Contract Vs Permanent Staff – Deciding which makes more sense for your business

Contract vs Permanent – it is a tough but important decision, especially for a small business or a new project. A good hire will have a huge impact on your business (likewise, a bad hire will have an even bigger impact).  Do I hire a permanent employee, or a contractor? Full time or part time? When is the right time? Ramping up vs ramping down? What level of skill-set?

Pros-and-Cons-to-Working-as-a-Contractor-vs.-EmployeeFor any business owner or manager this is something that needs to be carefully thought through.  A few things immediately spring to mind.

Firstly, there is quite an obvious financial difference in the hire/appointment. You pay a premium for a contractor (versus a permanent) for a service, and for the risk they take in agreeing to a short term commitment, for the lack of other benefits like sick leave, annual leave or public holidays. But what they bring to your business is a level of expertise and accountability that you may not find in a permanent employee.

Is the need a long term need? Or is it just a seasonal uplift?
Is the role core to your business? Or is it a specialist role?

Let’s look at the advantages and disadvantages of each:-

– Flexibility
The idea of a contractor allows you to ramp up and down as the project or your company requires it. Traditional hiring practices are quicker that what transpires for a permanent hire.
– Efficiency and Productivity
Bringing in skills quickly that your team may not possess will increase efficiency and productivity to solve the business requirement. The right skills at the right time. There is also the idea that a contractor is paid to hit the ground running and add value from day one, more so than what a permanent employee is. Contractors too often have a different mindset – they know they’re being paid to work and deliver, so they come to work each day to do just that.
– Economically
It’s different. We already spoke about the obvious financial differences, however, if we are talking from an IT project perspective, then the contractor cost will come from the project budget, not the broader HR spend.
– Disengagement PIC1

To put it bluntly, it is much easier to off board a non performing contractor than a permanent, less HR processes to go through.
Hiring the ‘right’ permanent employee can have a great impact on your business. They will contribute to the success of your business in both the short and long term.
– Engagement
Traditionally the permanent employee will be more engaged and “bought in” to the company culture, vision and future. They have bought in and invested in your organisation, entrusting their career to you. It’s a big investment.
– Economically
OK, so they’re a little cheaper initially, however, you will need to invest in ongoing training and development (contractors don’t expect this but permanent staff do), in Superannuation, (hopefully) long service leave, holidays, sick leave, but the long term economical bonuses are also there. If you retain them and have the opportunity to reap the ROI.
– Consistency
You don’t need to scramble when workloads increase as the people will already be with you.
– Growth
Organisations will only grow with permanent employees. If this is in the organisation’s goal, then this option needs to be seriously considered. However contractors still have a very important role to play in helping businesses grow and deliver.
Of course there are other options as well-: freelancers, Consultants, part timers etc, contract/temp with a view to permanency, but let us leave that for another day – that might be our next blog.

Hiring is one of, if not the most important things, you can do for your organisation. Take it seriously, do it right, and have fun, because it really is if and when you get it right. As Steve Jobs said, “hiring the best is one of your most important tasks”.