Tech & Work

Full-time vs. contract employees: Learn how to determine the best fit for your team

Outsourcing may be all the rage, but it might not be the best choice when deciding how to staff your organization. In other cases, it might be the best solution. Tom Mochal gives some guidelines about how to make the decision whether to build teams from full-time employees or contract employees.

Organizations have many options today when determining how to staff a project team. You can use existing employees, hire a new employee, use contract resources, or you may just decide to outsource all or portions of the project. These choices are the result of advances in communications and technology, as well as the desire of companies to be more flexible in their hiring options.

Your organization should have a Staffing Strategy that provides guidance on when to utilize employees, contractors and outsourcing options. If your organization has a strategy, you should be able to apply your project situation and determine what type of staffing approach makes sense.

Where to begin

Perhaps the place to start is to understand whether there are employees available in the timeframe needed for your project. It usually doesn't make sense to hire contract people when you have employees that are available and otherwise would have nothing to do (assuming the employees have "close-enough" skills).

Things to consider

Let's assume for the purposes of this article that you do not have current employees available to staff your new project. Let's also say you work for an organization that is open to utilizing contractors or hiring employees depending on the needs of the specific project. Let's look at some of the criteria that we can use to make the hiring decision. (Similar criteria may be found in your organization Staffing Strategy, if it exists.)

  • Urgency - If you need to get started very quickly, you may need to hire contractors. In most organizations you can put a call out to the local contract companies and be interviewing people in a couple days. Most organizations can't (and don't want to) hire employees that quickly. You may look at options to bring contractors in quickly and then ask for a right-to-hire option in the future.
  • Length of the need - If you need a resource for a short, finite duration, then a contractor may be the way to go. You can bring them in for a short contract and then release them when the work is done. If you have a full-time, long-term need, an employee would make more sense.
  • Strategic vs. non-strategic work - Many companies identify certain types of work to be more strategic that other types. For instance, many companies chose to staff the senior project positions, like the project manager, with employees, and are more willing to use contract labor to assist with programming, testing and implementation.
  • Skills and knowledge needed - Many companies make decisions about staff based on the type of skills needed. For instance, if you are moving into a new technology, you may want to hire employees to start seeding these skills into the organization. Similarly, if you are installing new software, you probably want some employees on the project to make sure that the knowledge stays in the company when the project ends.
  • Confidentiality - Most companies will chose to staff positions with employees if the project team will handle confidential or proprietary information. There is a sense that the information might not be confidential once the contractor leaves the company.
  • Cost - In general, the hourly cost of a contractor is more than the corresponding fully-burdened cost of an employee. However, usually the long-term cost implications are just as important. With a contractor, you typically pay a higher hourly rate, but only for the length of time they are needed. Employees may cost less in the short-term, but you are taking on a long-term cost commitment.

If you look at the decision criteria above, you can see that much of the answer for using employees of contractors comes down to risk. If a project is short, it might be risky to hire an employee since you may not be sure if you can keep the employee busy long term. If the project involves core skills to your organization, confidential information, or is strategic to your business, it may be too risky to hire a contactor.

Balance your needs

Organizations tend to keep a leaner staff of core employees these days. The core staff stays relatively constant from year to year, while increases in workloads are staffed through contract resources. You just need to make sure that the employees are generally hired to work in the areas that are more important to the long-term success of your business. Additional needs for staffing non-strategic, low risk, generic positions can be staffed with contractors or outsourced entirely.

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