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HCMWorks Insights

What is the Difference Between Permanent, Temporary and Contract Work?

Posted by Julia Fournier on 6 Sep 2019

To beat the shortage in skilled workers it’s likely that your organization has begun to create an agile and flexible workforce - making use of the highly-skilled and growing number of contingent workers.

Unfortunately, however, a large number of organizations are struggling to classify their workers properly. Many managers lack the necessary knowledge and time needed to fully understand the difference between permanent and the various groups of non-permanent workers.

Generally speaking, there are three categories of workers that your company can work with - permanent, temporary and contract workers. While many companies separate workers into two groups, permanent employees and non-permanent workers, there are significant differences between all of these groups of workers.

In fact, referring to temporary workers as contractors or the other way round could lead to issues for your business. That’s why it’s incredibly important that you get the description of your workers correct, and that you have complete clarity into the type of position they are filling in your organization.

So, what exactly is the difference between permanent, temporary and contract workers, and how can you ensure your company is managing its mixed workforce correctly? We explain all in this blog.

Permanent

A permanent employee is someone that works with your company on a permanent employee contract. Permanent work also includes fixed-term contracts, where the employee is paid through the employer’s payroll.

Permanent workers are eligible for employee benefits, such as paid vacations, sick days, bonuses and a wide range of other perks that are given to permanent employees as part of an employer’s workforce retention strategy.

Temporary

Temporary workers are generally provided to your company through either a staffing agency or a human capital firm. These workers are employees to the staffing agency, but classified as a temporary worker for your organization.

A temporary worker will receive an hourly wage from the staffing company, as well as potential benefits such as vacation, health insurance at retirement plans - but your business will not be responsible for any of these.

Since there is a contract of services for an agreed hourly rate, temporary workers must be paid overtime when applicable.

Contract

While temporary workers and contract workers are both part of the contingent workforce, which makes up the wider gig economy, there are significant differences between these classifications of workers.

Unlike temporary workers who are paid an hourly rate, true contract workers (independent contractors)are self-employed and should be paid a flat amount by a company for the completion of a specific project or pre-determined deliverable.

These workers should be able to choose their own hours and can work from where they want, whether that be at their employer’s office, home, or a location of their choosing. They are responsible for calculating and paying their own taxes.

Unlike temporary workers, independent contractors usually do not fill out timesheets and are paid for the work they do, not the time they work. That means they are responsible for delivering a product or service by a specific deadline and shouldn’t be paid any extra no matter how many hours they spend working on it.

How to manage a mixed workforce

If you are in the procurement or HR department of a large organization, it’s highly likely that you are responsible for the management of your company’s workforce. However, managing a mixed workforce is highly complex - and it’s unlikely you either have the resources or expertise to do so successfully.

In fact, here at HCMWorks, most of the contingent workforce management programs that we see are disorganized - leading to inefficient practices, expensive errors, a lack of visibility and control, fragmented process, poor hiring choices and much more.

A managed services provider (MSP) with expertise in the contingent workforce, however, will give you all the tools and knowledge your company needs to streamline the management of your contingent workforce supply chain.

This will allow your organization to have complete visibility and control into your workforce, allowing you to hit those workforce targets. Not only that, but a proper contingent workforce management strategy will help you to improve compliance, significantly reduce costs, save wasted time and implement a clear human capital strategy that empowers your company’s growth.

Are you looking to gain more visibility into your entire workforce, both contingent and permanent, but don’t know where to start? Contact HCMWorks today and find out how our workforce advisory and management solutions can revolutionize your company.

> How Are You Managing Your Contingent Workforce?

Tags: Contingent Workforce

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