Permanent vs Contracting: Pros, Cons and Choices to be made


I’ve had numerous discussions in the past with fellow colleagues about the advantages and disadvantages of working as permanent employee of a company versus working as a contractor. I know there are a few resources out there too on the web about this topic e.g. Google = “Contractors vs Permanent employees”. This is one of the better articles on this topic.

So let me give you some context here before I start: a contractor, in this context, focuses on contractors that work in projects. The project managers, directors, consultants, business analysts, testers and QA’s, and developers of this world. Of course a lot of truth can also fit with other type of contractors but the focus is limited to this as I write.

Perm vs Contracting

I pieced this little graph together to best explain my slant on this story:

Work Type


That should be self-explanatory but let me furnish the diagram with a little bit more explanation.

If lifestyle ranks at the top of your priority list then hands down, being a full time employee of a company is a world better than being a freelance contractor. You receive holidays and should you fall ill, you’re covered. Contractors on the other hand, are not. This is probably the single biggest reason why contractors get paid more by the hour or by the day; the holiday-and-sick-days dollars paid for permanent staff is forwarded directly to the contractor. On the flip side, holidays and sick days now appear to be very expensive from the perspective of the contractor. This entire notion gives birth to one of the core assumptions every contractor must make when jumping into the game: assume good health.

Now my next 2 assumptions should be self-explanatory too. When the economic environment takes a dip, the job market takes a dip too. Of course this can impact both permanent and contract roles but the tendency here is for contractors to get squeezed out as business investment (on projects -under capex – which is usually where contractors land) dries up faster than revenues from proven business units. Who would really want to spend on growth opportunities when the environment is bad?

Some would argue that there’s no safety in permanent roles too and I certainly won’t argue judging by the scores of permanent jobs that disappeared after ’08. The mechanics are simple enough; when there’s a downturn in the business environment, revenue floors and staff disappear. The drop means less money for investments too with the rare exception of investments made to keep pace with regulatory changes (the Dodd-Frank, Basel III liquidity etc.)

So I guess this all depends on your perspective: do you want to dice it being a permanent staff where, if you’re lucky, you might even receive a redundancy payout? Or you might be real ballsy in nature and prefer the money now and chance being a contractor hoping that you won’t receive that tap on the shoulder. Horses for courses.


Ah another dimension to consider (and perhaps I should have called it something else but ‘stress’ just popped into my head).

Here’s the way I see it and of course you might see things a little bit differently. The stress employees go through depends on what type of employee you are. Both have contractually set hours of work but the tendency is for contractors to work that little bit extra as you’re only good as your last contract.

The kind of stress is different for both. Permanent staff have business-as-usual matters to deal with; activities focusing on reporting periods, production support etc. Stress for contractors on the other hand might be due to a shortfall in project funding and therefore the contractor may have to look for other options. Contract renewal could be a given for most but not for some select contractors too. And of course the nature of projects mean that contractors could be subject to some level of stress when deliverables are due.

Permanent staff have better career prospects in climbing the corporate ladder. Of course contractors give these prospects away but they can move to other business units or companies who might require their skills (my reference to ‘shifting career’).



And that’s my little spiel on this topic.

Comments? Would love to hear from you.

n.b. I used a fab new app called Zamurai to put the above diagrams together on the iPad. It’s one of the better sketching apps out there.


2 thoughts on “Permanent vs Contracting: Pros, Cons and Choices to be made

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