When to Hire a Permanent versus Contract Employee

Running a successful business is all about smart resourcing.

In other words, it’s important to have expertise on tap, without being over-resourced with more employees than work to do. Businesses ultimately want to build a team of flexible and skilled individuals whilst also always having workers available for more general tasks.

When should a business hire a permanent employee, and when does it make sense to bring in a contractor?

What suits one organisation won’t necessarily work for another, and a business’s needs can change over time for a plethora of reasons – such as the types of projects on the go, budget restraints, and time scales. There are HR, technical, and financial implications on both sides for employees to consider, so which is the right choice for your business?

Here’s a look at what to consider when debating between hiring a permanent versus contract employee.

Putting more in to get more back

Permanent employees are no doubt a larger investment for a business. Outside of salaries, there are numerous associated costs such as benefits, training, and support for career development. But as result, permanent employees tend to be invested in the growth and success of your company as well as ‘bought into’ your business values. This can translate to employees who are more likely to go above and beyond when completing their tasks. 

In contrast, contractors require far less of an investment in terms of time and resources. An example is the minimal amount of management required, as contractors are often experts in their field and will only need a brief outline before completing a task with minimal supervision. But because of this, and the nature of the work, contractors can arguably be less invested in your businesses’ goals and mission and therefore may not be motivated to prioritise your work if they are doing several different jobs at the same time.

Long-term solution or quick win?

Organisations that are willing, and in a financial position, to invest in permanent employees will benefit from the building of a core group of very experienced professionals who are loyal and this is conducive to long-term growth and progress. However, if specialist skills are required and the resources are not available in-house, then companies may be better off outsourcing tasks – an option helpful for tight budgets and quick problem-solving.

Additionally, if an employer wants a candidate in position quickly – to fill the gap of a staff member leaving or for an urgent project – contractors are far more readily available than their permanent counterparts, due to the lack of, or shorter, notice periods. Contracts can be as short or as long as is needed and can be easily extended at short notice.

However, the nature of contracting means that a particularly excellent candidate might not be available the next time you need them, so you may decide that you are better off bringing those resources in-house full-time.

Expertise demands

The choice between a permanent versus contract employee will also depend on the type of experience that an organisation requires. If a company is looking to expand its offering, by enhancing in-house expertise or adding another string to its bow, investing in a highly skilled permanent employee who has built years of experience and is committed to the growth of the company, is likely to better fit the bill.

However, for a very specific or niche project, employing a permanent staff member might not be appropriate or make financial sense. Contractors tend to have a very precise set of skills, such as being highly adaptable as a result of working in numerous scenarios, navigating pressures, and needing to make an immediate impact.

Whilst contractors have been adding varied experiences to their portfolio, permanent employees may have been busy building skills from being with an organisation throughout several yearly cycles of work and encountering seasonal trends. Don’t forget there are plenty of financial factors to weigh up as well, such as expensive day rates and navigating the revolving door of IR35 rules, versus expensive employee benefits and complex PAYE systems.

Ultimately, the decision between a permanent versus contract employee will likely depend on whether your business has clients and workloads that change drastically on a month-by-month basis or has a steady, predictable stream of work.

One thing is for sure – with working from home and digital nomadism on the rise, contracts are becoming an increasingly popular option for candidates. Whether that’s a trend that employers will follow – only time will tell.

Interested in hiring a data contractor for an upcoming project or expanding your team with a permanent data professional? Our expert team knows the market inside out, and how to reach the best talent out there, get in touch today.