Pros and Cons of Hiring Permanent vs. Contract Employees

Pros and Cons of Hiring Permanent vs. Contract Employees

Whether you’re starting a new venture or currently operating a successful business, one thing’s for sure: at some point, you will need to ask for help from someone else. However, building a great team that can help your business grow and prosper is one of the most challenging aspects one should think about. In most cases, businesses’ success lies in a highly productive workforce that can easily and efficiently cooperate and perform with utmost respect and loyalty. To find the person best fit for the organisation, business owners must have a better understanding of the two most common hiring options first. Choosing between hiring permanent or contract employees is a must.

The Difference with Permanent vs. Contract Employees

Permanent employees are individuals who are hired under an employment contract that can be terminated either by the employer or the employee. Under this contract, permanent employees are entitled to a wide range of statutory employment rights. Typically, they receive monthly payments and work on standard work schedules. Most often than not, permanent employees are responsible for an organisation’s core functions. Thus, they are considered as the company’s long term investments. 

On the other hand, contract employees manage short-term projects, providing a flexible solution for businesses that are dealing with manpower shortages. These individuals are often hired in a predetermined period that will end once a specific project has been fulfilled. Contract employees are usually paid on an hourly basis and are not required to work on a regular work schedule. 

Pros and Cons of Hiring Permanent vs. Contract Employees

Here, we’ll compare the advantages and disadvantages of hiring permanent vs. contract employees. 

Pros of Hiring Permanent Employees

Pros of Hiring Permanent Employees

Most permanent employees tend to stay in their job and organisation for longer years. As such, most of them have gained the chance to grow their career and the opportunity to be promoted. With this, permanent employees are likely to value their job, investing more time and effort in what they do. In most cases, this results in better work performance and higher efficiency level. 

The length of time a permanent employee has spent working in an organisation comes with an amount of company knowledge that cannot be found or gained in just a matter of months or years of stay. While this may vary from role to role, essential positions such as in HR and marketing require in-depth company knowledge including an extensive understanding of the organisation’s history, goals and plans. 

What’s more, permanent employees provide organisations with far more viable reasons to invest in training and development programs as they can eventually take on future leadership positions and become a vital part of the company’s growth. 

Cons of Hiring Permanent Employees

Unlike contract employees that are paid only for the jobs they are tasked to complete, permanent employees are far more expensive to hire. One major reason is that full-time employees have longer working hours. Thus, they are mostly compensated with a fixed salary and are entitled to a long list of benefits including performance bonuses, medical, retirement, paid leave and even travel allowance. 

Furthermore, the process of hiring, onboarding and terminating a permanent employee is more extensive and time-consuming than hiring a contract employee. As such, it usually involves additional paperwork and costs.  

Pros of Hiring Contract Employees

Pros of Hiring Contract Employees

Organisations can easily reduce the amount needed for hiring permanent employees by hiring contract employees instead. Since contract workers are only hired for an agreed period of time, their remunerations are more often relatively lower. Moreover, organisations are not obligated to provide contract employees with medical benefits, paid vacation and sick pay. Contractors are also expected to manage their taxes. 

Unlike any other employee groups, contract workers tend to offer more flexibility, skills and experience. Hiring these employees means they can quickly jump right in and start their job without the need for a time-consuming onboarding process. Even better, hiring contract employees allow organisations to choose the candidate that has the necessary skills needed for the specific job to be done. Thus, reducing the risk of hiring a permanent employee who doesn’t actually have a full range of knowledge and experience needed for the role. 

Cons of Hiring Contract Employees 

Sadly, most contract employees are less committed to a job compared to full-time employees. Since they are flexible enough to work with multiple employers at the same time, they may not be able to prioritise your needs the way you want and provide the same loyalty and dedication a permanent employee can offer.

Although you can set basic guidelines and deadlines, you still have less authority over contract employees. Most often, it is them who are in control of how they can manage to finish the tasks regardless of their preferred work schedule. 

Hiring Permanent Employees vs. Contract Employees: Which is Best for Your Business

Hiring Permanent Employees vs. Contract Employees: Which is Best for Your Business

Before choosing between permanent and contract employees, you have to understand that what works for other businesses may not work exactly the same for yours. It all boils down to your objective, your long-term plans and your KPIs. Are you willing to invest in a permanent employee or are you looking for a skilled worker who can just get a short-term project done? You should be able to answer this kind of question to clearly understand the needs of your business. 

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