Contract vs. Permanent Employees: Who to Hire

When hiring for a position, there’s a lot to consider. Often at the top of that list is whether to hire a contract or permanent employee. There are similarities, differences, and benefits to hiring contract and permanent employees. Let’s breakdown the differences between the two and help you decipher which may be more beneficial for the position you’re trying to fill.

Contract vs. Permanent Employees: The Differences

There are many differences to understand between contract and permanent employees. Pay, benefits, and hours all play a part in separating the two.

1. Pay

Contract employees are typically paid a set-rate weekly, bi-weekly, monthly, or upon project completion. Once a specific project ends, so does their contract with a business, and therefore their payment. On the other hand, permanent employees typically get paid hourly or salary weekly, bi-weekly, or monthly until they resign or are terminated. Contract employees typically come at a slightly higher rate than permanent employees for various reasons.

2. Benefits

Permanent employees are often offered company benefits, such as retirement plans, insurance, PTO, employee wellness resources, sick leave, and more. However, contract employees typically don’t reap the same rewards. Businesses are not obligated to offer the same benefits to contract employees, ultimately saving them money.

3. Hours

Full-time, permanent employees, whether they’re salaried or hourly, tend to work a set number of hours a week and are more often tied to a regular schedule. Contract employees, however, have more flexibility in choosing their hours, as do their employers. Instead, their focus is to ensure project completion, no matter the time of day they work on that project or number of hours spent on a given assignment.

 

 

Contract vs. Permanent Employees: Benefits

There are benefits to hiring both contract and permanent employees. It’s important to understand each to get a better idea of which type of hire will best suit your needs:

1. Permanent Employees

Longevity

Hiring permanent employees is more common practice than hiring contract workers, so many people understand the benefits to hiring a permanent employee. Permanent employees are often hired for a longer period of time and become members of a team who help build company culture and a strong team atmosphere. This helps employees feel a sense of community that contract workers don’t necessarily experience when hopping from company to company.

Additionally, permanent employees are more likely to be with your company longer and can therefore be trained to complete a wider range of tasks. Contract employees typically come already trained (a benefit in its own way) in one field and give their time to that position until their contract expires.

Orientation

Finally, permanent employees take less orientation time. Since new hires go through orientation upon hire, if a company’s turnover is low, this doesn’t take up too much company time. Contractors, on the other hand, are switched out more often, requiring more frequent orientations.

Permanent employees are multi-skilled and widely available team members who will develop a sense of pride for the team they work on, remain flexible in what they do, and be highly dependable, because they are striving to advance within an organization.

2. Contract Employees

Permanent employees seem to be the standard when hiring. Let’s dive into the benefits of hiring contract workers instead.

Economical

For starters, contract workers can be more economical. Although their hourly rate may be more than a permanent worker, businesses save a great deal on benefits. Generally, employers are not required to provide contract employees benefits – health insurance, retirement plans, PTO, or pay taxes on their behalf (contract workers pay self-employment taxes). From this, businesses save thousands of dollars they would otherwise be spending hiring a permanent employee.

Of course, some employers do provide their contract workers benefits such as health insurance. In those cases, they’re still saving on PTO says, paid sick leave, retirement planning, and more.

Hiring

Contract workers also have many benefits in terms of hiring. Contract workers expand an employer’s access to highly in-demand skills. Employers aren’t tied down to a location and aren’t typically looking for someone with an expansive background, so their talent search opens up to a global candidate pool.

Once they do find a candidate with the specific skill they’re searching for, the hiring process tends to be shorter. Since contract workers begin as temporary employees, there’s usually fewer interviews. Whereas when looking for permanent employees, hiring managers are often more concerned not just with skills and background, but with finding multi-skilled professionals, people looking for growth, longevity, etc., resulting in a longer hiring process.

Contract workers offer enterprises greater staffing flexibility and a wider talent pool than permanent employees, and businesses can save thousands of dollars hiring them. They offer niche skills on a need-basis and are often open to hopping on additional projects in the future, alleviating onboarding time and costs.

Additionally, they provide the opportunity for an employer to “try before you buy”. If you’re not positive what it is your company needs, make a role contract with a permanent hire potential. This can give you the time you need to test out a few different roles and see which skills you really need. Overall, contract workers area huge benefit to businesses everywhere.

Contract vs. Permanent Employees: Which Should I Hire?

Contract and permanent employees both have many benefits but are often needed in different instances. Unsure which way to staff? We’re here to help. Addison Group has more than 20 years of hiring experience and can help decipher exactly what your company needs. Let us hand over the perfect candidate to meet those needs. Contact us today!