Contract employees versus permanent employees

Having the right talent is crucial for growing your business. However, there are many decisions you must make during the hiring process to get it right. Choosing between contract and permanent hires is a challenge many organisations face. In fact, there are multiple pros and cons for permanent and contract employees.

In this article, we break down the differences between contract and permanent hiring so you know the best route for team growth. By the end, you will have a better understanding of how to grow your team effectively for the long-term.

Jump to:

• The differences between contract and perm employees
• Why should you choose a contract hire?
• Why should you hire a permanent employee?
• How to decide between the two staffing options

What’s the difference between contract and permanent employees?

There aren't many differences between a permanent member of staff and an independent contractor in terms of how they conduct their jobs. Both can bring immense value to an employer. However, logistically, there are two main differences between permanent and temporary recruitment.

Relationship with the business

The most prominent difference between contract and permanent recruitment is their relationship with the employer.

Permanent employees are engaged exclusively by a business. This means they will complete their assigned tasks within the hours their employer sets out in their perm contract. On the other hand, contractors work as self-employed professionals or as part of an agency. Contractors work fixed-term contracts (FTCs) or on a day rate, and can decide:

• Who they work for
• What projects and assignments they want to work on
• When they want to set their working hours

Contractors do not have to work exclusively for one employer. 

Pay and benefits

Compensation packages also largely differ for permanent and contract employees. 

• A permanent employee will receive a salary and company benefits from their employer. 
• A contract worker will be paid at the market rate for the time they support a business. This might be a set number of hours or for the duration of a project.

Contractors can often expect a higher day rate than permanent hires, as interim recruitment is often considered more cost effective as you do not need to supply employee benefits. To understand the difference between permanent and contract salaries, access our 2025 salary guides.

Differences between contract and perm employees

Here is a complete list of differences between contract and permanent employees:

Contract vs permanent: What’s best for your business? 

There are a number of pros and cons to both permanent and contract recruitment. With a 25% uptick in contract recruitment in 2024, hiring temporary workers is definitely on the rise. Here is a quick overview of why you might decide to hire a contractor or a permanent employee.

Why should I choose a contractor?

Hiring a contractor gives you flexibility, speed, and specialist skills without the long-term commitment. Contractors can start quickly, require minimal onboarding, and are ideal for project-based work or covering short-term gaps. 

You'll avoid the ongoing costs of benefits, pensions, and holiday pay. Plus, you gain access to highly experienced professionals who can hit the ground running. Contract recruitment is a cost-effective way to bring in expertise exactly when and where you need it.

Why should I hire a permanent employee?

Permanent employment is ultimately how a business scales. Permanent staffing is an investment in your company’s long-term goals. Your hires should align with your company values, and become key players in your business' success. 

As your business scales, permanent employees help you manage workloads more effectively and adapt quickly to new challenges. They're embedded in your culture, making it easier to plan, delegate, and collaborate, whether you're tackling a long-term project or responding to a fast-changing brief.

How to make the final decision

Still unsure on which is the right staffing solution for your business? Try answering the following questions to help determine which option makes the most sense for your business. 

• Why do you need to hire someone? (increase resources, fill a skills gap, replace a former employee or cover for talent away on maternity)
• How much support (headcount) do you need?
• What specific skills do you require?
• How long do you need the support? (to cover a specific project or multiple assignments)
• What’s your budget?
• What level of experience do you require? (entry, mid, senior or executive)

Deciding between contract and permanent hires isn't easy, however, you'll be pleased to know we're here to help.  

Need help with contract and permanent recruitment?

Ultimately, the needs of each business will determine the right route for bringing new team members on board. However, if you're still unclear, our specialist recruitment consultants have the experience and expertise to support you through your hiring journey.

At 3Search, we have a broad range of services to help you find the best talent to help scale your business. Check out our contract recruitment and permanent recruitment services, or get in touch with a recruiter today.