Is Contract Hiring Ideal For Your Company?
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January 5, 2021
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February 18, 2021Is Contract Hiring Ideal For Your Company?
Companies looking to fill open positions usually have two hiring options. The first is to hire a full-time employee or hire a contractor. Over time, there have been several discussions on which is right for a company between contract workers and full-time employees.
The conversations used to be about which type of employee is more suitable for the open position or task in consideration. In that case, a contract worker will offer specific skills for a short-term project, while a full-time employee will help a company on a long-term basis.
But not anymore; the contract hiring vs. full-time hiring has gone beyond who is suitable for what. It is now more about which option offers the specific work or skill a company needs and saves costs.
Is Contract Hiring The New Trend?
The answer to this question lies in statistics, so let’s get straight to it. In 2018, Google hired more people as contract employees than full-time workers for the first time in their records. Another study showed that more than 1/3 of the American population is making considerable income from informal work.
News also broke that Amazon is offering $10,000 for employees to quit and work as a contract employee. But is contract hiring only for the big guns? No. There are statistics to show that small businesses are hiring significantly more contract staff than full-time employees. So, it is not only Google, Amazon, or other top companies that are snapping up more contract staff.
From all indications, it is clear that contract working is on the rise in the United States.
Why Are Companies Hiring Contract Employees?
It is clear that companies are hiring more contract employees for specific reasons. Such a significant move is too crucial to be made based on perception or chance. It must be deliberate. Let’s dig deeper to find out why companies have decided to tow the path of contract employees.
Base Compensation
The base compensation an employee gets, whether as a full-time or contract employee, varies. However, a full-time employee will become more expensive for a company to keep than a contract employee in the long run.
Let’s look at a hypothetical situation. A full-time employee hired can earn up to $12 per hour in the first year. While this is relatively low, if the company keeps the employee for several years, their earnings may rise to around $20 per hour. This is a considerable increase in their base compensation costs.
Conversely, a contract staff from a temporary staffing agency can cost around $15 per hour, including the agency fee and compensation. While this is higher than what you pay for a full- time employee for starters, it doesn’t increase over time. Hence, it is less expensive, over time, compared to hiring a full-time employee.
Employee Benefits
Employee benefits include paid vacations, retirement savings plans, health insurance, and more. These account for a considerable amount of hidden cost attributed to hiring full-time employees. However, employers avoid these costs by hiring contractors instead. Contractors do not incur such a high hidden cost of employment, despite getting good benefits.
Tax and Insurance Considerations
It is no news that companies are expected to submit payroll taxes on behalf of their employees. To avoid this, companies offer employees a pre-tax compensation amount and then reduce the amount of compensation based on the amount of taxes submitted. Conversely, contract employees are in charge of their taxes. In the end, employers pay lower total compensation to contract employees because the tax is not factored in.
Additionally, companies are expected to purchase new insurance policies alongside the present liability policies for their full-time employees. There is also a need for workers’ compensation insurance. Employers avoid all of these financial burdens by hiring contract employees. With contractors, employers can avoid workers’ compensation insurance and other liability policies.
Flexibility
Companies and businesses grow over time. Adjusting to structural growth is easier with contract staff. Since the arrangement is short-term, it is easier to replace contract employers with new ones with the right in-demand skills without any risk. This is another reason contracting is increasingly popular.
Hiring The Right Contract Staff
Ready to bring in more temporary staff into your team? You need the help of a reputable staffing agency. At Flexible Staffing, we specialize in helping companies and businesses find the most suitable contract employee for their open roles.
Learn more about how our temporary staffing services can help your business. We will be delighted to hear from you.
