Contract vs Direct Hire
Direct or contract? When hiring for a position, which is better? Some companies will only hire direct, while others prefer a hybrid approach.
Contract Employee
A contract employee typically works for a company for a specific time frame, project. Their length of employment may be tied to a date on the calendar, upon completion of a project or they can work on an as-needed basis. They typically come ready to work on day one, bringing their knowledge, skills and even hardware and software with them to jump in feet first.
Direct Hire
While the direct hire may stay at your company longer than a contract worker might, they may not be there more than about 4.2 years, according to the Bureau of Labor Statistics. The direct hire will need to be onboarded and trained, supplied with all of the tools to do their job, and most likely will require ongoing training as their role develops. They are considered more of an investment than a contract or contingent employee.
Pros & Cons
There are both advantages and disadvantages to contract employees. If you’re debating, it’s worth evaluating specific goals and needs of your business. Here are a few typical motivators in either direction.
Long-term vs. Short-term
Are you looking for a specific skill set to fill a short-term need? Such as a project that has a definite beginning and end point. If so, hiring a contract employee ensures you are only paying for that talent to complete that particular job. Once the project is over, they’re off the payroll.
Cost Effectiveness
Contract employees generally cost less than direct hire (permanent) employees. With a contractor or contingent worker, you are only paying for the time you need them. You are also less invested in that employee and can change them out quickly if needed. But, on the flip side, they are less invested in your company and may have other clients, walk away for a better opportunity, and less interested in the overall success of the company.
An Alternative
It’s worth considering a hybrid approach to hiring. Many contract or contingent workers are interested in being hired after their contract agreement is up. With a contract-to-hire option, both you and the contract employee have had the opportunity to learn about each other over a ‘set period of time’.
In Summary
By understanding the difference between contract and direct hire, you can make smarter decisions to maximize your returns on labor costs. In a nutshell, contract employees are cost effective for high-skill projects and peak workloads. Direct hires typically make more sense for long-term and core tasks. Contract-to-hire gives you the flexibility to hire stellar contractors into a permanent position. Many temp agencies like Cardinal offer a host of staffing services and options – temp, temp-to-perm (hire), direct hire, and onsite enterprise staffing solutions.
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