The cost of hiring a permanent employee rises every year. Beyond bonuses or salary increases, companies are also faced with increasing costs across the board.
On average, a family of four now costs an employer over $25,000 a year through an employer sponsored PPO. And, according to Dice, nearly 39% of full-time IT professionals planned to make a job-switch this year. These combined with limited H1B visas (application limits were met for the H1B in 5 days in 2016), mean that finding permanent software engineers or developers is increasingly difficult and expensive.
While there are many benefits to hiring permanent employees: company buy-in, commitment, brand ambassadors, stability, training for the long term – there are also significant reasons why companies, particularly in tech, are choosing to hire temp employees.
Skills Training:
Time and time again, we hear from computer science graduates and experienced tech professionals alike, that technology based positions are primarily meritocratic. You can code, or you can’t. You can show your previous work experience, or you can’t. Employers are able to use these hard skills to immediately integrate an employee into their teams without much need for training on the technical side. While company culture and overall vision can be taught or absorbed, the functioning part of the role is already in place.
Try Before You Buy:
From a resume, you can check off required skills or industry experience that your company desires. From a coding challenge, you can evaluate key technical skills. But what happens if your perfect candidate is a whiz through the entire interview process but isn’t the right fit? Contracts provide companies with “try before you buy”. Companies want to keep engaged contractors on as full time employees, but the contract period gives companies (and candidates!) the opportunity to work with each other before a permanent commitment is made.
Employer Costs:
The type of contract (1099, W2, Corp-to-Corp) can also affect the cost burden can have on an employer. In certain cases, employers pay independent contractors a higher wage, but don’t have to deal with the cost or time of dealing with employer taxes (federal, state, unemployment, etc.) or benefits.
Visas:
Talented engineers come from all over the world. But hiring these employees on a permanent basis can be challenging when visas are applied for and snatched up in a less than a week. Short term contracts can be easier to negotiate than trying to apply for and pay for working visas.
Time:
It can take several weeks to hire a permanent, full time employee. If the role is difficult to fill, months can go by without an employee with the technical knowledge to fill the void. This costs the company money & time. Typically, contractors are able to apply, interview & start working in less than three weeks.
