Contracting Vs. Direct Hire

For many professionals the decision whether to be a consultant (contractor) or a full-time employee (direct hire) is a difficult one. There are benefits and drawbacks to each choice.  We have identified the details of each option to help you with this decision.

Consulting

Companies hire consultants for a myriad of reasons. Primarily, consultants are hired to perform highly specialized work that requires a skill set that they do not possess within their full time headcount. With the pace of technological advances it is difficult for companies to retain full time people who have experience on the cutting edge of technology. Additionally, companies hire a consultant to do work that is project specific. Such engagements are for the initial implementation of a new technology or an upgrade from an older technology to a newer version. For such project based work it is difficult for companies to justify carrying full time headcount.

Pros

• Flexibility: Consultants enjoy the flexibility of owning their own business and are often highly independent. They typically go from project to project and can often choose what kind of work they'd like to perform. With this option, they can more easily stay on the cutting edge of technology.
  
  
• Diverse Experience: Consultants have more exposure to different technologies and companies. Due to the nature of consulting, there is no limit to who, what, where and when he/she will be involved with the latest technology. This is an advantage over specialized skills that may become obsolete.
  
  
• Increased Hourly Rate: Over the years, due to the high demand for technical expertise and their specialized knowledge, consultants have enjoyed a steady growth of their hourly rate. This trend will probably last for some time to come.
  
• Tax Benefits: Consultants also have the option to benefit from the tax laws specific to those who are self employed (1099 or Incorporated).

Cons

• Instability: Since the majority of contract work is project specific, there is a likely completion date thus ending employment.  Consultants are typically the first people cut in departmental downsizing.  Finally, steady work is dependent on the markets demand for the specific set.  While there is never a guarantee of steady employment, there is less
  
  
• Lack of Benefits: Consultants do not share the benefits of full-time employees.  These benefits include Paid Holidays, Paid Personal/Vacation Days, Health/Dental/Life Insurance, 401K or Retirement plan, and employee stock purchase plans.

Fulltime

Simply put, full time employees are hired by companies to satisfy long term skill needs in their business. These skills are typically the core skills needed to provide the product or service a company offers.

Pros

• Job security: When a company hires a person full time it is typically a core skill for their business they will need for the long term. Seniority at a company is usually one of the primary factors taken into consideration when headcount reductions are being considered.  
  
  
• Advancement: Full time employment with a company typically offers some career options and potential for advancement within the ranks of the company not available to consultants.
   
• Benefits: the full time employee will typically be able to participate in any paid Holidays, paid personal/vacation days, health/dental/life insurance, 401K or retirement plan, and employee stock purchase plans.
  
  

Cons

• Dependence: The primary drawback to becoming a full-time employee of one company is that your success in the company is highly influenced by the success of the company as a whole. A company experiencing minimal success typically cannot offer the career path many look for as a full time employee.
  
  
• Outdated Skills:  While possessing a specialized skill set can be an advantage, it can also be a detriment if the skill becomes outdated, outsourced or obsolete. Often, a full-time position focuses on a narrow skill set that may loose its demand in the marketplace.