Hiring the right team is key for your business’s ongoing success, but you don’t always need to fill all positions permanently. Sometimes, it makes sense to hire short-term or even long-term contractors. Contractors are more common in some industries than in others, but they can be found in almost every sector of the workforce.
As an HR professional, it can be difficult to know when you should hire an employee over a contractor, since each situation is unique. If you’re wondering if hiring a contractor is worth it, read on for some of the pros and cons of hiring contractor (or many!) for your organization.
Pro: It costs less overall
This is the big sell for hiring contractors. It just costs less. Sure, most contractors (and the firms they operate through) bill for much higher rates than direct hires. However, you’ll be exempt from many of the costs associated with hiring an employee directly. The company will not have to cover a portion of Social Security and Medicare taxes, there will be no workers’ compensation insurance, and contractors won’t expect the benefits you pay out to direct hires, like medical insurance, paid time off, and other programs you offer. This can cut your costs significantly—by 20-30% or more off your payroll.
Pro: You can hire for shorter term projects
If you have a large project you need extra help with, but the project has a definite end date or goal, hiring contractors might be a perfect solution. Entrepreneurships in America is growing and contract freelance workers are becoming more common every year, and for good reason: they’re an economical way for companies to get help on short-term projects, and they allow workers more freedom and autonomy. If you hire a contractor for a specific project within your organization, there will be a clean break at the end of the contract: no hurt feelings and no surprises. If the project is still going on and the relationship is going well? A contract renewal is easy to arrange.
For many companies, hiring a culture fit is a major concern. For an employee that will be contributing long term, it’s important that they fit in well with the rest of the team. While it’s important that contractors get along with everyone, they’re usually hired for a specific skillset. This means that they’re usually highly skilled and can jump into work right away, without too much time spent bringing them up to speed. Whether you’re hiring a data analyst, software engineer, or business consultant, contractors usually have a strong set of defined skills you can look for when making your hiring decisions.
Pro: Contractors don’t fall under many federal regulations
Contractors don’t have unions, they don’t necessarily have to be paid overtime rates, and they don’t have to be guaranteed time off. Of course, to maintain good relationships with your contractors and the firms they work with, it’s important to be fair to both employees and contractors. But there are fewer opportunities for violations and potential lawsuits.
Con: Retaining great talent is tougher
Sure, contractors who like the project and the people they’re working with might be willing to re-sign over and over again. Or, they might not. Contractors generally like to be challenged and are used to moving from job to job. If they start feeling bored or unfulfilled, they’re free to leave as soon as their contract is up. That’s a risk you have to take, and you may have to just endlessly renew contracts, convince your contractor to go direct, or say goodbye.
Con: They won’t be expected to have the same pride and investment
Contractors take pride in their work, but they’re not usually expected to take pride in the company or become invested in your company’s long-term goals and values. Outsourcing talent means you sometimes have to sacrifice some of the passion you see in your direct hires.
Con: They can’t be paid on salary
One of the benefits of direct hires is that they can be hired on salary, and won’t need to be paid overtime if they put in a few extra hours here and there. Contractors must be paid for the hours they work, no exceptions.
Con: Integrating into company culture is more difficult
If you do decide to hire contractors, it’s important to make sure that they are welcomed into the company culture. This will promote harmony within the organization and ensure that everyone is treated fairly—regardless of which tax forms they send in.
Are Contractors Right for Your Organization?
So, should you be thinking about hiring contractors for your next opening? That all depends—on your organizational goals, the nature of your projects, and your company culture. Only you can make the decision—both direct hires and contractors have their pros and cons.
Ryan Ayers is a strategy and management consultant with over five years of experience in multiple industries including information technology, medical devices and logistics. Many clients call him the BizTech Guru. He is a freelance writer on the side and lover of all things related to business, technology, innovation and the LA Clippers.
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