The Difference between Permanent and Contract Employment
Businesses use different types of employees to meet various labour needs. Apart from part-time and full-time positions, one of the major differences between types of employees is those who have permanent positions versus those who do contract work.
Both types of employment have advantages and disadvantages for the worker himself or herself and their respective employers.
- Expected duration of the relationship between worker and employer
Contract work involves the hiring of a contractor, who is also called an independent contractor or contract employee. This person works for the business on a finite basis. Therefore, contract work generally has a set time frame. It means that the worker usually has an agreement with the employer to work for the duration of a particular project.
An example of this would be an employer who hires a graphic designer to work on a project-by-project basis, rather than bringing the designer on to work at the office. The contract can be for a one-time project or an agreement that allows the business to hire the designer frequently without writing a new contract each time.
Permanent employment suggests open-endedness, with no set end date. It also includes fixed-term contracts (where you will be contracted through the client/employer’s payroll).
For permanent positions, you will most likely be eligible for full employee benefits offered by the employer. Many businesses use permanent employees to form the core of their workforce and contract workers to fill in gaps or help complete unique projects.
- Hiring process
This difference regarding the process of hiring lies in the necessity of each kind of worker.
When an organisation hires a contract worker, the major focus is that worker’s specific skills and ability to perform a task.
With permanent workers, issues about growth potential and the ability to integrate into a team also play a role.
- Contract of employment
Contract workers generally sign a contract of employment that specifies certain terms including wages and duration of the job.
Permanent employees also sign employment contracts. However, they have the hope of ongoing employment.
- Effect on the worker
As mentioned earlier, contract workers usually need to be able to cover their medical insurance and retirement savings plans. However, the advantage that contract workers have is that they are free to work for numerous employers in quick succession.
They often have unique skills which allow them to earn higher wages than permanent employees. However, these permanent employees enjoy greater stability but cost their employers more in terms of benefits, training and recruitment.
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