The changing face of permanent vs contractor staffing

Some industries like Engineering and Construction have experienced a changing dynamic to the workforce with permanent staff seeking the “quick win” financial rewards and flexibility of contracting. 

So is this the best outcome for the Company and or the worker? Well there are pro’s and cons to be discussed on both sides and getting this balance right is crucial to commercial success.

The benefits of hiring permanent staff seem obvious and thetheory is that permanent staff buys in to the company’s goals and values, so you gain an individual with greater loyalty to your organisation, which can result in higher productivity. With training investment, they provide long term talent and internal career development, aligning with the company goals in order to progress through the ranks for succession planning developing their skills and benefits of growing future talent within the business. Loyal staff members will be more responsive to taking on additional roles where required, cross skilling and this flexibility provides a more diverse workforce for the company, with a greater demonstration of customer service levels from staff who become experts at what they do.

The biggest draw for the employee choosing permanent employment is that of job security, training and development and company benefits. These benefits vary from company to company and can influence a potential employee’s choice of employer and the attractive benefits package can dramatically reduce the employees’ outgoing expenditure and increase their monthly disposable income.

So are there any cons for employing permanent staff? Permanent staff could become “bums on seats” and become negative or complacent, due to office politics or bad management, with contractors choosing not to get involved and carry on with their work, being less likely to develop negative attitudes and out perform the staffing community. Overheads means that each additional employee increases the costs of employee benefits and payroll to the company, which can cause issues with companies that have inconsistent turnover and could eventually require larger office space and expansion.

So you make the decision to leave the secure staff role behind and take the plunge into contracting with the benefits of very high financial awards and the flexibility of working when you choose. Aside from seeking advise on setting up a Ltd company and being aware of your rights with the HMRC legislation and IR35, you need to think about marketing yourself to ensure that you are kept in successive employment to gain the full financial incentive of being an independent contractor and budget for necessary eventualities like holiday and sickness. The risk you take is that your contract can be terminated at any time and very few companies will invest in your development, so sometimes contractors rarely progress in their career and if they don’t keep their knowledge updated, this could result in them losing out on significant opportunities.

From a company perspective, hiring a contractor offers flexibility to the changing output demands of your company and an organisation has the ability to grasp added opportunities as they arise and during slow periods the have greater cost control. A contract workforce often comes fully trained and highly specialised with the experience to be dropped in the business to make an immediate impact. If you went through the process of adding permanent staff to your organisation, you have to follow the rules prescribed by human resources with regard to coaching, disciplining, documenting, and terminating employees, but with a contractor they can be removed or replaced as required with little or no recourse, enabling your business to adjust more easily and quickly to workload fluctuations. 

There is no doubt that the rate charged by a contractor is often significantly higher than the salary paid to a permanent employee, as they do not get to enjoy the additional benefits offered to full time employees and need to cover all their expenses themselves and hiring a contractor may work out to be cheaper as a short term solution, in comparison with the long term option; it is often less expensive to permanently employ with cost to company overheads and benefits.

Return on investment is another area to consider for the company, with loss of intellectual property when the contractor leaves or opting to move on before their contractual commitment is completed for more attractive opportunities and this can result in costly replacements or additional pressure and challenges to the commercial output and disgruntled permanent employees.

So getting the balance right in your business is key to the success of this model. There is definitely a place for permanent staffing and independent contractors to work harmoniously in the workplace and support the delivery of the commercial model and after all its success is down to the basics of “supply and demand” and finding the right people who “fit” your organisation at the right cost and at the right time. That sounds familiar……………...

To find out more about the permanent vs contractor debate contact Francine Stewart on 
francine.stewart@bps-world.com or 01628 857 345