Contractors are almost always paid less in my experience after taking into effect stock grants and bonuses. The contracting agency probably gets a nice portion of the takehome though (for having the political capital of being on a preferred vendors list), so to the company they probably pay more than salary.
You also have to factor in the amount of responsibility for pay. A contractor with decent negotiation skils may net out slightly less than a FT senior dev at a company, but they often have less responsibility than even the FT junior and mid-level devs. Not to mention that they never get dragged into internal company politics or loyalty games.
Factor in overtime, or the lack thereof, and you can make more or have far more work/life balance than FTs. That weekend app release? There's an extra $500-$1k that the FTs aren't getting. Company doesn't allow contractors to work over 40 hours for budgeting purposes? Leave at 5 everyday without anyone complaining.
It's way more than 1k. I did a contract with a company once and looked to move to FTE. My rate was about $70/hr with an informally enforced cap at a bit over 40hr per week.
They submitted a total cost of employee as part of their employment request to HR. Their bog standard expenditure for an employee sitting right next to me was 50k/yr higher than I was making (my 1099 rate was the official standard for the position and not negotiated). $15/hr less (given unofficial hour cap), but with good insurance (group rates are also lower for the same insurance compared to individual), bonuses, vacation, 401k, etc.
Most companies simply refuse to pay out the same for a contractor as they would for an employee.
A large programmer union could do wonders for the industry.
Let's say the average developer works 45 hours a week at a company and makes $15/hr more than a FT senior dev (with salary calculated at 40 hours). That's $2500 more a year, which sounds bad when you factor in all the FT benefits.
But, the FT senior developer spends a quarter of his/her time in meetings, is expected to be a "team player" in regards to internal politics, and can't do any side projects without running it by the business.
Both sides working 45 figure is kind of a fairy tale too. Having been on both sides, usually either FT or contractors are working all the extra hours. If it's open-ended contracts, then the FT are working many extra, unpaid hours and the contractors get a work/life balance (worth multiple $10k, IMHO). If it's short term contract, the contractors work 50+ hours a week, within the project window, make out like bandits, and go on to the next gig.
It's all preference. Neither side is objectively better.
That's not a self employed contractor is (which is the focus of the question) just some one working through an agency - just ban w2 status or force them to convert to cheap umbrella companies as is the case in the UK.
