Why do companies lay off employees, but hire contractors?
Companies like Citigroup and JP Morgan continue to hire contractors from WITCH and Mphasis during this layoff period, while laying off their own employees Is it safer and better to join these consulting companies then at this time?
It’s an ‘asset light’ model. You can shed contractors very easily.
Jamie Dimon’s wet dream is a world in which all of us are disposable contractors working for minimum wage and living out of a shipping container, with our residency contingent on a worker visa.
No health insurance, 401k match, etc
Easy. Permanent cost vs temp cost. Different cell in an Excel file… small changes but it looks much better in the financial reports.
Because the capitalist machine is impersonal, and any attempt to reconcile it with the logical needs of humans is a fools errand. If it makes sense on a balance sheet, the capitalist prerogative is to pursue that action, end of story. Human intervention (empathetic leadership), or systems designed with human interests (unions, labor laws, etc) are the only things that reroute the system's designed function.
Contractors are billed to clients. No cost is absorbed by the firm. If you need more bodies, hire them, no benefits costs, no retirement costs, no overhead. No training. Fire when needed because project scope changes or shrinks. Client pays all associated costs plus a premium. Easy as can be.
Full-time employees are a fixed cost... Contractors are a variable cost... More fixed costs looks bad too investors less looks good.
Easier to cut ties when you don’t need the labor anymore, maybe cheaper too if outsourcing outside the states
But isn't it unfair?
Who said it had to be fair?