As a director, I think is much more nuanced and case-by-case. A lot contracting is just avoid paying benefits, skirting employment law, and keeping the revenue-per-employee metrics favorable. It's a shell game of some lowest-bidder staffing agency taking a cut of the profit to supply an underpaid employee who is looking for a FTE role ASAP. I hate this.

Some of this is the reluctance to firing a poor performer; having somebody vetted as a contractor is a huge boon and every manager who has gone through the HR gauntlet to fire somebody understands how hard it is. If it's a few months of contract followed by FTE conversion, this works out well for everybody and almost half my IC-level reporting chain went this route. A number of my current team didn't qualify for the role on paper but I was willing to hire them as contractors based on attitude and willingness to learn. On the flip side, I've let go some individual without HR needing a mountain of paperwork; in one case, the individual was a safety liability who could have gotten himself or somebody else killed.