Hiring Temporary vs. Permanent Employees: Benefits & Disadvantages
Imagine you’re a hiring manager facing a talent shortage, with a critical project looming and a tight budget. Should you hire a temporary worker to fill the gap or invest in a permanent employee for long-term stability? This decision can make or break your workforce strategy.
Owning and running a recruiting firm for twenty years, helping clients and prospects choose between “temp versus perm” is a discussion I’ve had countless times.
The right answer will always be situation-dependent, requiring a clear understanding of costs, benefits, and strategic goals…among other factors.
I’ll help you figure all of that out, but first, let’s start with the basics.
Temporary vs. Permanent Employees: Key Definitions
What is a temporary employee?
Temporary employees, often called temps, encompass freelancers, contract professionals, and staffing agency-sourced talent. They perform work for your organization with clearly defined parameters:
- They serve for predetermined timeframes, whether for specific projects, seasonal demands, or covering staff on leave
- Their compensation typically follows hourly rates or project-based fee structures
- They generally operate outside your company’s benefits ecosystem, without access to healthcare coverage, retirement plans, or paid time off
- Many temporary workers, particularly freelancers and independent contractors, assume full responsibility for their tax obligations
- They provide specialized skills and immediate workforce flexibility without long-term commitments
This employment model creates agility for organizations navigating fluctuating demands, specialized project requirements, or uncertain growth phases.
What is a permanent employee?
Permanent employees form the foundation of your organizational structure, working on an ongoing basis with no predetermined end date to their employment relationship. These team members:
- Establish long-term professional relationships with your company, contributing to continuity and institutional knowledge
- Receive consistent compensation through regular salary or hourly wage structures
- Access your full benefits package, including healthcare coverage, retirement planning options, and paid leave policies
- Benefit from employer contributions toward taxes, unemployment insurance, and workers’ compensation
- Develop deeper connections to your company culture, mission, and long-term strategic objectives
- Build specialized knowledge about your specific operations, processes, and client relationships
This employment model creates stability, fosters loyalty, and supports long-range planning while providing workers with greater security and comprehensive benefits.
Benefits of Hiring Temporary Employees
Cost-effectiveness
From a financial perspective, temporary employees often present significant savings. While their hourly rates may appear higher, the total cost typically remains lower because:
- You avoid expenses related to benefits packages
- You don’t contribute to their taxes
- You can scale staffing costs up or down based on business needs
- You eliminate costs during periods when their skills aren’t needed
Replacing an exiting employee can cost between 30% and 400% of their annual salary, making temporary staffing an attractive option for roles with high turnover potential.
Access to specialized expertise
Temporary employees allow you to access specialized knowledge and skills.
Talented, in-demand professionals (i.e., the ones you want to hire) know their worth. To keep their skills sharp and their income high, they will often choose hourly, project-based opportunities over the perceived security of direct employment. Many of the temporary employees our team recruits won’t consider long-term employment at a single organization.
Opportunity for a “trial run”
One of the toughest things about hiring is accurately gauging what a person will be like to work with day in and day out. Or, as I often phrase it, “you won’t know what someone is really like until you live with them.” Temporary work arrangements give employers the perfect solution:
- You can evaluate performance in real working conditions
- Both parties can assess cultural fit without long-term commitment
- If successful, you can transition the temporary worker to permanent status
- The temporary employee already understands your workflows and culture if hired permanently
This approach significantly reduces the risk of making a poor permanent hiring decision.
Building your talent pipeline
When you treat temporary workers with the same respect and appreciation as permanent staff, you create valuable relationships that benefit your organization long-term.
Your previous temp hires can create a lasting network of known professionals who can hit the ground running from day one. Our clients who hire seasonally consistently benefit from bringing back former contractors. In fact, a large employer we work with in the hospitality industry has retained the same temporary employee for the past seven years — and counting!
Related: How to Build a Talent Pipeline
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Speak with our recruiting professionals today.
Potential Drawbacks of Temporary Staffing
Extended time-to-productivity
Temporary employees require training just like permanent staff—sometimes even more if they lack industry experience. This creates several challenges:
- They may reach full productivity shortly before their assignment ends
- You might invest in training multiple temporary employees instead of one permanent staff member
- Knowledge transfer becomes an ongoing requirement with each new temporary hire
Organizations must weigh these training investments against the projected value of temporary staffing.
High turnover risk
A temporary employee seeking permanent work might leave anytime for a better opportunity or even a higher-paying temporary role. Consider these factors:
- Repeated turnover can disrupt projects and team dynamics
- Some professionals choose temporary work specifically because it’s noncommittal
- While flexibility benefits both parties, it also creates uncertainty
- You risk losing a temporary worker with minimal notice
Related: Highly Effective Strategies for Employee Retention
Reduced engagement
Temporary employees may not develop the same level of investment in your company culture as permanent staff. This can manifest as:
- Limited participation in long-term planning and innovation
- Less emotional connection to your company’s mission
- Focus on completing assigned tasks rather than contributing to broader goals
- Divided attention if they work for multiple employers simultaneously
Higher hourly costs
Because temporary workers don’t receive the same benefits and tax contributions as their permanent counterparts, they often come at a higher hourly rate. When deciding whether hiring a temporary or permanent employee makes more financial sense, you’ll need to carefully consider the duration and scope of the work you need to be done to see if the hourly rate is practical.
- Carefully analyze the duration and scope of work needed
- Compare the total cost, including benefits, to permanent options
- Consider the value of flexibility versus the hourly rate
- Factor in potential productivity differences between temporary and permanent staff
Advantages of Permanent Employees
Increased engagement and commitment
Permanent employees typically apply for positions because they want to work specifically for your organization, not just for immediate income. This fundamental difference often results in:
- Greater willingness to go beyond basic job requirements
- Higher investment in producing quality work
- Motivation to advance within the company
- Deeper connection to organizational goals and values
Workforce stability and knowledge retention
Because permanent employees remain with your organization long-term, they contribute significantly to your company’s knowledge base and operational stability:
- They preserve institutional memory through organizational changes
- They accumulate valuable job-specific knowledge over time
- They refine workflows and processes based on experience
- They maintain relationships with clients and partners
Reduced recruiting burden
Once you’ve successfully hired a permanent employee, you won’t need to fill that position again for a considerable time. This contrasts sharply with temporary positions that may require repeated recruitment efforts:
- You minimize disruption to teams and workflows
- You avoid the time and expense of multiple hiring cycles
- Your HR team can focus on strategic initiatives rather than constant recruitment
- You reduce onboarding and training repetition
Stronger company culture
Permanent employees have time to develop meaningful connections with colleagues and the organization itself:
- They serve as culture carriers who help integrate new team members
- They build relationships that enhance collaboration and teamwork
- They develop an intrinsic connection to the company’s mission
- They contribute to and strengthen your organizational culture
Challenges of Permanent Hiring
Added expenses
When considering the full cost of permanent employees, organizations must account for numerous expenses beyond base salary. These costs can add 40% or more to an employee’s salary:
- Paid time off and vacation benefits
- Health insurance and retirement plans
- Employer tax contributions
- Ongoing training and development
- Potential severance packages
Related: How to Reduce Hiring Costs
Significant up-front commitment
Hiring represents one of the most substantial investments organizations make. When extending an offer to a permanent employee:
- Separation costs can be significant, especially for longer-tenured employees
- You accept greater financial risk than with temporary workers
- The stakes are higher if the relationship doesn’t work out
- Termination typically involves more legal considerations and paperwork
Recruitment challenges
Sourcing and attracting talent for permanent positions is generally more difficult than filling temporary roles, particularly in competitive labor markets:
- Recruitment strategies require continuous refinement to remain effective
- You compete against similar employers for the same talent pool
- Extended hiring timelines increase both hiring costs and productivity gaps
- Specialized positions may remain unfilled for extended periods
Related: Common Recruitment Challenges and How to Overcome Them
Strategic Decision Framework: Temporary or Permanent?
When to consider temporary employees
You might benefit from hiring temporary employees when you:
- Need specialized skills for a short-term project
- Face seasonal demand fluctuations requiring additional staff
- Need coverage for permanent employees on leave
- Want to evaluate candidates before making permanent offers
- Are navigating a period of rapid expansion with uncertain long-term needs
When to consider permanent employees
Permanent hiring likely makes more sense when you:
- Value stability and institutional knowledge retention
- Need consistent coverage for ongoing operational responsibilities
- Require specific skills to achieve long-term strategic goals
- Are experiencing increasing overtime costs in certain departments
- Want to build your leadership team and organizational capabilities
Decision-making checklist
To determine the best hiring approach for your specific situation, consider:
- Budget considerations: What can your organization afford short-term and long-term?
- Timeline requirements: How long will you need these skills or capabilities?
- Skill specificity: Are the required skills highly specialized or more general?
- Market conditions: What’s the availability of talent in your industry and region?
- Growth projections: How certain are you about future business needs?
- Cultural impact: How will this hiring decision affect your team dynamics?
Conclusion: Create Your Optimal Workforce Strategy
The decision between hiring temporary vs. permanent employees isn’t always straightforward. One thing I can definitely say to anyone reading this is that you shouldn’t take an all-or-nothing approach!
Recent workforce trends show increasing flexibility, with 31% of employees leaving jobs within six months and contingent workers projected to comprise nearly half the global workforce in 2025. These statistics highlight the importance of thoughtful workforce planning.
By carefully analyzing your organization’s specific needs, timeline, budget constraints, and growth projections, you can develop a hiring strategy that maximizes the benefits of both temporary and permanent employment models.
Remember that the best approach often evolves as your organization grows and market conditions change. Regularly reassessing your workforce composition will allow for maintaining the right balance of stability and flexibility to meet your business objectives.
Ready to Optimize Your Hiring Strategy?
Whether you’re considering temporary staffing solutions or looking to build your permanent team, expert guidance can help you make informed decisions that align with your organizational goals.
Contact our team today to discuss your specific hiring needs and discover how we can help you implement an effective workforce strategy tailored to your unique requirements.
