Contractor Vs Employee – The Pros and Cons

16 Sep, 2019

Contractor versus permanentTo use contract staff or to hire permanent employees, that is the question. Whether you’re trying to fill a new role, planning to scale up, down or sideways, understanding contract vs employee pros and cons is absolutely essential.  With contracting on the rise and the gig economy disrupting the way we work, this decision has never been more complicated.

Contractors offer a range of benefits for employers, as does hiring an employee on a permanent basis. Both options also have their downfalls. Below we’ve listed the major benefits and disadvantages of hiring contract vs permanent employees to make your life a little easier. 

There are obviously a few other options such as freelancers and consultants but for now we’re just focusing on the main two forms of hiring.

Benefits of permanent employees 

A major pro of a permanent employee, is that they are generally more devoted. They’ve persevered through the rigours of the interview and on-boarding process which means they identify with your culture and are already committed to your vision.

Through training, your culture is further entrenched as your employees become increasingly dedicated to your mission.   

As they spend time in the office, permanent employees tend to develop strong bonds with other staff and enjoy the familiarity of routine hence strengthening their commitment to the role and the company. 

With training, staff can move their way up the organisational hierarchy. They can apply their deep understanding and loyalty to the company as they move into a leadership role. 

When you scale and you need more staff, they’re there to help. 

You don’t have to deal with the stress of constantly hiring new employees. 

Employees cost less on a per-hour basis.

If your goal is growth, permanent employees are essential. 

Benefits of contractors 

The best thing about hiring contractors is the flexibility. You can scale up or down, depending on the companies’ activities and your requirements and you can respond to changing business demands easily.

Contractors are often available immediately and the hiring process is much quicker and easier than with permanent employees. Once on-boarded, contractors swiftly bring in the skills you require and which your team may not possess. You get the skills you need, at the time that you need them and only while you need them. 

Because they are perpetually selling themselves as candidates, contractors are more likely to up skill more often and tend to be more current and up to date with the latest technologies. Plus, each time they work with a new client they add new strings to their bow. 

Contractors tend to have a slightly different mindset. They are more accountable for their deliverables in a smaller window of time so they are more efficient and productive within that window. 

You can off-board a contractor without the fuss or HR processes required with a permanent staff member. 

Although contractors cost more on a per-hour basis, they are usually more cost-effective when you take into consideration the various costs associated with permanent employees. For example, contractors don’t require: training, sick leave, holiday leave etc. 

The best thing about a contractor is, if they’re amazingly impressive and you don’t know how you ever lived without them and if they really enjoy working with you too, you can always offer them a permanent role!

Cons of permanent employees 

If you need to scale down, letting go of staff can require lengthy, time consuming and costly processes.

Although their hourly rate is less, the downside of using permanent staff is that you’ll need to invest in ongoing training and development which is less expected from contractors. You also need to provide superannuation, long-service leave, staff engagement, holidays, sick leave etc. But, of course, you will reap the returns on these investments, so long as your staff stick around. 

Cons of contractors  

For the various reasons provided, contracting staff are simply not as loyal to a company as permanent staff. As the very nature of their role is transient, they may leave you at any moment for a better opportunity.

Contractors cost more per hour.

Some training is required, even if it is just to get them up to scratch on the company and its unique processes. This can be particularly time consuming if you have several contractors coming and going. 

Situations in which contractors are best 

Contract staff are great for shorter projects that don’t require a lot of supervision but require specific expertise you and your staff may not have. This way you don’t have to spend time and money on training.

A contractor is best for: 

  • Seasonal projects – if you forecast a busier time, contractors are a great way to fill the gaps until things get quieter. 
  • Specialised expertise – marketing, copywriting, web design, administration, IT etc. 
  • Maintenance – when equipment needs maintenance this can be done when needed.   

Situations in which permanent employees are best

Obviously you want permanent staff who are going to become a future investment to your business. 

Permanent employees are great for: 

  • Projects that require close supervision. 
  • Developing long-term relationships with your clients. 
  • Incarnating your culture and your business knowledge and essentially becoming walking advertisements for your company. 
  • Becoming your biggest advocates. 


There you have it, folks. To contract or to permanent – that is the question.  Hopefully we’ve made the answer a little simpler for you!