No, the logic is right.

If you have full-time employees you have to fire them when times get tough. In some countries it’s very hard to fire people and it requires months of notice. These laws encourage companies to choose contractors so they don’t get stuck with employees they can’t fire during tough times.

If you have freelancers you can more flexibly pause, delay, or reduce hours and then resume them again when you need them.

You can also scale freelancers to your workload or ability. With each FTE you’re committing to an extra 40 hours of pay every single week, no exceptions. With a freelancer you could have them do 5 hours one week, 0 hours the next, 40 hours after that. Even at 3-5X the rate it could come out to be less costly if the workload is intermittent.

> In some countries it’s very hard to fire people and it requires months of notice

This is, of course, true. I want to add that a company in Europe can still tell you not to come back tomorrow. They would just have to pay for those months of notice as if you were employed. In other words, it is expensive, but it is only a money issue.

> In other words, it is expensive, but it is only a money issue.

Bingo. That's all that matters.

Where's the difference in employing a freelancer for 1 month for 20k vs paying an employee for 3 months for less?

It doesn't make any sense.

In some EU countries like Portugal you are also required to pay quite handsome severance based on years worked. Between 15 and 45 days of base salary for each year of service, with a minimum of three months’ salary.

You don't hire the freelancers _when_ the time gets tough, you hire them when you're fine. But _if_ you need to downsize, you can cut them easily.

In a country with strong labor laws, you can't do that with FTEs, you're stuck with them unless they make major missteps.

In some cases you can do layoffs, but that is larger process that takes time. And there are some regulations that mean you must try to find other work inside company for them or offer them job if such comes available. Ofc, you can pay them off if they agree to.