Ask The Mentors

Do you have a question about







Exit Strategy?

Contract Personnel vs. Staff

I have mainly used contract personnel due to the unstable nature of my industry, however, what are the benefits between contractors vs. staff?

1 Answer

Hi Alan. What's your industry as this may actually have a bearing on the answer. However, the pros and cons of contract vs employed staff in my opinion generally are: CONTRACT STAFF PROS: You’re not obligated to them if there is a change in circumstance. They could provide their own tools and insurance. Contractors may be available at the drop of a hat to fit in additional work, whereas employees may not be so freely available if you need additional work. Contractors may already be trained in the role. If there is a decrease in the workload, you’re not obligated to pay them for a set number of hours. You can pay contractors on a ‘project’ basis for an outcome, rather than an hourly rate. Contracting is often a specialised service which means you’ll get somebody with higher qualifications and experience. CONTRACT STAFF CONS: Depending on the nature of the work they may be deemed by the ATO to be employees even when they’re engaged as contractors, this means that you’re obligated to take care of their PAYG and SGC. They may not take to training and using your business methods so well if they have a ‘running their own business’ mindset. You may lose some control over how the work is to be performed. They could get other work and not have time to fit you in, leaving you in the lurch. The hourly rate for a contractor is generally higher than an employer, and you may or may not still be responsible for PAYG and SGC. If contractors come and go from project to project, you may not have the same continuity of work. Contractors may not feel part of the team like employees do, leaving them less invested in the work. EMPLOYED STAFF PROS: You can train them into your business and they’ll become more part of the team. Employees more likely to create a good culture and working environment within the business. They have more of a commitment to you. Most employees want to feel like they’re part of something and if you are inclusive in your management and leadership style, many employees will flourish with additional responsibility and feeling like they’re part of something bigger than them. Hourly rate is usually less than a contractor, although you will be responsible for PAYG and SGC. You can easily expand the employee’s work load with different tasks within the business to take some of the load off you. You have complete control over how the work is to be performed. Employees are comforted by the guaranteed income and hours so can be more committed to your business. You’re more likely to invest in professional development with an employee, leading to more engagement and loyalty by the employee. EMPLOYED STAFF CONS: Depending on the circumstances you may be stuck with an employee who is not a good fit for your business. Some staff feel entitled and are only there for the payday, taking everything they can get out of you, and aren’t fully committed to your vision. There may be intensive training required to get employees up to speed. If there are cash flow issues, employees will still expect to be paid and you can’t put in a payment arrangement like you can with suppliers. If you’ve hired employees on a PPT or FT basis and there’s a decrease in the workload, you are still obligated to pay them the committed hours. You may be obliged to pay entitlements or penalties. You’ll be responsible for insurance, training, and tools for the job. I hope that helps. Kind regards, Sarah Stein.

Sign In to answer