How to know whether to hire a contractor or permanent employee

As a recruiter who built an entire career based on contracting, and even founded a recruitment agency that today heavily caters to the contract sector, some may be surprised to hear that I still question clients over their decision to hire a contractor over a permanent employee, writes Matt Collingwood, managing director of IT recruitment agency VIQU.

New recruits: what motivations, and mindset do you want them to have?

‘Permies’ have vastly different motivations and focuses than contractors, and can be a fantastic asset to many businesses. Such permanent employees are more likely to be loyal and passionate about your business, if you’re a hirer.

They will want to progress with you or inside your ranks, and gain new skills which will benefit both you and themselves long term. We clearly see the benefits of full-timers, otherwise every member of our staff would not be a permanent employee!

What to look at to discover who’s best for your outfit. Is it permies or contractors?

Nevertheless, there are many motivations for our clients to use contractors over permies, some of which are outlined below.

1. Availability of resource

If you can’t fill a role – whether it’s perm or contract, it will have a negative impact on the business. Currently, the market is very candidate-driven. Highly skilled IT professionals are in high demand, and we are seeing huge skills gaps in multiple areas.

To put this in perspective, in June 2022, our live job opportunities had increased by just over 200% compared to June 2021. We’ve also found that ‘fill-time’ i.e. the period from job advertisement to offer and acceptance, has increased by 33%. So we have more assignments but they are taking longer to fill.

Due to the nature of contracting, contractors are far more readily available than their permanent counterparts, either immediately or within 1-2 weeks. By contrast, skilled permanent staff could have a notice period of up to FOUR months. And on top of that, if you do want them for yourself, you’ve got to lure them away from their potentially very cushy existing permanent job first!

2. Flexibility of resource

Business needs often mean that flexibility of resource is required. Like I mentioned above, this may be in terms of how quickly you need an extra pair of hands, however, it can also mean the length you need the resource for and the flexibility to have them for longer if required.

A contractor can be contracted to work for as little or as long as you need. Contractors are often very happy to extend their contracts if your needs require it, as long as they are given advance notice.

Our staffing business works with a US-owned logistics organisation that no longer believes there is enough demand to continue trading in the UK. Previously, their workforce was 90% permanent. However with their plans to close all UK offices in the next 18 months, they can no longer hire permanent resource. It would be unethical. Therefore, they have explored their options and switched their new workforce -- to 90% contract! 

3. Requirement for (and potential transferability of) specialist skills

Contractors have very precise skills and experience – they are used to running the same project or deployment multiple times, whereas a permanent employee might have done it once or never before.

Contractors’ experience of the process gives them specialist knowledge of what might go wrong, and what to look out for beforehand to stop it going wrong. This gives businesses the reassurance that their projects will be delivered on time and to the specification required. Having a contractor on-site can also give engagers the opportunity to offer a bit of free training, as collaborative-types of contractors will, in effect, upskill permanent staff who they work alongside.

4. ‘Different’ interests, focuses, work environments

The technology industry in the UK is a tight-knit community, and it’s a community that likes to talk! Therefore, if you suffer from having a bad employer brand – whether that’s poor retention, bad management, or something to do with the nature of your business/products -- this can heavily impact your ability to attract permanent staff.

As a staffing agency with its own values, we have had times where we have refused to work with a certain brand on their permanent recruitment, because of their reputation in the local market. However, contracting is different.

Most contractors aren’t interested in the internal politics and drama that often comes with a permanent role. Contractors are there to make money, and gain experience to take with them to their next contract.

For instance, in the past, we struggled to hire for a company based in Oxford as it was known locally for testing on animals. Almost no one wanted to take a permanent role within this sector. We also had the same experience with a military hardware/defence organisation in Wiltshire that, at the time, had taken a beating in the national newspapers.

I’m certainly not saying that every contractor would take on these sorts of opportunities, however, the mindset in contracting and the ‘deal-breakers’ for contracting’s practitioners are very different. In short, contractors are a lot more open in many respects to less conventional, more contentious, work and working environments.

5. Experience with older tech

We work with a high street retailer who uses a lot of legacy technologies, including Mainframe.

Unfortunately, there is a huge skills shortage for 30-year-old tech stacks like Cobol CICS and DB2. IT professionals who have entered the industry in the last 10-15 years have no experience with these legacy technologies, and are not interested in taking a role to learn these skills because they are outdated and will not be useful to them long term. Contractors are far more willing to take on projects involving legacy tech, mainly because:

• They already have a lot of subject knowledge. Computer professionals tend to enter contracting after gaining solid permanent experience, therefore, they are a slightly more senior demographic that came across these legacy technologies when they were in their heyday.
• They will not likely have the same progression goals or corporate ambitions as permanent employees. Most contractors are very experienced individuals who have solid knowledge of their subject area. Therefore, they are happy to use whichever skill meets a client’s needs, even if it’s working with a technology that will not benefit them long term, personally in their own career. They just want to earn good money; work as they see fit such as remotely/flexibly, and give an excellent level of service to those who are prepared to premiums for it.

Finally, it’s thanks but no thanks to fixed-term assignments

Individuals who take on a Fixed-Term Assignment (and as a client you may be considering offering fixed-term opportunities) are treated just like a permanent employee. A fixed-term worker even gets paid a salary instead of a rate! However, their role is typically fixed to six months, or even 12 months.

As a client potentially eyeing FTAs, it might help you to know that our business normally rejects working on fixed-term assignment requirements, mainly because the candidate market simply does not favour them. After all, we all know it’s a candidate-driven market, there are many opportunities available to skilled IT professionals; and as with any other system -- if it ain’t broke then why try to fix it?! Perhaps the proof is in the pudding. In fact, we’re yet to meet a techie, au fait with today’s rates, who would happily take a contractor opportunity which only had a permanent salary price tag attached for the 12-month duration.