I used to work for a company that (over my time there) seemed to use contractors more and more, and the justification was always to cut costs. I'm highly doubtful that their hourly rates were as high as one might imagine a temporary position to be.
I wasn't privy to all the details, but the impression seemed to me that it was a cost-cutting measure (no benefits for comparable pay), and a hiring-cap dodger, since at this company they didn't seem to count.
The increasing use of contractors-as-full-time was part of the reason I left. I personally knew two people who were getting strung along by HR with vague promises to turning full-time, and one who was unceremoniously let go when he was getting close to the legal limits. This seemed like a regular occurrence. I hated working next to people who had no benefits, no job security, and were doing precisely the same work as full-timers.
Most bodyshops due hard-line negotiations with the employees.
One particularly nasty one that I ran into would arbitrarily delay payment to employees for 90 or 120 days, unless the employees agreed to pay 10% for a weekly paycheck. The bad ones are even nastier to folks on temporary work visas.
If they are a good place, they will pay people whatever the fully-loaded cost of an employee is. Contractors aren't getting rich.
My experience at BAC was that contractors were used for the ability to be fired for no reason. Employment is at-will or whatever, but apparently firing full-time employees is nearly impossible (until they get promoted to Director or above).
As for pay, we were hiring people right out of college at $65 an hour plus overtime, which works out to over $130,000. That's more than I made as an employee.
I wasn't privy to all the details, but the impression seemed to me that it was a cost-cutting measure (no benefits for comparable pay), and a hiring-cap dodger, since at this company they didn't seem to count.
The increasing use of contractors-as-full-time was part of the reason I left. I personally knew two people who were getting strung along by HR with vague promises to turning full-time, and one who was unceremoniously let go when he was getting close to the legal limits. This seemed like a regular occurrence. I hated working next to people who had no benefits, no job security, and were doing precisely the same work as full-timers.