IT Staffing Professionals Need to Know the Answer to a Critical Question… Temps and Contractors vs. Direct Hires: What’s the Best Option for Hiring Information Technology Talent?
Have you ever tried to fill an open IT position?
I think we would all agree that certain jobs are better filled by a temporary employee, or a contractor, as opposed to a full-time employee. The reverse is also true. So which option should a hiring manager pursue, and when?
This post will provide you with the guardrails and guidance to help you decide which type of staffing option makes the most sense for your open position.
You will learn the “What” and the “How” of the staffing option selection process:
- What Are the Three Prototypical Staffing Options for Employers in the IT Space?
- What Are the Differences Between These Options?
- How Do You Decide Which Option Is Best for Your Requirement?
Sound complicated? It’s actually a fairly straightforward process. So let’s get started with a brief description of the three most common staffing options for almost any open job:
- Full-Time Employee (aka FTE’s)
- Temporary Employee (aka Temps)
- Contractor (aka Freelancers or Independent Contractors)
There are also several close cousins to these staffing options known as “temp-to-hire” and “contract-to-hire.” These options are intended to evolve into permanent positions and will be discussed in detail in a future post.
So what is a full-time employee? OK, I think most of us get it, but let’s look at an FTE vs. a temporary employee. There are some subtle similarities and differences.
First of all, the term “employee” implies that the person filling that position is entitled to the privileges and obligations that come with being an employee of a company.
These include things like:
- Health Insurance and Health Benefits
- Financial Benefits (401k, etc.)
- Paid Time Off and Paid Vacation
- Unemployment and Workers Compensation Benefits
- Managed Payroll, Including Payroll Taxes, Unemployment Taxes, etc.
In the case of a temporary employee, these benefits and obligations are most commonly managed and borne by the staffing agency, or human capital firm, that placed the temp.
There should also be a definite time limit placed on positions filled by temporary workers.
This limitation is stated by the US Department of Labor as a maximum of one year. The DOL also recommends a clearly defined end date on these types of employee engagements.
Some common reasons for utilizing the temp staffing option include:
- Seasonal Workforce Requirements
- Temporarily Replace Full-Time Staff on Leave
- A Desire to “Try Before You Buy” with Specific Employees and Positions
Full-time employees, by contrast, are typically placed in positions with specific, business-critical, permanent job descriptions.
So what is an independent contractor or freelancer?
Independent contractors do not receive any of the corporate benefits that employees, whether temps or FTE’s, typically receive from a company. This type of workforce staffing option implies that contractors are responsible for; tracking and reporting their hours worked, paying their own income and payroll taxes, providing for their own benefits, etc.
Contractors must also set their own work hours and provide their own work tools, such as computers, devices, transportation, etc. Work is typically project-based, and fixed wages are paid to the contractor until the project is complete.
Some of the differences between employees and contractors are a bit more subtle, however.
Temps tend to have less higher education than contractors and FTE’s. They also tend to have skill sets that are more in demand in the workforce in general, but that tend to command lower wages. Temps are also more likely to work part-time and to engage with multiple staffing agencies at the same time.
Contractors and FTE’s, on the other hand, tend to have more formal education and more specialized skill sets than temps. They also tend to command higher wages and tend to work longer engagements.
Temporary staffing engagements can also be more open-ended with contractors than with temps, with no requirements for clearly defined end dates.
We’ve discussed the “What,” so now we’ll discuss the “How” part of the process.
How do you decide which staffing option is best suited for your specific job requirement?
We’ve actually covered this to a large degree already, but let’s unpack it a bit further and encapsulate a few takeaways.
Pay attention to your job description.
For help with this part of the process, visit our previous post on how to streamline your selection process.
The requirement for a full-time employee has normally been discussed internally and in great detail by the company prior to creating the job post. You have determined the need for an employee to support your IT department. You’ve calculated the cost and the benefits of this employee and have decided to move forward.
But what if your requirement is a little more vague and open-ended?
You may want to consider a temporary employee as an option. Secretarial, administrative, intermediate level technical, and clerical help can often be sourced as temps or temps to hire.
You are probably better served by using an independent contractor if your hiring requirement is outside of your core IT competency. An example might be a requirement for a specialized cloud-native web developer in a company that is not normally focused on web technologies. In this case, you have a special project with a limited duration that creates a demand for the specialized skill set.
Independent contractors typically tend to have more formal education and specialized skills that command higher wages. Freelancers also typically bring skill sets that are not currently available inside of your organization or are in limited supply.
So now you’re ready to start the candidate selection process.
As always, leverage your staffing agency! They are familiar with which staffing option is best suited to identify the right candidate for you.
Your staffing agency may also have an MSP (managed service program) to manage your entire contingent workforce for you. This can be enormously beneficial.
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