Why Use Long-Term Contractors

Why are some of the top companies in the world using long-term contractors instead of hiring FT employees? It has been happening often enough and for long enough that I am ready to call it a trend.

Different companies have different motives:

  • Some do it because they have the budget but not the headcount. It may end up costing a bit more, but it comes out of a different bucket and they don’t have to wait weeks, months or even quarters to justify creating a new position.
  • Some do it for faster time-to-hire. Contractors will often bypass the HR group on their way into an organization. They meet or speak with the key stakeholders and quicker decisions are made.
  • Some do it for faster time-to-contribution. Contractors are generally expected to bring the full tool set with them to work on day one.
  • Some are open to contractors if it gives them access to a hard-to-find skill. The IC market is not huge, but there are a lot of specialists out there. If you need to simply bring a skill onto the team (expertise in a particular tool, etc.) you can access an additional talent pool if you consider contractors.
  • Some can’t pay competitive salaries. In a lot of cases the organization is resistant to adjusting the salary range for “Analyst II” to the digital measurement pay scale. They insist on treating the 3-year accounting analyst the same as the 3-year web analyst. After the position has been open for a while and the pain becomes great, the team starts looking for creative alternatives.

What’s in it for the contractor? Why would they want to be an “interim” resource if they are going to be there long-term anyway?

  • More money. You can make more on a dollar per hour basis as a contractor — especially if you don’t need a lot of health & welfare benefits.
  • Less politics. Sometime it helps to be an outsider.
  • New challenges. If you take a new job every year because you get bored easily you are considered a flake and you hurt your market value. If you take a new contract every year you are simply a contractor.
  • You can try before you buy. After contracting somewhere for 6-12 months you know what you are getting into when they offer you a FT position.
  • Access to more positions. There are more and more companies that are motivated by the reasons listed above… if you are not hung up on being called a consultant then you can open yourself up to more opportunities.

It is not a cure-all for either the talent or the organization, but there are clearly many situations when both sides benefit with this type of relationship. These types of opportunities are keeping our team busy these days and we have actually started hiring consultants and paying them health benefits so that we can accommodate these needs for our clients.

If you check out the jobs page on our website you can see how many long-term contracts have come through our office in the past few months.


0 thoughts on “Why Use Long-Term Contractors

  1. My concern with this is the tax liability. In most of the contract cases, these companies expect the contractor to be on-site. The truth is that if you can’t provide a legitimate reason they must be on-site, but want them there, the IRS considers them an employee and the company is liable for all the benefits including taxes (which is what the IRS really cares about). Even tougher is the fact that both parties involved will get penalized harshly. So far, the tech world has gotten away with this, but I imagine the IRS will start to go after this tax revenue as the government starts needing more money to clean up its mess. I wrote about this a little over a week ago – http://webanalyticsconsultant.net/is-it-really-a-contract/

  2. This is a great point Dustin. It is the reason why we are phasing out all 1099 (Independent Contractor) relationships. Each improperly classified 1099 is a $5k fine for the employer. We are now employing all of our new contractors – either on an hourly basis or as FT employees of IQ Workforce. Another workaround is when the contractor incorporates him/herself. An incorporated entity (LLC or S-Corp) can be paid as a subcontractor without any risk of improper tax classification.

    Thanks for the comment.

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