How do you determine whether to hire a contractor or permanent employee? Normally it depends on your recruitment budget, your business needs and knowing your options for hire. Listed here are some points to consider on the Advantages of Contract Hires and Permanent Hires along with some Disadvantages that may come into play.
Advantages of Contract Hires:
- You can choose to hire a contractor for any amount of period of time
- Ability to have a “no strings attached” mentality: You can let go or fire the contractor whenever you deem fit within reason
- There are no tax cost of payroll, workers comp, state & federal taxes any more
- There are no benefits, health, dental, vision, 401K, stock options, pensions that need to be given. Normally on average it costs a company around $2K – $5K+/year to cover employee benefit costs (survey done on 50 local employers).
- Getting a consultant will give you the opportunity to have someone that has worked in many different types of organizations and industries. Having someone with this experience can accelerate their job capabilities within your organization.
Disadvantages of Contract Hires:
- You can spend a lot of time training the new hires for each project, resulting in a loss of productivity as you “start over” with each new contract employee.
- You are getting candidates from the unemployed candidate pool. The unemployment rate in the State of Louisiana right now is 5.4%. For the State of Mississippi its 8.0% and for Texas it’s 5.1%. That percentage is out of 100% of the working population for that state. So it’s a very minimal amount of people to choose from when you look at the whole picture.
- The contractor can feel like there is no job stability or security.
- The contractor either has to wait a period of time for health benefits to take effect through a staffing agency and most do not offer benefits at all to their contractors.
- You tend to have to pay more money on an hourly rate for a contractor because they do not have non-wage benefits such as health, vacation, holiday pay, sick leave, retirement and savings.
- Contractors tend to leave a contract job for more money on another contract assignment or they find a permanent job. While other contractors working through agencies may choose to operate on a contract to contract basis, which gives them the opportunity to “shop” jobs and switch agencies when and if they choose.
- Contractors may work on multiple jobs (contracts) at one time versus solely working on your job or project.
If your business works on a wide variety of projects with different needs, contract employees will allow you the flexibility to hire the right people for each job. However, considering a permanent employee will give you the advantage of having the stability and commitment of the employee’s abilities, performance and current work circumstances. Below are a listing of some advantages of Permanent Hires.
Advantages of Permanent Hires:
- You are pulling from the employed candidate pool and the unemployed. So this will include everyone that is actively or passively looking for a job at any given time.
- Your training time isn’t in vein! It is an investment with an employee that you know will be staying there in that position for quite some time. You feel as if you save time to not have to “ramp” them up and then have them go once the contract is over.
- It can help you grow your business as they get more efficient in their jobs through being familiar with the processes.
- Permanent employees develop a fondness of commitment to their employer and have a loyalty usually based on the feeling of job security.
- You can also take a smaller team of permanent employees to train the new hires and keep the business running smoothly rather than starting over with a new team for each new project.
The best way to choose the right hire type, contract or perm, is to determine your company’s specific needs. Identify whether the work is project based with a specified skill set need with long term or short term possibility OR if you needing a full-time, permanent employee to where they tend to do their job more effectively knowing they have job security, long-term prospects and the opportunity to build relationships with other staff . This distinction should help guide your decision to make the best choice for every staffing related situation.