Contract v Permanent – Which is Best for Your Company?
Mar 14, 2023
Contract v Permanent – Which is Best for Your Company?
Mar 14, 2023

Are you currently looking to hire in IT? If so, there’s a lot to consider. And it may be that the first thing you need to decide is the benefits to you of contract v permanent. Which will you choose when it comes to filling your next IT role? There are advantages and disadvantages of both. Our consultants share their thoughts to help you make the right decision.

What’s the difference? Contract v permanent

A contractor is someone who provides their services to your business. Typically, a contractor is hired for a set period of time, or a set piece of work. A daily rate will be agreed, along with deliverables, deadlines etc. Contractors are usually self-managed and can be left to work independently based on the project brief.

A permanent candidate is an employee that works for you on either a full or part-til basis. They are expected to produce work based on their contract of employment and in return, they are paid a monthly salary on a continuous basis.

Pros and cons of hiring a contractor

When it comes to contract v permanent, it’s important to consider the pros and cons of each. Here’s our top 3 for each –

Pros of hiring a contractor

  • Hire as and when you have a need. If you have a project that needs completing, or you are experiencing a temporary increase in work, a contractor could be the perfect answer. Also, if you suddenly have a drop in demand, you don’t have to continue to use the services on a contractor. This can save your business money but only paying for the services of a contractor when you need them.
  • It can actually work out cheaper. Yes, it’s true that contractor rates are usually more expensive than a permanent salary. However, it can still work out cheaper to hire a contractor. With a contractor, the daily rate is all you pay. There’s no paying into pensions or other benefits. It gives a certainly of cost so works particularly well if you have a set budget.
  • Higher level of expertise. Most of the time, when you hire a contract, you tap into a huge amount of expertise. Having someone in your team who has a lot of experience working for multiple companies can really be more beneficial than you realise. Using their past experiences, they can bring new and exciting things to your business, meaning you could be in a position to tap into this a fast track certain areas of growth.

contract v permanent

Cons of hiring a contractor

  • Continuity. If you want to turn the services of a contractor on and off, you could end up disappointed. Once a project is complete and the contract has come to an end, the contractor will move on to their next role. Therefore, if you want the same contractor back again a few months later, it may not always be that simple.
  • Day rates can be high. We touched on this above. But, day rates can be high when compared to the salary of a permanent member of staff. Contractors looks for higher rates due to the risks associated with the role not being permanent
  • IR35 rules – be aware. You can face large penalties if you are in breach of IR35 and need to take extreme care. Make sure that you work with a reputable agency to ensure that you are hiring contractor legitimately.

Pros and cons of hiring a permanent employee

Pros of hiring a permanent employee

  • Higher level of control. With an employee, you decide when, where and how they work. They are employed directly for you (and in most cases, only you if full-time), so you get to call the shots.
  • Commitment. When you hire a permanent employee, you both agree on the details of an employment contract. This is a long-term consideration for the employee. Therefore, when they agree to be employed, they are fully dedicated to your company.
  • Employee engagement levels. A permanent employee has made a choice to join your company as part of their career development. They are more likely to align with your values and are therefore likely to be highly engaged.

Cons of hiring a permanent employee

  • Commitment. Both a pro and co on hiring permanent employee! You need to be sure that you will be able to pay a monthly salary, plus all the additional costs, every month despite ups and downs.
  • Employee rights. There’s lots to remember here, from holiday pay, redundancy, maternity, sick pay and lots more.
  • It can work out more expensive. There’s lots of things that can affect your costs when hiring a permanent employee. From paying agency fees, to higher salaries, you need to have a budget up front. However, to retain your staff, it’s likely that you will also have to invest in training and development too.

Contract v Permanent – which will you choose?

We’ve been helping companies to recruit the very best in IT since 1999. We can advise you on which route is best and can even give you detailed insight into the IT jobs market. Each month, we produce our IT Salary Guide which looks at average salaries and day rates across all areas of IT. We also produce a monthly Report on Jobs so that you can see what’s happening in the market. As ever, we are here to help. So if you are looking to recruit into your IT team, get in touch with our expert consultants today.

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