Perhaps our income tax system can take some of the blame.

My current employer's senior people are continually talking about getting ris of "those expensive contractors".
Well, I was a contractor here two years ago. If they had been paying me directly I would probably have cost them less than an FTE.  Mostly due to the phobias of getting hit with tax and benefit liabilities, they will only contact a person through another entity. So the guy that gets $50 an hour costs the client $200 and hour.  At another of my regular client locations, contractors work through two intermediary companies, plus their own cross-division "burden rates" apply, so the customer's budget still gets hit for two to four times what the contractor gets.

This is why (I imagine) the third-parties only want to pay $45/hr for HP3000/Speedware work in the Bay Area (?)


Now, I have my own type-LLC company, do my own tax withholdings, and pay myself on a W-2 basis, so when I contract with a company (even if they are re-selling me to someone else) they are pretty well protected on the tax and benefit issues.

But the legal department has most medium-to-large companies fearing the possible tax and benefit liabilities of contracting directly with the worker.

Of all the people who call wanting to send me on assignment, only about %10 are willing to discuss corp-to-corp.  Maybe a few more will go 1099.

So, as I see it, the middlemen are making the bucks, and to a large extent, are part of the mechanism keeping contractor rates down.

Comments?

-Dave

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