When it’s time to hire, you have two main options: onboard a permanent employee who will be part of your team for the long haul, or opt for a temporary worker who can help meet your needs on a short-term basis. Which should you choose? This article will help you decide on hiring temporary vs. permanent employees.
Differences Between Temporary vs. Permanent Employees
Temporary employees, sometimes called temps, include freelance and contract employees and workers hired through an employment agency.
They’re employed for a limited, predetermined amount of time, like during a company’s busy holiday season. Or, they may be brought on indefinitely with the understanding that the arrangement is not permanent, like when a full-time staffer is out on medical leave but plans to return.
A temporary employee is paid an agreed-upon rate for their work, typically via an hourly wage or a contracted fee. They’re not usually eligible for benefits like employer-sponsored healthcare, retirement, and paid time off. Some temporary employees, like freelancers, are fully responsible for their own taxes.
Permanent employees include both full- and part-time employees who work for a company in an ongoing capacity. In other words, there’s no predetermined end date for their employment.
Full-time permanent employees are eligible for any benefits the company provides, and some companies include part-timers in this offering as well. Employers are responsible for a portion of their permanent employees’ taxes and things like unemployment insurance and worker’s comp in some states.
Pros of Hiring Temporary Employees
Purely from a dollars-and-cents perspective, it’s generally more affordable to hire a temporary employee than a permanent one. This is because the only wage-related cost of temporary employees is their compensation, whereas permanent employees also bring costs in the form of taxes and benefits.
Temporary employees allow you to access specialized knowledge without the expense of hiring a full-time employee.
For example, let’s say your agency lands a major marketing campaign, and part of that campaign involves building a niche mobile app. If you don’t already have developers in-house, bringing onboard a full development team would be very expensive.
Instead, most agencies would opt to leverage temporary workers to provide those technical skills for only the duration of the campaign, greatly saving on labor costs while still meeting the business’ needs.
Opportunity for a “trial run”
One of the toughest parts of hiring is accurately gauging what a person will be like to work with day in and day out. Temporary work arrangements give employers the unique opportunity to actually see how a candidate does the job firsthand before making an offer for permanent employment.
And, if the company does decide to make an offer, the temporary employee is already ahead of the game as a new hire because they have some prior knowledge of the company’s workflows and culture.
Builds talent pipeline
Suppose you treat temporary workers with the same appreciation and respect you give to permanent employees. In that case, you can build valuable relationships that can benefit you in the future in the form of viable candidates for long-term positions.
Temporary workers are often in between opportunities–figuring out their next career move or paying the bills while they earn their degree, for example. If a permanent position becomes available, one of your temps might be the perfect candidate, whether next month or sometime further down the road.
Not only does this help you hire quickly, but reduces the cost associated with tracking down brand-new talent.
Related: How to Build a Talent Pipeline
Cons of Hiring Temporary Employees
Temporary employees require the same training as permanent employees, and often more because they might not have any prior experience in the field. This means it typically takes them longer to get fully up to speed in a role, and their employment may end soon after reaching full productivity.
This can mean the company spends more onboarding and training multiple temporary employees versus just one permanent staff member.
Higher turnover potential
A temporary employee who’s looking for permanent work could leave at any time for a better opportunity or even a higher-paying temp role.
Moreover, not all temps are looking for a full-time job; some temporary employees opt for temp work because it’s noncommittal. While both parties in a temporary work agreement enjoy the benefit of flexibility, the company also risks losing a temp at any time, for several reasons.
Temporary employees don’t usually have the same “buy-in” to a company’s culture as its full-time workers. The nature of temp work means some employees are in it strictly to collect a paycheck rather than trying to make a meaningful investment in a company’s mission.
Also, some temps work for multiple employers, so you may not get 100% of their focus or energy.
Increased cost per hour
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.
Pros of Hiring Permanent Employees
Permanent employees presumably applied for their position because they wanted to work at the company, not just because they needed fast cash or were assigned to the gig through a temp agency. Thus, permanent workers tend to invest more in doing a good job. They also can advance within the company, which motivates higher performance.
Because permanent workers are, well, permanent, they make a bigger contribution to a company’s knowledge base. They have more time to accrue job-specific knowledge and refine their workflows, which can result in better output.
Lighter recruiting workload
Once you’ve landed a permanent employee, you won’t have to fill that position again for a long time. This is in contrast to temporary positions, which may need to be filled multiple times consecutively.
Contributes to strong culture
Permanent employees can develop meaningful relationships with their coworkers, which leads to a sense of belonging. They also have time to build an intrinsic connection to the company’s mission, strengthening their commitment to the organization. Both of these things contribute to a positive company culture.
Cons of Hiring Permanent Employees
When considering the cost of PTO, health insurance, retirement plans, taxes, training, and development, permanent employees are usually the more expensive hiring option.
Related: How to Reduce Hiring Costs
Hiring is an investment. In fact, it’s one of the most expensive activities a company engages in. When you make an offer to a permanent employee, you’re taking a greater financial risk than with a temporary worker. There’s more on the line if it doesn’t work out.
It’s more difficult in most states to fire a permanent employee, with added legal considerations, paperwork, and costs.
Identifying and attracting talent for permanent positions is typically more challenging than filling temporary roles, especially in a tight labor market. Plus, you’re up against competition from similar employers. The longer it takes to hire, the more hiring costs and labor increase.
To combat these challenges, you must continually refine your recruiting strategy to optimize the hiring process as much as possible.
Should I Hire a Temporary or Permanent Employee?
Here are some scenarios where hiring each type of worker might make sense.
You might want to hire a temporary employee if you…
- Have a short-term project that requires niche skills
- Need to beef up your workforce to meet seasonal demands
- Need coverage for a permanent employee who is on maternity or medical leave
- Want to test out a candidate before making an offer for permanent employment
- Are going through a phase of rapid expansion
You might want to hire a permanent employee if you…
- Need someone to cover a consistent, ongoing set of duties
- Require a specific skill set to achieve long-term goals
- Are incurring increasing overtime costs in a certain department or skill area
- Are looking to build your leadership team
Ultimately, making a careful analysis of your budget, timeline, required skills, and overall objectives will help you make the best decision about which type of employee to hire.