The Benefits of Employing Contract Employees
To hire, or contract, that is the question –
Whether ‘tis wiser for the employer to commit
To a permanent hire,
Or outsource projects to contract employees
And through contracting, ultimately benefit?
While this question may not harken back to the days of Shakespeare, it is a frequently pondered conundrum for employers looking to expand their current workforce: should I hire a permanent employee or a contractor?
Permanent employees have historically been the lifeblood that circulates through the veins of most organizational structures. By providing stability, consistency, and a framework for corporate culture, employees have long defined the identity of their organization. However, following the recession, many companies are shifting away from a hyper-permanent workforce in favor for a more flexible, streamlined option: contract employees.
A contract employee is paid an hourly or flat fee for completing a specific project or for providing expertise for a pre-determined length of time. While a small segment of contract employees receive some level of corporate benefits, many do not. They also generally have greater control over their work schedules, resources and operational processes than most permanent employees. Let’s take a look at the core benefits of hiring a contract employee:
- Lower Operating Cost: Even though contractors typically charge a higher fee to make up for lack of benefits, the ability to cut long-term operating costs in the form of insurance, pension, disability, and more, allows employers to be leaner and more financially nimble in the long-term.
- Less Tax Burden: Because contract employees are paid hourly through the employment agency, employers are not required to withhold income, Medicare, Social Security or unemployment taxes from contract employer salaries. It is the employment agency’s responsibility to withhold these taxes for the contractor.
- Greater Workforce Flexibility: As contractor tenures can range from several months to several years, it allows the employer to more closely tailor its workforce to support fluctuations in profitability, competition, and market conditions.
- Trial Period: The employer gets a chance to see the contractor in action before making a permanent hiring decision. And the contractor can see the employer in a real-life work environment. This is something neither party gets from an interview process, but is really the crux in a hiring decision – Getting the right fit!
To hire or to contract, aye there’s the point,
To profit, to streamline, is that all?
As our literary conscience for this post, Shakespeare brings up a solid argument. While many companies are finding it more profitable to fill a larger portion of job openings with contract workers, employers must also balance this with their larger business objectives. Without lifeblood, a heart cannot beat. So, too, is a company without its permanent employees. Employers must take care to balance the need for profitability with the long-term benefits of a successful and sustainable corporate culture.
Burchard & Associates is happy to partner with businesses and organizations in identifying the right candidates for both permanent and contract positions.
NOTE: Inspiration for this blog post borrowed from William Shakespeare’s Hamlet.