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As a junior software engineer, I worked at a large UK bank. Senior management routinely seem baffled that they could announce redundancies or hiring freezes, y

• rr808 3mo ago
  > Senior management routinely seem baffled that they could announce redundancies or hiring freezes, yet technology costs would continue to rise. I dont think they're baffled, they just trying to show they're attempting to keep costs under control.
  • etothepii 3mo ago
    Lots of shouting on one particular occasion left me with the impression that they genuinely had not anticipated this consequence of simultaneously pulling the "no contractors to be renewed" lever and the "any MD can sign contracts up to $1m with approved suppliers" lever. The people involved weren’t stupid. They were trying to achieve one outcome and got a different one because the rest of the organisation adapted to the incentives in front of them.
    • necovek 3mo ago
      How do you call when someone repeatedly does the same thing expecting a different outcome each time?
• betaby 3mo ago
  > One pattern I saw repeatedly was a contractor being let go, only to return via a large outsourcing provider. That's 'normal' in Canada and France.
• OptionOfT 3mo ago
  I've seen that in a large management consultancy company. Part of their risk management procedures (both for the company and in terms of some EU law) meant they couldn't keep contractors for longer than x years. They'd have to convert to employee or separate for 12 months. Bit that doesn't really work in knowledge systems. Even with the best documentation people will build up knowledge that no one has, and their departure is costly. Equally at the end of their contract a lot of time will need to be spend on a handover which slows down others even more. So what happened? The contractor went via another middle man, which checked the correct boxes on the form, and everybody was happy.
  • selcuka 3mo ago
    > Even with the best documentation people will build up knowledge that no one has I think that's the part management teams are missing. They assume that employees are just human resources and they can replace a senior engineer with a 100% equivalent one when needed.
    • annzabelle 3mo ago
      I worked for a large US bank that has a 10% biannual attrition target at all levels across the company. Twice a year they PIP 10-15% of staff, most of whom take a substantial buyout. Institutional knowledge is constantly being lost and experienced staff are being replaced with fresh cohorts of new grads, who then get replaced themselves right as they start becoming useful. I knew multiple people there who made more in signing bonus, pay during training, and severance than they made for work actually performed. The CEO is convinced that this is the path to "top tech talent."
      • pyuser583 3mo ago
        Does the approach apply to senior management?
        • annzabelle 3mo ago
          There's some level where it stops, but that's after you've got 100+ reports. I don't know that I interacted with anybody senior enough to avoid this process in the time I worked there.
• jojobas 3mo ago
  This doesn't seem to answer why an engineer is let go and gets rehired through an outsourcer.
  • jijji 3mo ago
    most large companies have a 2-year limit on contractor employment so what they tend to do is they'll hire the same guy through a different contractor with another two-year agreement..... that's to get around the situation where if someone is working as a contractor for more than 2 years they can legally claim that they're actually an employee....see Vizcaino v. Microsoft Corp., 120 F.3d 1006 (9th Cir. 1997) [0]... this is just a guess by the way but it seems like a plausible one, as I've seen it happen in Fortune 500 a lot, where the same guy comes back through a different vendor 2 years later if he was really good and they needed him to come back.... [0] https://law.justia.com/cases/federal/appellate-courts/F3/120/1006/578343/ https://law.justia.com/cases/federal/appellate-courts/F3/120...
  • shoo 3mo ago
    In some cases it could be driven by the shape of the work & where the funding is allocated: If there isn't enough guaranteed recurring work, it might not make sense to have a full time position, particularly in a country where its difficult to lay people off & if employees have additional overhead (pensions, employer funded heathcare or insurance, etc) vs contractors. But, if there's funding allocated for some key project that's framed as a 6-12 month project, there might be a good business case to hire a contractor. Maybe the funding comes out of the project bucket, not the core funding for legacy product X bucket. If the contractor is someone who was recently let go & has a good reputation within the company as someone who gets stuff done and is easy to work with, it's probably a no-brainer to re-engage them as a contractor vs rolling the dice on an unknown quantity. Whoever is managing the budget of their old team gets a win as they were able to reduce headcount to fit in their budget Whoever is managing the new project gets a win as they find a great contractor for their key project The former employee returning as a contractor probably gets a win, as they get paid at a better daily rate while the project is rolling, provided they're able to line up more projects or land a new permie job once the project is completed. If there's an outsourcer involved, they win by taking a cut. The former employee might also win by having the outsourcer involved if the company has some baroque process for engaging contractors with many compliance hoops to jump through -- in extreme cases (think banks, or public companies that need to demonstrate they don't do business with suppliers engaged in slavery, or so on) it could save the worker months of paperwork and tens of thousands in legal expenses to set up their own one-person agency and go through the compliance process to be able to work for their former employer, so they might not be able to win the contract work without piggybacking on an outsourcer who already has the contracts & compliance stuff sorted out.
• shoo 3mo ago
  when i worked for an australian bank, one co-worker in a nearby team had been working on the the banks systems as a sysadmin for over a decade. the bank would go through cycles of "we need to reduce our headcount and outsource everything" and then 4 years later "we need to reduce spend on contractors and retain more knowledge and expertise in house". he'd survived multiple waves of it, switching back and forth between being an employee or a contractor through some external agency, as management trends changed, while essentially doing the same job.
  • sekh60 3mo ago
    I hope he was able to get a paybump each switch!
    • somat 3mo ago
      Sometimes(most of the time?) that is the only way to get a pay bump.
  • jfengel 3mo ago
    Managers love the idea that contractors can be fired more easily than employees. Except that this flexibility comes at a cost; people insist on being paid more to have an insecure job. The uncertainty never goes away. You can pay someone else to suffer it, but it will always cost more than dealing with it yourself. And that can be ok. Just don't fool yourself into thinking you're getting a bargain.
    • OccamsMirror 3mo ago
      A stable environment with a great culture has lower costs. But then they have to hire good managers and for that you need to be a good manager yourself.
    • marcus_holmes 3mo ago
      I've seen this happen because of accounting/corporate finance policy. Payroll is an ongoing commitment. Consultancy is a temporary service. Moving people from payroll to consultancy means they can reduce overhead in financial projections. Even though consultancy costs more, and employs the same people, it makes sense to do if it means you can convince shareholders and analysts that Opex will shrink in the future, and therefore profitability increase, and therefore the share price increases.
• stackghost 3mo ago
  The military is like this. Higher Headquarters decides to contract out maintenance and logistical support for $aircraft_fleet. Uniformed maintainers go home in Friday and show up Monday making a lot more money to do the same job but without risk of getting posted or deployed. Contractor fees come out because of a different pot of money, so perverse incentives abound.
  • LPisGood 3mo ago
    Don’t those uniformed maintainers get reassigned to other military jobs or are they allowed to work as a contractor while being active military?
    • trollbridge 3mo ago
      They're dismissed due to a reduction in force.
      • derektank 3mo ago
        That’s pretty rare in the USAF. Most servicemembers will be sent to be retrained on a different airframe or even into a different career field unless their date of separation doesn’t make it worth it. Voluntary separation programs do sometimes pop up but they’re not that common. It is common to have people separating and coming back immediately as contractors into basically the same job, but that’s usually because there is already a contracted workforce in place and they made connections while serving.
        • jimnotgym 3mo ago
          But it is the same affect as what the OP said. In a large organisation, attrition is so high that if you slow recruiting you will soon have a lower headcount. So yes the uniformed deployable military are replaced with civilian 9-5ers. But not the very same people, just the very same roles. I don't think this changes how I feel about it.
    • stackghost 3mo ago
• guhcampos 3mo ago
  I think I have a simpler answer: quarterly results. Management just really needs to make the next earnings look like what it should look. Next quarter is next quarter's problem.
• chiph 3mo ago
  That's because the bankers didn't realize they're not in the banking business anymore - they're in the IT business (which has a focus on tracking money).
  • toomuchtodo 3mo ago
    I have made this same argument to a C level person in the US capital markets and told I don’t know what I’m talking about. As long as the check clears, I have no strong feelings on the topic, it’s just a performance on a stage.
• nostrademons 3mo ago
  I have a friend who left BigCo and then rejoined it as a contractor, plus some additional employees that he manages now. He cynically says "My job is to convert OpEx to CapEx when the finance department tells some director they can't have more headcount."
  • cdavid 3mo ago
    The same way cloud is about doing the exact opposite. Understanding a bit of accounting / corporate finance opened my eyes to many things.
  • jimnotgym 3mo ago
    How is hiring a contractor Capex? >the finance department tells some director... Don't shoot the messenger. The finance department is implementing the board's policy.
    • Foobar8568 3mo ago
      Because they will work on new projects, which are considered as CAPEX. Basically big4 and accounting firms fucked worldwide organizations.
• bandrami 3mo ago
  At the risk of injecting recent US politics into this, the shipyard I used to work at had five employees laid off under DOGE and replaced by the exact same individuals (there aren't actually that many naval architects in the US), now working as contractors at a higher base pay. I feel like there's a lot of that out there.
  • edg5000 3mo ago
    This is extremely common at govenments in the Netherlands as well.
  • eszed 3mo ago
    The defense and security-related sector is legendary for this. I had a friend who worked at a three-letter agency ~20 years ago who saw multiple colleagues quit, get hired by contractor firms and sold back to the agency to work on the exact same projects they had been working on as employees. They got a 2-3x pay bump, and the government paid 3-5x for their services. In one instance, my friend said, a guy clocked out on a Friday and came back to his exact same desk on Monday, with a new "employer" and a higher salary.
    • ecshafer 3mo ago
      Per a friend, they are told to use more contractors in the government. Its also not clear if the contractor is actually making more money. Government benefits are significantly better than most contractors will give (I will be all of them).
      • vintermann 3mo ago
        The contractor has better take home pay. For them, it's maybe a wash whether they get the extra pay or the better benefits, but what they are paid is only a fraction of what the government pays to the contractor's company. For the government, giving those benefits is definitively a much better deal than using a contractor.
        • 3mo ago
• taneq 3mo ago
  > Sometimes that means working around processes and incentives in ways that look very strange from the outside. At my last performance review, at my last job (this is going back more than a decade now) one of my agreed KPIs was to take the lead on a 3-6 month project, making all the required technical decisions etc. and successfully delivering it on time and on budget. I never got the opportunity, and quit that job six months later to start my own business, but still did contract work for them. Got a social call a year later from my old boss (who also left, before I did) and got to tell them “so I hit my KPI, you’ll never believe what I had to do to make it happen…” :D
• jdw64 3mo ago
  In my experience, it's probably due to differences in budget line items. Usually, regular labor costs and outsourcing costs are budgeted separately. Some teams may not have the authority to hire an additional full-time employee, but they do have the authority to use external contractors. On top of that, the internal political landscape differs as well. When it comes to office politics, increasing headcount in a particular department means increasing that department's influence. There are also additional benefits and administrative costs that come with hiring permanent staff. Moreover, standard contracts usually come with overhead for contract management personnel and procedural costs, and these are often handled by the vendor side. In other words, direct employment comes with long-term responsibilities for performance and benefits, but when you outsource, most of that liability shifts to the external vendor.
  • deleted 3mo ago
    [deleted]
• b800h 3mo ago
  It's very possible that this occurred during the IR35 shake-up - HMRC moved the liability for unpaid income tax (in a situation where a contractor was determined to be a de-facto employee) from limited company contractors themselves onto the client (the bank, in this case). Banks had a very low risk appetite and so had to let these people go. What was going on in a lot of places was that vital staff who had to be dumped were intermediated by outsourcing providers. These companies either then paid the staff a very high salary and sold them in as temp labour, or took on the risk themselves and hired them as contractors for the same purpose. This all made sense, but for a lot of contractors at the time, it felt like the apocalypse. The net effect was that HMRC exchanged flexibility in the labour market for immediate tax take. This may not have been a sensible decision.
• throwaway2037 3mo ago
  Most large corporations treat these categories of employment as different budget line items with different rules and limitations: (1) full-time employees, (2) individual contractors, and (3) large contractor "body-shops" or outsourcing providers. Many times in my career, I have seen layoff a few from (1) then way over spend on (2) or (3). The mid-level manager who makes the decision gets to "claim" that expenses were reduced in (1) and "win" at year-end reviews. Yes, I know: This is total non-sense, but I have seen it many, many times at mega-corps.
  • pjc50 3mo ago
    Related to this, the massive advantage of AWS is that it allows staff to buy infrastructure without having to raise purchase orders. If you ask permission for spending, it's a very onerous and frustrating process. If you just deploy stuff and get billed for it, it's much easier! Even if that's more expensive than having your own cloud. Worse, if you have on-prem, you have to have staff. They might even be permanent. Businesses hate having to have important staff. Not coincidentally, this results in massive overspend until someone notices and has to painstakingly go round checking what all your instances are for. And AWS is very profitable (well, margin rather than accounting profit). Now, look at the billing model of AI, especially once flat rate goes away. People can spend millions on tokens without ever having to ask a manager! Obviously this is going to rake in money hand over fist, because it will be years before anyone catches up to ask "are we actually getting value for money here?" rather than "quick spend more tokens".
    • lscharen 3mo ago
      > If you ask permission for spending, it's a very onerous and frustrating process. If you just deploy stuff and get billed for it, it's much easier! This point is underappreciated as it appears in many forms and can really help reconcile things that seems obviously wasteful (they may actually be wasteful, but sometimes financial structure makes this hard to determine in an honest capacity). Capital costs and operational costs are a similar dichotomy. When I was in graduate school, the university was breaking ground on new buildings at the same time that staff layoffs were underway. On its face this seems grossly unreasonable, but staff salaries were paid from one funding bucket and capital improvements (new buildings) were funded by a completely independent state-level allocation process and those buildings that were breaking ground had essentially been locked in 5 to 10 years prior.
• thomashabets2 3mo ago
  > One pattern I saw repeatedly was a contractor being let go, only to return via a large outsourcing provider. The provider must have added a substantial markup despite supplying the same engineer back to the same team, without having incurred any procurement costs. When I worked (well, was a contractor at) a very large company, they'd kicked out all their small contracting providers only to get the same people back via a single big one. I was told this was part of a vendor consolidation move, because maintaining their existing direct relationship with literally hundreds of thousands of vendors had a huge cost in itself. I doubt they were dumb enough to think there was no markup, but going direct isn't free either. There ain't no such thing as a free lunch. Now, was it a net good move? That's both above my pay grade and not my expertise. But from the fact it took me a month of billed time to buy a license of that same company's own product[1], I wouldn't have called it an efficient bureaucracy. [1] all purchases of own-company product had to be done through the 99% internal billing discount program.
• mrweasel 3mo ago
  I've told this story before, but I worked for an ISP that was obsessed with things like CAPEX vs. OPEX and staffing vs. outsourcing (they always mixed those two for some reason, even if I'd say that buying consultants and salaries are both OPEX). In any case, it resulted in outsourcing 50% of development to a another company, at twice the cost, then keeping those consultants on for a decade. The saving, had they hired instead would have been massive. The reasoning was: Well we can fire the consultants in within two weeks... sure but you can fire staff within a month or two. Six months at the most. Right now you're just announcing that you suck at long term planning. At one point they were convinced that the operations team was horrible inefficient and outsourcing would be cheaper (they'd already pulled operations back from IBM, because IBM is expensive and incompetent). Luckily someone decides to get some other consultants involved and actually measure the inefficiencies, before taking action, so the savings made from outsourcing the team (again) would be more clear. They didn't expect to be told that they had one of the speediest, leanest and most efficient operations teams in the country. Same company handed out 20% raises one year and the next we were apparently almost broke. Then no on wanted to work there, because there were no prospects of a raise in the future, so they started hiring new people at MUCH higher starting salaries. They'd start people out on the salary levels you'd expect to reach after 5-8 years, so they would avoid having to budget in raises. At some point companies just get top heavy with incompetent business types, who doesn't tend to stick around, at least not in the same role for to long. They forget the past and start their playbook, which always happens to be the reverse of what happened two years ago.