Deciding to hire someone as an independent contractor or permanent employee is a big decision that can affect organizations in a major way. A variety of factors must be considered before making a determination and organizations must ask themselves many questions in order to ensure they hire the correct type of worker. The two major questions that must be answered are:
- What is the scope of work?
- What can we afford?
What is the scope of work?
This will probably be the first and most important question for organizations to answer when they’re trying to determine which type of worker to hire. Managers will be forced to truly evaluate the needs in their department. They must determine exactly what work needs to be completed and in what time frame the work needs to be done. Once this is determined, it becomes easier to figure out if a contractor or permanent employee will be necessary.
If managers have a large project or initiative that needs to be implemented within a certain time frame, it will most likely make more sense for them to hire a contractor. Hiring a full time employee wouldn’t necessarily be beneficial in this situation because once the work is done, the employee will no longer be necessary to the organization. Although a higher hourly rate will most likely need to be paid to the contractor, it will still save the organization money in the long run. Money can be saved due to the elimination of high cost items such as health insurance or other benefits that are paid to full-time employees (depending on the contractors classification, either W2, Corp-Corp, etc).
If a thorough review of the department reveals an ongoing need, then it would possibly make more sense to hire a permanent employee. The cost of hiring a permanent employee is usually higher than people realize, so ensuring the best candidate for the position is hired is extremely important. One way organizations can do this is utilizing a contract to permanent hiring model. Third party staffing agencies usually offer this option, which can be a major benefit to employers. Utilizing a contract to permanent model allows employers to essentially “try before they buy.” If organizations realize the individual is not performing the way they hoped, they don’t run the risk of investing the valuable resources and hiring costs usually associated with in-house permanent recruiting. If they do feel the employee is a great fit, they simply pay a small fee to the agency and welcome the individual as a permanent employee.
What Can We Afford?
Budgets always play a huge part in hiring decisions for organizations. Managers may feel the necessity to hire one or more full time employees, but just not have the budget to do so. Contractors could be a justifiable alternative to permanent employees in a situation such as this. The manager would first have to convince their superiors that more manpower is necessary to successfully accomplish their project(s). The manager could then display the cost savings that could result from hiring contractors due to not being forced to pay for the benefits usually required for permanent employees.
A major benefit of this tactic is having the ability to still employ great talent to do the necessary work, but it also gives the employer the ability to wait until the organization is in a place financially to hire them permanently. Because the contractor will already be familiar with the organization and their job duties, the onboarding costs usually associated with hiring will be minimal compared to a brand new hire.
The decision to hire contract or permanent employees is one that requires much thought, consideration, and scrutiny. There may not always be a clear cut right or wrong answer, but doing the due diligence to make the best decision will result in tangible benefits for all organizations.