Contractual Employee vs. Permanent Employees: Which one is better



Most firms have a variety of employee types, such as full-time, part-time, and contractual workers. Both the employee and the employer will know what to expect in terms of taxes, paperwork, and working specifics based on the category. We will look at the distinctions between having contractual and permanent employees, as well as how they are employed in the workplace.

When hiring for a new or current position, firms should weigh the benefits and drawbacks of contracting vs permanent employment. To satisfy its labor demands, a company may use a combination of several employment kinds. Full-time, part-time, and independent contractors are examples of these employee kinds. It is crucial to grasp the differences between contract and permanent work when weighing the advantages and disadvantages of each.


What is a Contractual Employee?

Contractual employees are engaged for a specified project or duration for a fixed cost. They are also known as "independent contractors," "contract workers," or "freelancers". Contract employees are frequently employed for their competence in a certain field, such as writing or artwork. Contract employees are frequently recruited for a set amount of time for a specific project. They might be paid weekly, bi-weekly, monthly, or when the job is finished.

A corporation hires a contractor for the period of the project rather than hiring a full-time, long-term employee with that skills. These are self-employed individuals who own their own firm, whether it be a limited liability corporation, a sole proprietorship, or a limited liability partnership. They frequently work for many companies at the same time.


Advantages of hiring Contractual Employee

1. Save long-term labour cost

They are a temporary solution that does not require a yearly wage. In most cases, you will not need to save money for paid learning and development for them because they'll only be useful to your company for a short time.

2. Shorter hiring process

Traditionally, the process of employing contract employees is much faster - and it should be! This is because, rather than looking for a long-term cultural fit, you should be looking for technical talents to produce something particular.

3. Immediate effect

They are just joining for a brief time and should be aware that they must create an immediate impression. Be kind, but understand that you will not have to spend weeks acclimating them to the workplace, introducing them to every member of staff, and training them on a variety of systems.

4. Novel perspectives

Sometimes all it takes is one outsider to entirely transform a company's operations for the better. The more temp workers you recruit, the more diverse opinions you will acquire.

5. Highly skilled, specific experience

Contract and temp workers typically have a specialized skill set and are used to working on particular functions. Having a highly specialized person on your team may be quite beneficial to moving your company ahead.

6. Flexibility

Temps provide you with the flexibility to adapt to market needs and demands as they arise. They are used to working in a variety of settings, for a variety of personalities, and for varying lengths of time. Additionally, employing a contractor allows you to assess if you have a long-term work demand in a certain role.


Disadvantages of hiring Contractual Employee

1. Policy breach

Employees engaged on a contract basis are informed of the policies they must follow. Employees who work on a contract basis, on the other hand, are less likely to obey business rules, which can lead to major problems for the firm.

Managing and monitoring the policy code becomes extremely tough, which might be the most significant downside of hiring contract workers.

2.  Inconsistency

When it comes to contractual staff, there have been challenges with consistency. Employees who work on a contract basis, particularly part-time employees, are frequently observed quitting firms.

They may quit in the middle of a project or not be managing any vital tasks, but they cause continuity concerns, which is a significant drawback.

When it comes to not being able to meet any customer needs, inconsistency in carrying out daily tasks might even result in a financial loss.

3. Motivation Issues

Employees that are hired on a contract basis are difficult to build loyalty for the company.

To guarantee that the task is completed on time and to a good standard, motivation is essential. Every company has a pressing need to keep its staff motivated. They have programs, policies, and procedures in place to keep the team engaged.

Due to the inconsistencies highlighted, it becomes difficult to include contract staff in these initiatives. This leaves the organization with very little control.


What is a Permanent Employee?

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A permanent employee works for a company and is paid directly by the company. They work until they are fired, laid off, retire, or resign. A permanent employee has the option of working part-time or full-time. They are paid on an hourly basis or on a salary basis. They are paid in weekly, bi-weekly, or monthly installments. Permanent employees frequently get benefit packages from their employers, albeit these packages may fluctuate depending on whether they work full-time or part-time.


Advantages of hiring Permanent Employee

1. Improved Employee Loyalty

Despite the fact that contract roles or temporary job placements necessitate a temporary hire, employing an employee for a permanent position benefits employee loyalty. The choice to recruit an employee on a long-term basis demonstrates to them that the firm is devoted to their decision, which increases the employee's sense of belonging to the organization. Employees employed for permanent positions will get closer to their peers over time and will be more inclined to participate in corporate activities and stay with the organization for the long term. Longevity and a greater staff retention rate are both linked to loyalty.

2. Career Advancement of Team Members

While contractors for temporary job placements are often employed for a fixed length of time based on a specific project or skill set, permanent workers who stay with the firm for the long term provide opportunities for training and career advancement, which helps the company expand. Additional training will benefit your employees, and many will welcome the chance to progress their careers.

3. Curate An Enriched Culture

Your company's team members' sense of camaraderie attracts and keeps the greatest personnel. Employees who appreciate their jobs are more likely to tell others about it. When applicants are awarded permanent positions, they have the chance to form long-term friendships with coworkers, which helps the team function more effectively as a whole.


Disadvantages of hiring Permanent Employee

1. The Fast-Paced Nature Of The Industry

With digital innovation and change moving at such a breakneck rate, there's a risk that permanent employees may be left behind. This can be solved by investing inappropriate training, but it will take time and money to do so. Consider whether or not you can afford to do so.

2. Disengagement

Your permanent employees may get disenchanted over time. There are a variety of causes for this, many of which may be handled, but most of them need some significant management on your part. Failure to do so might result in a significant drop in productivity and your ability to meet project deadlines.

3. The Risk Of a Bad Fit

The recruiting procedure for a permanent employee is often longer than that of a contractor. As a result, it's understandable that you would want to find the greatest candidate for your long-term position.

However, faults in recruiting do occur. Your bottom line suffers whether the problem is discovered months or years later, especially if you have to repeat the procedure. With contractors, a less-than-ideal fit may be discovered sooner, making corrections quicker and less expensive.



After, there are both pros and cons to hiring a contractor and permanent staff member. It is highly dependent on your company’s needs and practices. It is crucial for your company’s management team to come across specifically what you want in your company before you make a decision on hiring.


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