Monday, November 30, 2020
Home Human Resources Contractor or Permanent Employee: Which is Better for Your Business?

Contractor or Permanent Employee: Which is Better for Your Business?

The days of working for one company for decades, building a pension there, and retiring with that company’s pension are largely over. Analysts have found that now, it is seen as somewhat unusual if someone spends more than a few years with one company. Instead, more workers are starting to bounce between roles, gaining experience in different sectors, and working more than one job on a contract basis.

Over the last 10 years, there has been a definite shift of focus towards contractor roles. Food delivery, ride share, and taxi companies have all capitalized on the increase of interest in contract roles and, although they have run into a number of issues, the success of the model has led other companies to consider shifting towards hiring more contract staff.

There are pros and cons to both hiring permanent employees and contractors, and you may find that it takes a certain amount of trial and error before you can determine exactly what type of hiring works best for your company’s needs. Keep reading to learn more about what it means to hire either a permanent employee or a contractor and find out what you need to know before you choose to hire one or the other. 

Advantages of Hiring a Contractor as an Employee

There are a number of advantages involved in hiring an independent contractor as an employee. Some of these include:

  • Increased flexibility – One of the main benefits of hiring a contractor is that they are more likely to be available to work at short notice and will have more flexibility. This is great for when your business has sudden demands and you need an employee to do work without much notice.
  • Saving money – Although contractors may cost more per hour than permanent employees, you will end up saving money in the long term because you will not have to pay a full-time salary or for office space, holiday pay, equipment and other similar costs.
  • Convenience – Once a contracted employee has been given proper instructions and a deadline, they will typically be able to do the work on their own, with little to no management or guidance.

Disadvantages of Hiring a Contractor Employee

However, there are a number of cons to hiring contractor staff, including:

  • Loyalty and investment – One thing to be aware of is that a contractor may not have the same investment in their work and in the company’s success as a permanent employee.
  • Decreased authority – It naturally follows that you will have less authority over contracted employees who work independently and, as a result, can be more difficult to manage and communicate with.

Advantages of Hiring a Permanent Employee

Conversely, there are a variety of benefits that hiring permanent employees can bring to a company, no matter its size. A few of the benefits include:

  • You can build a team you trust – While it may take more time and be costlier, by hiring permanent employees, you can slowly build a team of employees who you trust and who you can rely on to competently get the job done. Building a team that you can rely on means that you will also need to take care of your employees. One of the most important ways to take care of your staff is through insurance, including workers’ compensation insurance. Next Insurance has a wide variety of insurance plans designed to suit the particular size and industry-specific needs of every business, including workers’ compensation insurance, so that you can find the perfect insurance plan for your business and employees.
  • Loyalty – A permanent employee will likely be more invested in succeeding and performing well so that they will be able to advance in their career as the company itself continues to grow and develop.

Disadvantages of Hiring a Permanent Employee

Along with the advantages, the disadvantages include:

  • Investment is required – To hire, train and retrain permanent employees, you will need to invest time, money and effort into their development.
  • Hiring the wrong person – Sometimes it happens – you hire the wrong person, and they just do not fit in well with the company’s culture or social dynamic. Sometimes this can be a drain on resources and a distraction from the company’s actual work.

These are just a few of the advantages and disadvantages of hiring contracted versus permanent employees. You may find that a combination of both types of workers is best for your business, or that you only need contracted employees during certain times of the year. Understanding the pros and cons of each type of employment will help you to make those decisions when necessary.

Free Templates for You

Pizzeria Business Plan

Use this free pizza business plan to create the best pizzeria restaurant or shop in town that's also a thriving, profitable business! Includes market analysis, strategy, more. Works for any other type of restaurant business plan, too. Free download available to customize the plan in Word or PDF for your business.

A Guide for Making an Assignment of Pre-Employment Works

When an employee hands over the rights to their employer for an invention made prior to employment, it is important to get that agreement in writing.

Guide for Making an Employee Promotion Press Release

Did your company recently promote an employee to Vice President? Let your public know by sending out an employee promotion press release.