Employee or Contractor? Don’t make an Expensive Mistake

Sunday, January 24, 2016, AM | 1 Comment

Organizations have many options today when determining how to staff a project team. You can use existing employees, hire a new employee, use contract resources, or you may just decide to outsource all or portions of the project.

These choices are the result of advances in communications and technology, as well as the desire of companies to be more flexible in their hiring options.

Acquiring project team members is one of the project management processes that are part of “Managing Staff“.

Perhaps the place to start is to understand whether there are employees available in the timeframe needed for your project.

Employee-vs-Independent-Contractor

It usually doesn’t make sense to hire contract people when you have employees that are available and otherwise would have nothing to do (assuming the employees have “close-enough” skills).

Let’s assume that you do not have current employees available to staff your new project.

Let’s also say you work for an organization that is open to utilizing contractors or hiring employees depending on the needs of the specific project.

Let’s look at some of the criteria that you can use to make the hiring decision.

  • Urgency

    If you need to get started very quickly, you may need to hire contractors.

    In most organizations you can put a call out to the local contract companies and be interviewing people in a couple days.

    Most organizations can’t (and don’t want to) hire employees that quickly.

  • Length of the need

    If you need a resource for a short, finite duration, then a contractor may be the way to go.

    You can bring them in for a short contract and then release them when the work is done.

    If you have a full-time, long-term need, an employee would make more sense.

  • Strategic vs. non-strategic work

    Many companies identify certain types of work to be more strategic that other types.

    For instance, many companies chose to staff the senior project positions, like the project manager, with employees, and are more willing to use contract labor to assist with project team members.

  • Skills and knowledge needed

    Many companies make decisions about staff based on the type of skills needed.

    For instance, if you are moving into a new technology or new equipment, you may hire contractors that already have the expertise.

    If the skill is needed long-term you might want to transition in some employees so that they can learn the new skills before the contract staff leave.

  • Confidentiality

    Many companies chose to staff positions with employees if the project team will handle confidential or proprietary information.

    There is a sense that the information might not be confidential once the contractor leaves the company.

  • Cost

    With a contractor, you typically pay a higher hourly rate, but only for the length of time the contractor is needed.

    Employees may cost less in the short-term, but you are taking on a long-term cost commitment.

If you look at the decision criteria above, you can see that much of the answer for using employees of contractors comes down to risk.

If a project is short, it might be risky to hire an employee since you may not be sure if you can keep the employee busy long term.

If the project involves core skills to your organization, confidential information, or is strategic to your business, it may be too risky to hire a contactor.

Organizations tend to keep a leaner staff of core employees these days. The core staff stays relatively constant from year to year, while increases in workloads are staffed through contract resources.

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This column is © copyright to www.Method123.com and originally appeared in their weekly project management tip newsletter.

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  1. One Response to “Employee or Contractor? Don’t make an Expensive Mistake”

  2. By Brian on Oct 18, 2016, 10:07 am | Reply

    Theres a lot to consider when determining if you should use a contractor or employee. Cost is probably the main thing many consider but theres so much more. Thanks for sharing.

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