Different Types of Temporary Contracts:
Ever wonder about the different types of working “contractors” available for employment? Listed here are five different ways to hire a contractor.
Please note: Contract employees are not the same as independent contractors. Independent contractors may work only on a specific project for a specified time, but they have their own businesses, use their own equipment, and determine their own methods for accomplishing tasks. In contrast, contract employees must follow the company’s procedures, work on the company’s property, and are subject to the supervisor’s direction for anything other than the final project outcome.
- Temporary Contract, Time-Based: Contractors, who are 1099, or working through a third-party such as a staffing agency, can operate under different types of contracts. Most of these contracts are time based and have an expiration date. Some of them do get extended by the employer from time to time, but this is not always the case.
- Temporary Contract, Project-Based: In this situation, companies are bringing a contractor in for a “specific project” and there are deadlines. Normally, no end date is provided at the start. The contract will expire when the project is completed. Temporary, project-based contracts are also chosen when a specific set of skills are needed for a project.
- Conversion Contract, 1099 Independent to Permanent: After a certain amount of time has elapsed, these independent 1099 contractors can get “converted” into a permanent employee. This may be a difficult decision because they may also have other 1099 contracts, and this side-work would have to be sacrificed if they are to become permanent employees for a company.
- Conversion Contract, Contractor through a Staffing Agency to Permanent: These are known as “Contract-To-Hire” employees. The contractor is “converted” into a permanent employee by being taken off of the third-party’s payroll or the staffing agency’s payroll. These conversions are usually done after a specified amount of hours have been worked and are set between the company and the contractor at the forefront or beginning of the job.
- Open-Ended Contract: Open-ended means that the contract is indefinite. One usually sees this in the government sector with long-term contractors. The company has no plans to hire this contractor as an employee or to take on the employee costs of benefits, taxes, worker’s comp expenses, etc. It is important, in these cases, to choose a staffing agency that will provide benefits to these employees so that they will stay on the job for the duration of the contract. An alternative for open-ended, contracted employees is to inquire if they have means for receiving benefits through a spouse’s job or some other avenue of receiving benefits independently.
In our economy, many businesses are cutting back on full-time employees by hiring contractors to do the same work instead. As a result, it can often be difficult to tell employees and contractors apart. That’s why it’s better to understand the nuances between the five different types of contractors.