I’ve noticed my company pays freelancers/contractors 3-4x as much an hour as they pay their employees. Is this a common practice?

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Yes. Freelance/contractors rarely get paid benefits, which companies factor into the hourly pay for FTEs. Freelance/contractors usually negotiate their rates and because the need for services is temporary in nature companies usually will pay a higher price for their services because they don’t carry the sustained business “risk” as a FTE.

It’s why so many people choose to move from corporate/agency Full Time to consulting/freelancing. You have a much higher earning potential but carry significantly more personal risk (no guaranteed income, no benefits, etc.).

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Yes. 1099 vs W-2 employees are taxed differently so that is part of the reason

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And if the freelancer was placed through an agency, the rate is inclusive of those fees, and the freelancer wouldn’t even see that money

Yes because freelancers / contractors are responsible for their own ass whereas a business who has employees does 401k matching health dental vision insurance social security tac payrol tax workmans comp, breathing oxygen tax, office space toilet paper etc.
You should Google your question

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It depends on a lot of factors, but 3x is fairly typical. Certainly it depends on the seniority of the contractor. But with contractors vs. employees, there are a lot of costs that the contractor is responsible for and the employee doesn’t cover: insurance, EI, health benefits, computer, phone, subscriptions, software, office/desk space, overhead, etc. Also it’s important to keep in mind that with contractors, the employer typically only pays them for their billable hours worked and not the rest of their time in a day that is unaccounted for (breaks, lunch, personal calls/texts). Plus, there is no job security in a contract position. It actually works out to be very comparable.

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Yes, in my experience this is normal.

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I think it depends on the freelancers individually and the work they provide. I freelance and work full time in house, and I charge much higher to freelance bc I’m covering my own taxes (sometimes as high as 25%) and I have years of experience so I charge much more. I also charge a lot because there’s no benefits provided

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Usually it’s specialty jobs for adhoc projects which is why the rate is higher. Also freelancers work is not as consistent so they charge more similar to like a wedding photographer.

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Yes, based on taxes and liability they incur not being a permanent employee

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Yeah there’s payroll taxes, benefits,m. Then there’s hardware costs for work devices. Then also there’s paying for the tools they use for the role. Also, they can pay more taxes as was mentioned a lot here already. The last bit is that freelancers should be highly skilled and require little to no training for a role.

All in all it could actually work out to be cheaper for a company.

HOWEVER, 2x - 3x what you’re getting paid seems a bit excessive. I’d check industry boards to make sure you’re being paid appropriately for your role.

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