Full-Time vs Contract Workers at Your Services Firm
Success for a services organization hinges on making the right hiring decisions. Your services firm can set itself up for consistent success by making the right choices in who to hire, what skills to look for during the process, and when to choose between full-time employees and contract work.
Balancing Full-Time vs. Contractor
Services organizations depend on healthy project margins to ensure profitability and support consistent growth over time. One of the most effective ways to improve project margins is to reduce the amount of time and money spent on poorly utilized full-time workers. When an employee spends an excessive amount of time on non-billable tasks and downtime, his or her duties may be best fulfilled by a contract worker. Using resources who are hired on a project-by-project basis can greatly decrease the amount of non-billable time across an organization.
However, full-time employees still have an important role to play in every services firm. Your organization will need to determine what roles and responsibilities necessitate full-time work and which do not. With the right balance, your full-time employees will have improved utilization rates without being overworked while contract workers will be consistently leveraged without slowing down the workflow.
Assessing Workforce Responsibilities
When considering whether you should add another full-time employee to your team, review these factors:
- The Amount of Extra Hours – Calculate the amount of project hours that are not being regularly fulfilled by your current team size and determine if a full-time employee or regular contractor will be the best choice.
- Impact on Existing Employee Workload – Will another full-time employee have a negative impact on the utilization rates of other employees due to project reassignments? Or will their presence improve resource allocation and prevent burnout?
- Possibilities for Turnover – Having contractors who specifically work on only a few non-repeating assignments or provide very specialized skills can prevent hiring full-time workers who will not be consistently needed in the near future, leading to turnover.
- Total Annual Hours – In the United States, the IRS dictates independent contractors cannot work more than 1,040 hours of work annually. If you expect a contract worker to supply more than this amount, a full-time employee may be best.
- Potential for Competitor Work – Work that involves highly sensitive information may be best for full-time employees. Contractors could provide services for competitors, leading to mistrust regarding information they access, whether it is a legitimate concern or not.
If you are not confident that hiring a new full-time employee will be the right next step for your services firm, move toward contract work. Freelance workers can provide agility in responding to new projects and provide specialized skills as they are needed.
Harnessing Distributed Employees
Services firms are leveraging contract work more than ever by effectively collaborating online with skilled workers around the world. Leveraging a distributed workforce can help firms find the right workers for the right projects. The larger the pool of potential resources, the more accurately you can match tasks with resources, rather than depending on who is located nearby and immediately available.
Effective project and resource management can keep relationships with freelancers healthy so that they can be contracted and utilized as needed. When used appropriately, these workers will help your business stay on target and consistently deliver the level of work your clients expect while still keeping your team at the right size and your utilization rates healthy over the long term.
Read “The Rise of the Remote Worker in the Digital Age.”