Employer/Employee Benefits: Contract Work

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There are many benefits to contract work – and while none necessarily come close to the contributory benefits offered to permanent workers, many people still prefer to work on contract and forego the rewards of permanent positions to take up what some people may view as an insecure lifestyle.

Employers find this option useful when a member of staff is sick or on maternity leave, or there is a particular task to be done annually, or there is a need to streamline current processes. Usually the contract term is bound by an agreed time of six months or a year. In most cases, an hourly rate is agreed upon, and the contract worker does not expect any of the usual working benefits offered by the company to permanent employees.

Benefits of contracts for employers

Cost savings in salaries: If there is a short-term job to be done, then hiring a contract worker makes sense, particularly if the work falls in a niche area which would prove costly if you had to hire a permanent worker. Once the job is finished, remuneration will come to an end. So contract work is cost-efficient to the company.

The cost savings in employee benefits: Cost savings when engaging contract workers is considerable. Contract workers often have higher salaries than permanent staff, but as they don’t qualify for benefits such as pension, medical aid, maternity pay, holiday pay, insurance, sick leave, etc, the savings in this regard to employers is considerable. There are fewer costs with training, onboarding, and professional development.

Planning: Contract work, planned and specific, also helps an employer to more accurately plan budgets and allocate resources.

Finding value: Hiring someone for a short while is useful in getting a particular job done, but it is also useful in acting as a ‘trial run’ for that employee. If the person is very good at what they do, there is always the possibility that the employer may offer a permanent position. It can in some instances, be a way of ‘trying out’ prospective employees.

Speeding up the hiring process: Contract work requires less onerous HR processes to bring the worker on board. You can hire more quickly – the focus being purely on the task at hand, and the availability and capability of the worker to get it done. You’re not looking for a company culture fit here, or the complications of career advancement and ambition that a permanent employee might bring with them.

Keeping permanent staff confident: Flexibility in hiring, means your core staff remains secure in their positions. If contract workers are only brought in at times of crisis or for annual peak work, then your employees are not likely to feel threatened or unsettled.

Time savings with regard to training: Contract workers rarely embark on this type of working lifestyle unless they have tucked a number of years of experience under their belts. This means time is saved because it isn’t wasted on training them up for the role – they can hit the ground running.

Disadvantages of contracts for Employers:

  • Contract opportunities can be difficult to fill if the right skills are scarce in the market. If a contract has to be terminated before its conclusion, this can cause protracted legal issues for both employer and employee.
  • Finding the right people willing to fill contract positions can be time consuming, and setting up criteria within HR to handle these aspects efficiently is a critical factor in making the hiring of contract workers worthwhile.
  • A disadvantage of contract work is that each time an employee leaves, there is a loss of intellectual property, along with legacy information. They tend to take a little piece of your business and your business methods away with them. If, however, companies are able to offer a great work environment, technical skills enrichment and dynamic communication, then persuading a promising contract worker to join the company fulltime may be a useful way to add quality staff members to your team.

Benefits of contracts for Employees

Change and experience: The idea of stepping into a secure job for the rest of your life is seen by many today as old-fashioned. With burgeoning workforces, many seek benefits other than the traditional pension plans, preferring flexibility of movement, the excitement of new environments and people, and counting their wealth in terms of experience and knowledge.

An hourly rate: Being paid an hourly rate is useful because the employee is earning well, and can engage in overtime work. A higher rate of payment can mean the contract worker can handle their own private pension plans and medical aid funding of their choice and arrangement. Paid public holidays are usually included in the agreement.

Up-to-date knowledge: Contractual work offers employees the opportunity to garner up-to-date knowledge in the software arena. Every project is different and usually presents different challenges; learning to solve these is hugely beneficial to any worker looking to move forward, continually adding to their resume, and keeping intellectual value at a high earning level.

Flexibility: For some contract workers, they may be able to take on more than one job at a time, depending on their circumstances. They are also able to juggle time off to suit themselves, especially if they are working from home, or between contracts. For some people this convenience of flexibility outweighs the security of permanent employment. Greater control of hours worked, and the ability to take work on when it’s convenient, is a huge plus for those people with the skills and experience to do so.

Higher earnings: For those workers with valuable experience and skills, some employers may offer extra remuneration to assist with private pension, insurance and medical aid plans. Apart from higher remuneration in general for contract work, for the high-end contract worker there are several options that may be negotiated for his or her benefit.

The value of time: A contract’s end is not seen by the contract worker as necessarily a worrisome thing. Many plan for time out in between contracts for travel or training courses, further empowering their value. It also means that the contract worker remains more focused on their work, and often suffer less from burnout because they are able to arrange their breaks to suit their situation.

Team spirit: A contract ending can even be a relief for a worker if they have found others on their team or within their working environment to be obstructive in any way. It’s much easier to manage working relationships when you know it’s only for a short time. There’s no time to build resentments or develop serious personality clashes.

Legal protection: As a contractor you have employment rights and are still legally protected. Contract workers should know the standard employment rules for temporary and contract workers. This is important because it prevents any employer from taking advantage of the worker.

Disadvantages of contracts for Employees:

  • Without certainty of work, planning ahead can become difficult.
  • Sick leave can really hurt your pocket, because the employer is not paying you when you’re off sick – unless you have come to some agreement with the company.
  • You will have to organise and maintain your own retirement funds, insurance and medical aid. This means more focus on the admin involved. But many companies can be open to negotiation on the aspect of benefits if the contract is a year’s duration or renewed for longer. But even with some customised agreements, you are losing parental leave, disability, educational assistance and housing subsidies, etc.
  • Sometimes great friendships begin the workplace – and if you are flitting from job to job, you may be denied the opportunity to form or maintain these relationships. This loss of camaraderie and support network may leave contract workers feeling lonely and disconnected.
  • The continual job search and anxiety of finding the next position can become draining. Contract work calls upon people who are prepared to strengthen their options through continual knowledge building and a strong career drive.

Empfin Solutions – the team that keeps your team happy

We’re An Old Mutual franchise with our primary focus on advising on and servicing umbrella pension and provident funds. Always striving to be a trusted partner in facilitating financial solutions for organisations and individuals, our dedicated team of fully accredited, experienced professionals have a passion for satisfying customer needs and providing a truly client-centric service.

Find out how you can benefit at: www.empfinsolutions.co.za

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