The Hard Choice Between Contractors And Full-Time Employees

These workers may make more money than part-time employees in the short term; however, they also have to pay self-employment taxes on their earnings, which can add up over time. In some cases, the cost savings of hiring contractors instead of full-time employees aren’t actually as big as you might think. Especially if companies need help on long-term projects that could take years to complete. Some organizations have a “revolving door” of short-term contract employees to work on these kinds of projects, but training overhead and management time can make this inefficient. Just as with independent contractors, there are hidden costs that businesses incur as a result of W2 employees. Some of these are a little more obvious because they are actual expenses.

Here, the most important thing you need to ensure is that you’re able to handle all the workload you decide to take on and meet all the deadlines accordingly. A complete Employer of Record (EOR) platform for onboarding, payroll, and compliance – so you can hire without the hassle. As recruiting continues to evolve, recruiters are becoming an increasingly strategic part of the business. Find out how to prepare your organization for what’s on the horizon in talent acquisition. Designed for business owners, CO— is a site that connects like minds and delivers actionable insights for next-level growth. Entrepreneurs and industry leaders share their best advice on how to take your company to the next level.


While contract jobs can result in full-time employment, most are positions with specific durations. Before choosing between a contract or full-time position, the vital point is to know all the details of the job. They complete one-off projects or are retained on an as-needed basis.

contract position vs full time

The report of Intuit 2020 says that by the end of the year 2020, 40% of US employees are working as contract workers. From prescriptions to dental care, you’ll be operating without any benefits or advantages that come with working full-time for a company. Covering the costs takes some planning and a healthy safety net – you need to make sure you’re always saving up for a rainy day.

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We believe everyone should be able to make financial decisions with confidence. I’m Josh Doody, a professional salary negotiation coach who helps High Earners negotiate their job offers. On average, High Earners improve their first-year compensation by $47,273 with my help. If you’re working in an industry or niche that allows you to choose, go for the option that will make it easier to improve your current skills and even expand them.

  • Part-time jobs give employees the chance to focus on other outside tasks, which is why many students take part-time jobs.
  • A temporary contract enables you to sample life at various organisations and to meet a range of people and to make contacts – which may help you find your next job.
  • Placing too strong an emphasis on contract work can exacerbate wage inequality, for example.
  • Use our employment calculator to get an estimate about your overall costs for employees in different countries.
  • Consistent work, loyalty, upward mobility, financial efficiency, and the availability of highly skilled labor make this a strong compromise between hiring contractors and immediately bringing on employees.
  • This termination could be an end of a project or covering someone who is on maternity leave or sickness.

As a contractor, you can also choose to work for multiple clients simultaneously – some of which may even be direct competitors. However, once you reach a certain level of success and manage to make a name for yourself, you can expect to be able to accept or decline projects as you see fit. And they can be proud of the work that they’re doing to not only benefit the long-term success of their company, but the labor market and society as a whole, as well. Placing too strong an emphasis on contract work can exacerbate wage inequality, for example. Keeping costs down has become a high priority in a corporate world where profits have become the primary product.

Why Companies Hire Contract Employees

On the other hand, full-time employees can expect things to be quite different. Full-time employees most commonly work as a part of a team, which enables them to relate to other employees, build quality work relationships and get in touch with other professionals from similar fields. How can an international company expand to America and hire new employees? But if you want someone who can help your company grow into a more successful organization over a period of years, hiring full-time is almost always the best choice. You’re more likely to be a pawn or fall guy for internal political struggles. Your performance may be judged more harshly than that of a regular company employee.

It can sometimes happen that, as a contractor, you do get offered consistent work within a company, but this will only last a certain period of time. When you work for yourself, you can’t fall back on a performance review when it comes time for a promotion or raise. You need to sell yourself by networking, meeting new people and being good and talking up your skills and know-how. As a contractor, it’s a definite advantage if you have an outgoing personality and good at meeting new people. While contract-to-hire positions are available today, they aren’t as common as they might be.

The hidden costs

Another option for IT professionals is regular, full-time, benefits eligible employment. This means an employee is hired by a company to work for a minimum number of hours per week at a set rate. Full-time employees earn a steady income and are provided benefits like health insurance, sick leave and retirement savings through their employer.

The take-home message is to either ask for more money as a contractor, or expect to take a paycut. But realistically, this amount may not be much; even if you’re able to write off $5K in expenses, that will only translate to maybe $2K less in taxes. If you run a local business that serves a local market, this can be crucial to your success. Your long-term, dedicated employees have a stake in your company and attract their friends and family members to your business. They often show dedication to their employers, advocate for them in their social circles, and work for the long-term benefit of these businesses. Today’s business leaders eventually all end up facing the contractor vs. full-time employee dilemma.

But the decision to hire a contractor or a full-time employee runs much deeper than that. But it’s not just huge international companies like Google that are cashing in on contract work. In fact, data from January 2019 shows that small businesses have been hiring significantly more contractors than they have full-time employees. In December 2017, NPR and Marist found that 20% of all American workers are contract workers or independent contractors. You’re not the company permanent employee with a fixed working schedule and salary, so you can have your own flexible working hours and several contract jobs, even within the same industry. Full-time employees (often referred to as W-2 employees) are hired directly by a company and are on its payroll.

  • If you work less than 30 hours a week, you’re considered a part-time employee.
  • You’ll also have to buy all of your own equipment like a computer, desk and office chair, and cell phone.
  • Staffing firms handle the job search process for their candidates, identifying opportunities that are a good fit for them, and assisting them with the application and interview process.
  • When you work for yourself, you can’t fall back on a performance review when it comes time for a promotion or raise.
  • Since full-time employees are guaranteed work, they’re also guaranteed compensation for the work they perform.
  • Before leaving a full-time job for a contract position, a candidate considers their risk.

In the US companies have been caught and fined for trying to classify people as contractors when they should be employees. It is not based on banning contractors from team building but based on how they control your location and schedule of work. If they say you must sit at this desk, during core hours, and attend these daily meetings then they should be paying you like an employee. However, not all employees get a guaranteed number of hours per week. Of course, full-time employees often have greater access to health benefits, profit-sharing, vacation time, and other perks.