That's how it works with contractors in most large organisations. The other side of the coin is that they're usually rewarded better than employees are, on the basis that they can be fired at any time with no notice.
In practice that rarely happens, as higher-pay => better-retention => becomes-most-knowledgeable-person-over-time.
I've never seen a contractor have better salary/pay unless they're a fully independent subject matter expert and have no interest in being employed. I've hired a quite a few contractors and there is usually two cases, I need workers, or expertise that is highly limited.
Most contractors, not SME, are sourced from staffing agencies/partners. Sure, the resource cost is on par with a salaried worker, but typically the staffing company sourcing these people are going to take a huge chunk on that contract, at least 1/3. So yes, the resource/person is 280K on paper, but it's extremely rare they actually get paid that. The staffing agencies will provide benefits, but they're not even close to what in house staff are getting.
It also becomes nearly impossible to hire a contractor from partners in cases like this because you have to buy out the resource on the contract which is almost a non-starter because these fees can easily be 6 figures per head.
The staffing agencies benefits are always subpar and more expensive.
And you’re right about the difference between “staff augmentation” contractors pay and SMEs. I just went into detail in a sibling reply.
But to add on, the company I ended up being a tech lead at with a full time position. I came in at $65/hour. I only took the job because I saw a chance to eventually wiggle my way into a tech lead role and I wanted to be on the ground floor of a green field project. I ended up working so much overtime - and getting paid for it - I made out pretty well compared to the local market. I got on my wife’s health insurance.
I also mentioned that now that I am a SME on a niche but growing AWS service [1], I am able to charge $135 an hour for a side project and that’s a discount.
[1] I beta tested the APIs while working at AWS and I was a major contributor on a popular open source official “AWS Solution” that’s built on top of it.
Not necessarily. I was a tech lead where I could only hire contractors. The run of the mill CRUD staff augmentation contractors were making about $65 and the contracting company was billing $100 a hour for them with no health care benefits, no PTO, no 401K match.
On the other hand, the “cloud consultants”, who were just old school operations folks who only knew how to do lift and shifts and make everything more expensive were billing $200 an hour. It was a small shop owned by the partners.
Long story short, I left there went to a startup for two years to get real world AWS experience, got hired at AWS in the ProServe department (full time job) and when I got Amazoned three years later (two months ago), I was able to negotiate a side contract with my former CTO for $135/hour and even that was low. I did it because I found the project interesting and I consider my former CTO a friend.
FWIW: I did get a full time job within three weeks.
I’m don’t think it’s true at companies like Google that contractors get paid better. My impression was they get a similar salary but no equity and worse benefits. I’m assuming we’re talking about the TVCs who basically act like ordinary contributors on a team. Not some specialist consultant, I don’t know about them.
Most large orgs don't have the perks of Goog, Meta. Amazon and Cisco don't have free food, massages, etc. so it doesn't matter contractor vs. fulltime.
It very much matters - paid time off, benefits, employer paid FICA taxes (if you are 1099). All that is just money and if you are an SME you can negotiate for a high enough hourly rate to make up the difference.
But if you are just doing staff augmentation, probably not.
In practice that rarely happens, as higher-pay => better-retention => becomes-most-knowledgeable-person-over-time.