Employer Resources

Using Contract-to-Hire vs. Full-Time Employees

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The main difference between contract-to-hire and full-time employment is the way in which each type of worker is paid. A full-time employee is on the company’s payroll; each paycheck includes deductions for federal income tax, social security, medicare, state income tax, if any, and so on. 

In contrast, a contract-to-hire worker will remain on the staffing agency’s payroll until their contract expires. If the company decides to make an offer of full-time employment upon the expiration of that contract, the individual will be moved to their payroll going forward.  

Understanding Contract-to-Hire vs. Full-Time Employment

There are various pros and cons to both contract-to-hire and full-time employment. However, they tend to alternate based on the needs of each business. The following information is a detailed comparison of the pros and cons.

Long-Term Against Short-Term

Suppose a business needs a particular skill set to fill a short-term role, such as a project manager for a single project with a pre-determined beginning and endpoint. If you hire a contract-to-hire to fill that position, you will only pay for the hours worked during the period the contractor will be providing you with their services. 

You will not need to deduct and submit taxes or pay out benefits such as social security. As soon as the project is done, the temp-to-hire worker will leave to do something else.

On the other hand, a full-time employee will be on your payroll for as long as you and they agree. This offers a more permanent solution for different company projects, and it saves you the time it takes to get the right contract-to-hire worker on the job. The downside is that, if your business experiences a slowdown, you may have more full-time employees than you need for a while.

Skill Requirements

There are times when a company may not have the internal skill sets or staff needed to carry out one or more phases of a project effectively. In such a situation, management may decide to hire a contractor. This is in fact one of the primary advantages of hiring contract workers; they can bring the needed skills into the business and get to work right away. 

On the other hand, if there happens to be more one-off projects that don’t require identical skills for each one, a contract hire will not remain viable. Hiring full-time staff will be more profitable and cost-effective since, in such a situation, the company will repeatedly require a different skill set throughout and may as well train their full-time employees where necessary. 

This is one of the reasons why it has become essential for a business owner to understand some of the pros and cons of full-time employment.  

Timelines

Another reason for going with a contract hire is that they have the skill set and experience needed to complete particular projects quickly. They don’t require a lot of hand-holding or onboarding. This means they can add value to your company from the very start and help out with time-strapped projects.

On the flip side, implementing a larger initiative, like enhancing the IT department or filling in a skills gap in the resource pool, a full-time hire will be a much better investment. Once they get settled, they can become experts and adapt to the evolving needs of your company and the various projects you may undertake. 

They can also go above and beyond what a contractor may be willing to do. Furthermore, they will work toward the company’s sustainable growth and invest their time and effort to achieve organizational objectives, not just for one project but for all of them.

Cost-Effectiveness

In most cases, contract employees tend to cost less when compared to permanent ones since they are only paid for the duration of a particular project. However, it is essential to remember that contract employees will also be less invested in the overall success of your company and may have a host of other clients who can offer them better terms when it comes to compensation, such as when you hire a freelance blog writer.

For full-time employees, they are typically seen as a long-lasting asset even if they cost more. As a result, if your business budget permits, it would be better to hire professional staff that will serve as a great addition to your organization in the long-run. 

To Summarize

When deciding whether to go with a contract hire or a full-time employee, the key is to understand your business goals and budget restrictions. By evaluating these two elements, you will be able to carefully evaluate the two and decide which kind of staff will work toward the betterment of your company.

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