Contractual Employment: Why Choose a Contract

So you’re looking for your dream job and you might have found it; there’s one snag though, it’s a contract, not a permanent position. You were hoping for the stability that will come with a permanent role and you don’t want to be in the same position in six months again looking for another job once your contract has come to an end. This is exactly why you need to know the pros and cons of contractual work. In many cases, contractual work can be just as rewarding, if not more rewarding than permanent roles.

What is a Contract?

A traditional contract offers employees the ability to work under the same or similar conditions as a freelancer would; depending on the needs of the business. The employee may be required to work on location or have the flexibility to work from home. The contract may stipulate that the developer will work for the employer for a specific amount of time such as six or twelve months. The employee will be paid at an agreed upon hourly rate and no benefits will be offered.

What is a Fixed Term Contract?

A fixed term contract means that your job will commence and end on the dates stipulated in the contract or once the project in question has been completed. Companies may offer contracts for several reasons; to cover maternity leave, to cover sick leave or to cover seasonal projects. The employee will draw a salary in the same way as a permanent employee would.

The Benefits of Contracts for Employers

For companies themselves, there are many benefits to hiring staff on a contractual basis, whether on a traditional or fixed term basis. For starters, if the developer’s skills fall within a very niche area which the company rarely works in, it may be wasteful to employ a permanent developer who may well be left with nothing to do once the project is finished. For this reason, contracts also aid businesses in more accurately planning budgets and allocating resources. Even more, the reason for companies to consider hiring developers under contracts is so that they have the opportunity to give the new staff member a thorough trial before committing to permanent employment.

The Benefits of Contracts for Employees

The assumption that permanent employment is a better arrangement for employees than a contract is a pretty old-fashioned train of thought. Many developers, actually prefer the additional flexibility a fixed term contract offers. One of the biggest differences is your payment and package structure; many companies have a compulsory retirement plan and medical aid schemes with predetermined financial service providers. Needless to say, this doesn’t work out perfectly for everyone.

For those on fixed-term contracts, the hourly rate often makes up for the lack of subsidised benefits. For example; permanent employment and even traditional contracts rarely offer overtime, so while the additional hours are often to be expected, there is no additional pay. A fixed term contract, however, pays an hourly rate, so you can reap the benefits of putting in extra hours when they are needed.

There’s no doubt how quickly software changes, the importance of keeping up to date with industry trends and continued learning is best not underestimated. Contractual employment may offer the perfect solution, preventing stagnation. A fresh environment, new people and different projects offer immense potential for growth while keeping boredom at bay.

Disadvantages of Contracts for Employers

When a great role is advertised as a contract, some of the more talented developers may be discouraged and rather search in favour of permanent positions which offer more job security. The perceived lack of job security of a contract may also lead employees to be less loyal and likely to seek out greener pastures. This isn’t always the case though and if employees are happy and can see the benefits of working for a particular company, they will be loyal.

While employees may be more likely to move around, companies also need to spend more time in search of new staff. Due to the time spent in search of staff, the overall productivity of the business may suffer. The onboarding of new staff may also take up valuable resources. If these processes are smooth and seamless, it really shouldn’t be a concern.

Employees hired under fixed-term contracts appear to come at a higher cost to the company due to the hourly rate and the lack of benefits offered to them, in truth the costs do balance out though.

One of the biggest disadvantages of contract work by far is that each time an employee leaves, there is a loss of both intellectual property along with legacy information. If, however, companies are able to offer a great work environment, tech stack and work-life balance, the company need not become a revolving door for ambitious developers.

Disadvantages of Contracts for Employees

When you accept a contract you need to see it as just that, a temporary form of employment. Often employees are lucky; they may excel so their contracts are extended or they are asked to stay on as permanent staff. This is not always the case though and if you are the type of developer who craves the security of a permanent role, a six-month contract may not be the right choice for you. Without the certainty of regular income, planning ahead becomes a bit more tricky.

When you are working on a traditional contract for an hourly rate, it’s pretty important to bear in mind that sick leave and holiday leave come directly out of your pocket due to your hourly rate. No one ever plans to be sick, it just happens so it’s important to factor in before you take off a week to recover from a common cold. At least you can plan around holidays though. On the other hand, a fixed term contract will offer paid public holidays but then again you won’t be paid for working overtime.

As with any form of leave, a fixed term contract rarely allows you to enjoy the same benefits as permanent employees. You will have to maintain your own retirement funds, unemployment fund and medical aid. It’s a bit of extra admin which you will have to take care of in your own time but if you are financially savvy this could really work in your favour.

Ultimately, if you haven’t tried it before, it’s absolutely worth considering contractual work as an employment solution. Everything has its pitfalls but there are so many benefits and many companies may be open to negotiation when it comes to the finer details of the contract. At e-Merge, we will give you options and help you find the right thing for you whether its contractual work or not. Get in touch with us.

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