Permanent Employee vs. Contract Employees: Main Differences

By Indeed Editorial Team

Updated 21 October 2022 | Published 27 September 2021

Updated 21 October 2022

Published 27 September 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Most organisations have several types of employees, such as full-time, part-time, permanent and contract employees. Each of these can offer unique benefits for professionals. Thoroughly understanding what each category entails can help you determine which employment type is the most suitable for you. In this article, we look at the definition and differences between permanent employee vs contract employee, discuss the advantages of each and look at other employment types you may consider.

What is the definition of a permanent employee and a contract employee?

A permanent employee works for a company and is receives payment from them. Permanent employees work until they're terminated, laid off, retire or voluntarily leave the role. A permanent employee might work part-time or full-time. Permanent employees are either paid an hourly pay or a salary and may receive pay weekly, biweekly or monthly. On top of a fixed salary, permanent employees may receive a variable performance bonus. Permanent employees frequently get benefit packages from their employers. However, these packages may change depending on whether they're full- or part-time employees.

An organisation may hire contract professionals for a certain project or duration for a specified cost. They're also known as independent contractors, contract workers, freelancers or work-for-hire personnel. Employers usually hire contract employees for their skills and speciality in a particular field, such as writing or drawing. Contract employees are often recruited for a short-term assignment for a set salary they may receive weekly, biweekly, monthly or when the job is done. Contract employees aren't company employees but instead self-employed individuals who own their own firm and frequently work for more than one firm at the same time.

Read more: What Is A Contract Employee vs. A Regular Employee?

Permanent employee vs. contract employee

A contract employee is not the same as a permanent employee. Both of these types of employees differ in many ways. Outlined below are the differences between permanent employee vs contract employee:

Benefits

Benefits like health insurance and paid time off are generally available to permanent workers. Contract employees don't get such benefits because they're not corporate hires. Contract employees are self-employed and usually provide their own insurance and take care of their taxes.

Read more: Types of Employee Benefits

Company resources

Permanent employees typically work in office settings. The employer of permanent employees tends to set aside a budget and provide office supplies, equipment and tools. Alternatively, contract employees usually work remotely from home and supply their own equipment, such as computers, laptops, printers and other office supplies.

Hours

Permanent workers often work a defined amount of hours and have a set working routine. This can be either full-time or part-time, depending on the employment contract. Contract employees typically have more freedom. They can choose their own hours and schedule as long as their output matches the demands of the organisation.

Related: Part-Time vs. Full-Time Employment: What Are the Key Differences?

Time off

Permanent workers, particularly those who work full-time, receive paid time off for holidays. The paid-time-off also applies to sick, personal, vacation, maternity or paternity leave. Contract employees don't get this same privilege unless specifically stated in their contract.

Related: Breaking Into Full-Time Work with A Contract Background

Is being a contract employee better than being a permanent employee?

There's no fixed answer on which path is better. Ultimately, it comes down to your personal preferences and circumstances. To help you better choose between the two paths, we discuss the advantages of each:

Benefits of being a contract employee:

Outlined below are some benefits of working as a contract employee:

Ability to come up with your own timetable

Unless you're employed on a contract basis for a specified hourly position inside an office setting, you can generally pick your own hours and may have a more flexible schedule. This is appealing to carers, individuals who have several jobs, those seeking more work-life balance or those who just desire flexible work hours. Be mindful that as a contract employee, you may still have deadlines to meet, but you're not obligated to use a time clock system.

Independence to select projects that appeal to you

As a contract employee, you've got the freedom to select the projects you want to do as well as the firms for whom you work. You can choose projects that are strictly in line with your career passion and aspirations. As you pursue contract work, you may also gather experience across different sectors or develop a specialised speciality within your own skill set.

Ability to work for numerous organisations at the same time

Contract employees have the option of working for numerous companies at the same time. Because of the flexibility of this type of employment, contract employees may perform numerous jobs at once more easily than full-time employees. As such, you may garner more exposure and experience in different organisational and industry settings.

Opportunity to earn a higher hourly income

Contract employees frequently earn a more attractive hourly salary than full-time employees due to a lack of benefits and shorter job periods. Contractors can also provide specific skills to fill a need in an organisation promptly. The time sensitivity of contract employees' work often serves as a premium.

Benefits of being a permanent employee

In contrast, here are some of the benefits of working as a permanent employee:

More job stability

When you take a permanent position, you're assured employment from the firm. Once a contract expires, you can work constantly in your job inside the business rather than start searching for a new project. Full-time employment with guaranteed labour provides more security to accommodate certain lifestyles.

More consistent income

Permanent employees receive a guaranteed compensation. This makes budgeting and planning your finances easier over the course of a year. You can count on a steady monthly income until something unforeseen happens to impair your capacity to work.

Related: How To Negotiate Salary

Stable benefits

The perks that come with the work are one of the most appealing aspects of selecting a permanent career. Companies, in addition to paid time off, provide health care plans that the company partially or entirely funds. Companies also offer other benefits to full-time employees such as subsidised facilities, insurance and transport options.

Access to office tools and on-the-job training

Permanent employees have the advantage of getting the essential tools for their duties. Working permanently for a firm also enables you to take advantage of the advanced on-the-job training and professional development possibilities. Your employer may compensate you for attending seminars and conferences that can help you develop your career by expanding your knowledge and abilities.

Other types of employees

A firm may recruit a variety of staff based on its budget, projects and workflow requirements. The following are the most prevalent employment classifications:

  • Full-time employees: Employers manage wages, benefits and responsibility for full-time employees. These professionals typically work standard hours.

  • Part-time employees: Part-time employees work fewer hours than full-time employees. Most businesses pay part-time staff and withhold the required taxes, and it's up to the firm whether to provide benefits to part-time employees.

  • Seasonal employees: During the busiest seasons of the year, businesses frequently hire seasonal employees on either a full-time or a part-time basis. It's the hiring company's obligation to document, begin payroll and ensure safe working conditions.

  • Temporary employees: Employers may recruit temporary workers in non-permanent roles for reasons other than the time of year. Temporary employees are frequently not eligible for benefits and might work full or part-time.

  • Contingent employees: Contingent workers are temporary personnel that fill a particular demand and include freelancers, consultants and independent contractors.

  • Leased employees: Leased employees are working full-time for businesses. They're classified as workers by leasing businesses and as such, they're responsible for payroll and other administrative responsibilities.

  • Interns: Interns frequently aim to learn or gain credits in exchange for their time. If an intern performs tasks that help the firm, the corporation may most likely categorise them as part-time or full-time workers based on the number of hours they work.

Read more: 5 Common Types of Employment and How They're Different

Is a contractor a permanent employee?

A contractor is a type of contract employee. These professionals are self-employed with autonomy and freedom. Typically, this professional doesn't get benefits such as paid time off or health insurance. A permanent employee works for a corporation and receives monetary and non-monetary remuneration in exchange for adhering to the organisation's policies and working towards the organisational goals. As such, a contractor is not a permanent employee.

Companies may recruit contractors for technical or creative jobs. The following are some of the most common fields performed by contract workers:

  • Application design and development

  • Legal consultancy

  • Public relations

  • Researcher

  • Virtual administrative assistance

  • Writing, copywriting and editing

  • Video game design and development

  • Social media marketing and management

  • Online teaching

  • Transcription

  • Web design and development

  • Photography

  • Search engine optimisation

  • Data entry

  • Graphic design

  • Online sales


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