Contractual Employee vs. Permanent Employee

You're a realist, so you never expected that looking for a job would be easy, much less fill your days with kicks and grins. But you didn't expect to see so many positions advertised as contractual, either – seemingly challenging, well-paying positions that appear to suit your career goals. Since you set your sights on a full-time job as a permanent employee, you're understandably in a quandary: Should you eliminate contract jobs from your search and look only for full-time roles or acquiesce to this burgeoning force in the job market? The sensible answers are “no,” at least until you take the time to size up some of the differences between contract vs. permanent employment – and decide which is the better fit for you.

Build Upon the Basics of Contract vs. Permanent Staff Members

Before you drill down and consider some specifics, it makes sense to add them to the nascent foundation you probably already have about contract staff vs. permanent staff:

• An employee is someone who works for a company on a permanent basis, which really means until one or the other decides it's time to part ways. Employees can work part- or full-time, and they are paid either an hourly wage or a weekly salary.

• A contract worker works for a company but usually signs a “contractual employee contract” that spells out a specific project he will work on, for a specific length of time and for a specific hourly, weekly or project rate. Contract workers retain a sense of autonomy, and so are best known as independent contractors (ICs).

Since your curiosity pointed you in this direction, you're probably wondering why some companies prefer to hire ICs over permanent employees – and why ICs have become so prevalent in job ads. The appeal can be reduced to one word: need. A company may need someone to assist the full-time staff with a time-sensitive or important project. In this case, the IC may work alongside full-time staffers. Or an IC may be needed to perform a specialized task that no one on staff has the skills to complete, Upcounsel says. A website creator and designer is a good example of someone who is needed by a company, but only until he launches the site.

Adaptive Solutions Group points out that a company may also need an IC to “fill voids” left by:

• Attrition

• Disability, family, maternity or medical leaves

• Retirement

• Vacations

Longevity Belies the Arrangement

It may be tempting to think of contract workers as short-term workers, but this depends on your definition of “short.” As you may have noticed, many contract positions last for six months to a year. Some positions are billed as “contract to hire,” meaning that after that six-month or yearlong term is over, the employer could seek to alter the terms of the working arrangement and ask the worker to become a full-time employee. In still other scenarios, ICs can work side by side with full-time employees for years because the arrangement suits both the worker and the company.

It's no understatement to say that the length of a contractual employee contract will probably weigh heavily in your decision-making process if you're offered one. It should; it could help compensate you for the sense of security you would enjoy as a permanent employee.

Before you sign anything, continue drilling down about the differences between contract staff and permanent staff. You might be surprised at what you might find, especially when Business News Daily sets the tone by saying the main difference is that “one can be controlled by the employer and one cannot.”

The Internal Revenue Service, which enforces strict rules about what constitutes contract vs. permanent employment, draws an even harder line:

• “An individual is an independent contractor if the payer has the right to control or direct only the result of the work, not what will be done and how it will be done.”

Consider the Pros and Cons of Being an Employee

Prepare yourself now to disagree with some of the following pros and cons of contract vs. permanent employment. Some measurements are subjective or vary depending on the situation. For example, contending with a daily commute to work can be a headache for someone who must drive 40 miles one-way but a pleasure for someone who lives right around the corner from the office.

Keep the shades of gray in mind as you consider the pros of being a full-time employee, who generally:

• Enjoys job security

• Can count on a regular paycheck

• Is paid for holidays and vacation and sick time

• Pays less in out-of-pocket insurance costs

• Is protected by anti-discrimination and workplace safety laws

• Is part of a team and has the opportunity to experience this sense of teamwork develop into friendship

In general, and depending on the company, being a full-time employee may not be the end-all, be-all existence if the employee:

• Must work when the boss directs him to, not necessarily when he wants to

• Is paid for 40 hours a week no matter how much overtime he puts in

• Feels stymied by a job, especially if he is not offered new projects or continuing education opportunities

Consider the Pros and Cons of Being an IC

If you've heard that independent contractors “have it made” because they work when they want, and for whom they want, you may wish to wash down this side of the contract vs. permanent employment equation with a few grains of salt, too. ICs work for and must meet the expectations of someone. And if they don't at least meet that someone halfway, they won't be working as an IC for long. This is their reality, too.

So keep the salt shaker handy as you consider why some ICs like the ability to:

• At least broach the subject of working flexible hours or to work remotely

• Often receive a higher hourly rate than full-time employees (to compensate for the lack of health benefits)

• Work for several companies at once, time allowing, and broaden their skillset

• Try out a company with fewer entanglements before committing to a full-time role

On the downside, independent contractors:

• Must accept that their roles can be unceremoniously cut with little or no warning

• May be saddled with an outsider status that may prevent strong bonds from developing with colleagues

• May be ineligible for unemployment and worker's compensation benefits

ICs Belong to the Gig Economy

With any luck, you know an independent contractor, so you can hear an inside account of what it's like to work as one. If not, it shouldn't be difficult to find an IC, especially with the explosive growth of America's so-called “gig economy,” in which “temporary positions are common, but full-time permanent ones are not,” Market Business News says. Through either their main or secondary job, more than one-third of all workers fuel the gig economy – a number that the U.S. Bureau of Labor Statistics expects to grow to 43 percent by the end of 2020, according to Fortunly. Millennials are particularly drawn to the gig lifestyle; they represent 37 percent of the gig market.

At this point, you wouldn't be alone if you register some discomfort over the somewhat pejorative term, whether or not you know its origins are traced to the entertainment industry and a time when singers, dancers, musicians and comics moved from one gig to another. You would be correct in pointing out that independent contractors have been around since George Washington hired them to tend his farm at Mount Vernon and have gone by many names since then, including temporary workers, on-call workers and freelancers.

If this is the case, try to put semantics aside and do your final analysis in a manner that Market Business News sums up nicely while contrasting contract vs. permanent employment:

• “A gig economy is one where companies hire independent contractors and freelancers instead of taking on full-time workers. The gig economy contrasts sharply with the traditional economy, which consists of full-time workers who focus on a lifetime career and rarely change positions.”

As a realist, only you can decide which work option stands the better chance of filling your days with kicks and grins.