employer is one of them. Several thousand employees, global reach, and owned by PE (Blackstone and Vista).

Also, I will repeat this as many times as possible: you can fire employees in Germany exactly the same way you can fire employees in the US. You just need to follow the damn law. You need to give your employee a WRITTEN letter of termination, to make the termination legally binding. Then all you have to do is give them notice (or pay the salary out immediately if you want to get rid of them immediately).

Paying double so you can fire contractors is illogical. The maximum amount of notice you can be legally entitled to is 7 months, after working 20 damn years at a single company, which means at worst the company would have to pay half your salary out a single time to get rid of you immediately. None of this 2x every year multi-year bullshit.

The reason why you hire contractors is that you do not need the full output of an employee. You might only need three months or maybe just a week. It's the same reason companies rent equipment instead of buying.

https://abc.xyz/assets/71/a5/78197a7540c987f13d247728a371/20...

> We provide non-GAAP free cash flow because it is a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including investing in our business and acquisitions, and to strengthen our balance sheet.

The main difference at least in my region is that if you're a contractor then it's much quicker for you to quit and find a better job so the incentive to stay isn't as strong. In other words, tech workers who become contractors here usually are better contributors and have an easier time finding good offers.

I believe the maximum amount of notice you can be legally entitled to as a contractor is whatever your contract says

This how true “consulting companies” work. You sign a statement of work with the requirements and costs and then they (we) go off and take care of staffing and lead the project. Your company will probably never interact with anyone besides sales, the tech lead and maybe the people over sub projects of the larger project (work streams) and their leads.

That is a great question that is at least partially unknowable. You cannot discount future cash flows without knowing how long you will live and thus how much you should discount. Also things like inflation are unknowable.

As I said, I did leave. I stayed with the same company but found a different division. Which is the best of all worlds. I think, perhaps I could get a better offer elsewhere? If so would that better job still exist or would I now be laid off for months before finding a new job and thus destroying all the income gain from that new job?

There are a ton of unknowable factors. I can say it worked out okay for me so far, but that is about it.

It doesn’t make sense to build the competencies in house if that’s not your core line of business’s

I left our part of my explanation of a general contractor. I meant when you are having a physical structure built like a house or in the case the analogy would be adding on to your office building

That is overly simplified. First, you have to commit to one of three types of layoffs, only one of which usually is applicable (betriebsbedingte Kündigung). But if you do that you have to consider the social circumstances of the employee and also other comparable employees. Which absolutely can result in not being able to fire the employee you would like to fire without also firing a number of other employees first. That could be really disruptive, so it is not quite so easy for German employers.

How dare people have feelings right? A lot of contractors (like myself) are treated like employees who are easier to fire.

I understand the separation from a legal perspective, but at the same time I've developed relationships with the people I work with and enjoy working with them. Being entirely honest? It hurts being excluded from things and not everyone has the option to just "become an employee".

This is great advice.

For instance, I was once in an interview where they were grilling me. I was reluctant to do the interview in the first place, because they'd gone bankrupt TWICE in the past five years.

At the end of the interview, it seemed fairly clear that my odds of getting the job were about 50/50. The interviewers were smart and they were asking hard questions.

But when I asked them to comment on their two recent bankruptcies, it changed the mood entirely. At that point, the entire "vibe" of the interview shifted. It became CLEAR that they'd been losing employees at a furious pace, because of their financial struggles.

Once we talked about "the elephant in the room," the entire interview tone changed, and they made me an offer in less than twelve hours.

My "hunch" is that they'd been grilling interviewees (because they were smart folks) but had been scaring interviewees off because they were in such terrible financial shape.

Basically, potential hires were ghosting them because of their financial problems, while they were simultaneously discussing technical issues when the real issue was financial.

I accepted the offer, and the company is still around. I had a similar interview experience at FTD in San Diego (the florist), and they are kaput:

https://www.cnbc.com/2019/06/03/flower-delivery-company-ftd-...

That doesn't make any sense. In any situation in which a contractor expense would be capitalized, an employee's salary would also be capitalized. Labor costs are labor costs; whether someone is a contractor or an employee is a labor law issue, not a tax issue. (Internal R&D was the big exception to the capitalization rule, but that loophole was closed, which is what prompted a lot of tech and videogame layoffs over the past 2 years.)

https://www.reuters.com/article/markets/companies/dont-treat...

The appointed management team has to operate within that scope (i.e. no real budget to work with, despite the 50% interest), and they squeeze a bit more each year, meaning it's an uphill battle each year to get a raise or promotion. On top of that it's a cashcow in an otherwise dying and slowly shrinking business sector.

In other words a terrible place for general salary growth.

So I'd add two points to your list which is to: look for (1) profitable companies, (2) in expanding markets, (3) that aren't owned by VC.

Startups have their own set of rules where (3) doesn't really apply as much.

Or, maybe, had better things to do. :)

It’s useful for a variety of reasons to have an LLC or an S-corp but you don’t need one to get started as a software contractor.

but that's a good way to set sued as an individual

if ur serious, have multiple clients, can't guarantee u won't piss off a client somehow... get an LLC

Aha, it's that: "Opex is subtracted from earnings before public reporting and before taxes" (I see in other comments here),

but capex is not subtracted, so then it looks as if the company is doing better, on paper, although it's not. And this works only for a while, maybe some years? Which might be long enough for the current management, if they leave before things get too bad?

The client's employees can be your "real" coworkers that your at every day, for years and years? Although maybe your company does shorter projects (?), what do I know

Just by classifying something as capex, it's automatically classified as profit already.