Earlier this summer it was announced that Google’s parent company Alphabet, who employs nearly 90,000 people, was comprised of more contract workers than direct employees for the first time. This raises a common question in the IT industry. When it comes to contract staffing or direct hire, which one is better? However, a more strategic question to ask is not which is better, but rather when each should be utilized. The answer depends on a number of factors and scenarios, which we explore below.
Consider Your True Hiring Needs
Hiring should always begin with a consideration of your overall business strategy and goals combined with the responsibilities that current and future positions will require. These are factors unique to your company. Start from scratch when considering what you want to get out of your open roles rather than copying and pasting bullet items from past job postings. This allows for a fresh perspective when considering which type of talent is the best for your need.
Use a Defining Statement
At the onset of the hiring process, attempt to summarize your talent needs through a direct and clear statement about what is most important. Below are examples of such statements along with what type of talent solution they typically lead to and why.
“I need to find niche talent.” = Contract
Hiring for any IT role is difficult, but it’s even harder to find specialized talent. Research shows contracting is increasing in niches such as data science, Python, IoT, cybersecurity, AI, and more. These in-demand individuals have often embraced and capitalized on the gig economy, finding consulting to be more lucrative and flexible to their needs. Due to that, when you need talent for a very specialized role, contracting makes it easier to find that elusive tech pro and get them producing for your team quickly.
“I need to fill a core-capabilities role.” = Direct
When you’re hiring for a position you consider the bread and butter of your organization, it typically means you need long-term consistency in that role. Find a great direct-hire who can be instrumental in determining important processes that affect operations in their department and beyond. An interesting example of this is in the U.S. Army. Recognizing that recruiting technical talent is critical, they’ve begun a new direct-hire initiative to secure the important tech professionals they continuously need.
“I need to turn this project around quickly.” = Contract
When speed is the priority, contract labor is often the answer. Expert talent who can come in with the skills needed, requiring no training, can start producing immediately and will boost the agility of any organization. While onboarding is still necessary for contract labor, the time from hire to production is drastically shorter than that of direct hires.
“I need someone for a long-term project.” = Direct
While using contract labor for back-to-back intervals of time can work, long-term projects lasting years often benefit from the continuity that direct hires can provide. Alternatively, shorter or sporadic projects lend themselves better to contract labor, and the same goes for when you’re not sure how long a project will run and simply need to get that role initially producing.
“I need to limit my risk and expenditure as an employer.” = Contract
Hiring contract talent often means engaging with a reputable staffing firm. This means the staffing firm, not you, can take on the worries of compliance and shoulder employment risk while you simply reap the benefit of having access to talented skill sets. At the same time, contract labor means you’re not committed to a yearly salary indefinitely. This allows more control over cost and the reassessment of hiring needs at shorter intervals as IT industry market rates change. With more regulations cropping up regarding the hiring of contract talent, haphazardly diving into the arena alone can be dangerous.
“I need to grow my company.” = Both
This may be a more general statement than those above, but it’s still a common objective for business leaders and requires both types of talent. Direct hires can be your leaders in key roles, those who set examples for others, provide mentorship, and create the core of your culture. At the same time, younger generations of technical talent who greatly value the flexibility of consulting can best be harnessed through contracting roles. Future growth depends on finding the right mix for you.
IT Contract Staffing vs. Direct Hire
Ultimately, there is no blanket answer to the contract staffing vs. direct hire debate. Yet, it’s necessary to understand there’s a reason an uber-style hiring model is the future of IT employment. More and more tech pros are becoming contractors, but businesses lag in their adoption of contract hires. As a result of older hiring mentalities, it’s necessary for companies to increase their usage of contract hires to better modernize and balance their workforce.
For more IT hiring insight, download the complimentary 2018 Midwest IT Salary Guide here.