The way that you structure your workforce can have a significant impact on your operating leverage, cost structure, and workplace culture – all of which determine how your company is going to perform over the long term. Having the right mix of permanent and interim hires requires aligning with your objectives and making smart decisions that give you the skills you need within the constraints you deal with.
With the US unemployment rate still near historic lows, finding and hiring great talent is still a challenge. In this article, we’ll compare permanent employees with interim employees and explore how to make the right choice between the two structures depending on the circumstances of the need you’re trying to fill.
Interim Hiring vs Permanent Hiring
Before we dive into the comparison, it’s worth defining the two options so that there is a clear delineation. Interim hiring refers to hiring someone on a temporary basis to fill a specific need. Often, these are secured with short-term contracts, and once the work has been completed, the employee is free to look for alternative work elsewhere. Permanent hiring refers to giving someone a job offer where they agree to work exclusively for you and on a range of different tasks. They become a part of your team and, ideally, will stay with you for as long as possible.
Neither structure is better than the other, and they both have different trade-offs to consider. It’s completely situational and dependent on what you’re trying to achieve.
How Do You Decide Between an Interim and a Permanent Employee?
When you’re deciding on whether you are going to hire someone as an interim employee or a permanent one, there are several considerations that you must work through. Every case is going to be different, so you need to evaluate the specific need and make the best decision according to its merit. To help you think about this decision, here are the three main assessments that you need to focus on:
Determine whether there is an ongoing need
Some work represents a once-off project that won’t be repeated once it’s been completed, whereas in other cases, it can be a recurring need that is more permanent in nature. You should determine where on this spectrum this role sits because that will contribute greatly to how you think about the employment structure.
Calculate what your budget is for the role
The funds you have available to compensate this person is also a key component because, ultimately that is the biggest constraint that you must work within. Decide whether you will have the ongoing funds to justify a permanent position or whether a project-based fee is more suitable.
Establish a realistic hiring timeframe
How soon do you need this work done? Understanding the urgency and the timelines involved can also sway this decision because interim hires can often be secured more quickly than permanent ones.
You can’t make an informed decision about the employment structure until you’ve answered these three questions. From here, you’ll then be able to weigh up the different options available to you.
The Pros and Cons of Interim Hiring
Let’s start by looking at the advantages and disadvantages that come with interim hiring. Each of these will have trade-offs that you should understand so that you can make the best choice for your specific needs.
Advantages of Interim Hiring
- Flexibility. The biggest advantage of an interim hire is that you’re not tying yourself into any long-term hiring arrangements that are difficult to get out of. Instead, you can hire solely for the work you need, which aligns directly with revenue-generating activity. This gives you agility and flexibility in terms of managing cost, and it ensures that you can match your work capacity to the demand you’re receiving. In addition, an interim hiring strategy can give you the flexibility to “try before you buy”; if an interim employee excels and is a good fit, you often have the option to hire them as permanent employees during or at the end of their contract.
- Specialized Skills. Interim hires can be much more specific than permanent hires, and that means that you can bring in narrow specialized skills that are well suited to whatever need you are encountering. By hiring specialized skills, you should get faster results and improved performance without having to go through a period of training and development. This has many advantages for urgent work where you don’t have the skills you need in-house.
- Cost-effectiveness. Interim hiring can often be more cost-effective because you are only paying for the time and effort spent on a specific project that you can plan in advance. This is in contrast to a permanent hire, which comes with fixed costs that don’t change regardless of whether the resource is being utilized or not. This should mean that it’s easier to manage costs and get the most out of your investment.
Disadvantages of Interim Hiring
- Training interim employees can be difficult. If you do need to train an interim employee, you’ll find that the cost in terms of time and money is a higher proportion of the total investment than would be for a permanent hire. This is because when the employee leaves, you lose the benefit of all that training, and you have to start again with the next person. The lack of continuity raises the effective price.
- Interim employees tend to demand higher salaries. Because they aren’t getting the stability of a permanent job, interim hires will tend to require higher salaries on an hour-to-hour basis. If this is not managed effectively, it can affect the overall profitability of a project and change decisions as a result. This increase in cost needs to be weighed up against the other benefits to decide if it’s the right fit for your particular project or needs.
- Having a range of different employment structures divides attention. There’s a certain simplicity you get from a fully permanent staff complement that you don’t get when you have interim hires in the mix. Multiple approaches to managing and compensating employees can divide your attention and diffuse your focus if you’re not careful. It requires more maintenance in terms of the legal, psychological, cultural, and financial aspects – costs that should not be ignored.
- Interim employees might leave suddenly if they are offered a better opportunity. With an interim hire, you don’t get the loyalty you might get with a permanent team member. If they receive a better offer elsewhere, they could leave your company in an unexpected fashion, and this can impact your normal operations. You should be aware of this risk and have a plan in place to mitigate it, especially if it relates to an important component of your business.
The Pros and Cons of Permanent Hiring
Now, let’s explore the other side of the coin. Permanent hires also come with trade-offs, and you need to understand them to find a suitable solution for your current needs. Here are some of the considerations you should be aware of:
Advantages of Permanent Hiring
- It brings commitment and credibility. When someone commits to a permanent employment agreement, they are implicitly committing to the mission of the company. In exchange for job stability, you get someone who will work to advance the company’s goals, and you should be able to rely on that. This can be important when you are trying to make sustainable changes to your business and secure a consistent growth trajectory.
- It contributes to company culture and engagement. Permanent employees bring a new dimension to the workplace culture, and you can benefit from the energy, personality, and values that they bring to the table. When you make the right permanent hire, this has a significant positive effect, and when they engage with your other team members, you can work to nurture a working culture that improves morale and performance.
- It helps to solidify skill development. The knowledge and skills acquired by permanent employees have staying power because they can be transferred within the organization, and the employees themselves can use those skills in future projects. This is in stark contrast to interim hires, where the knowledge leaves when they do. As a result, permanent hires contribute to a constantly evolving internal knowledge base that can set the company up for long-term success if managed correctly.
- It makes for more effective strategic workforce planning. Permanent hires are a more predictable and effective component of a long-term plan because you know who you have to rely on, and you can plan accordingly. This allows you to be more strategic and align your future growth prospects with the talent you have on board. When utilized effectively, this can be a significant force for good as you aim to achieve your longer-term objectives.
Disadvantages of Permanent Hiring
- Permanent employees can come with extra costs. When you employ someone permanently, it’s not just the salary costs that you must cover. There are also a range of direct costs (benefits, perks, raises, etc.) and indirect costs (rent, software licenses, training, technology, etc.) that are implicated. As such, the ongoing work needs to justify these if the permanent employment is going to work. Running a nuanced cost-benefit analysis here will help to point you in the right direction.
- It can be difficult to terminate low-performing permanent employees. When you hire a permanent employee, there are elements of the employment relationship that can be a challenge to get out of. Despite poor performance, there are protocols that need to be followed to let an employee go, and that means that you aren’t as agile or flexible as you would be with an interim hire. Additionally, if you do make a poor hire and you aren’t able to terminate their employment, they can have a negative impact on the rest of the team and the working environment as a whole.
- It can be more costly and time-consuming to vet potential new hires. The costs (in terms of time and effort) involved in attracting and recruiting permanent employees can be significant because so much due diligence should be performed. You want to make the right decision because it’s challenging to reverse, and that means that you need to invest upfront to make sure you’re getting the right person.
- There is a risk of complacency with repetitive work. If you’re hiring someone permanently to do a routine set of tasks, there is a risk that the quality degrades as time goes on, and they get stuck in their ways. You need to work hard to continually provide novelty and growth potential so that work standards remain high. The culture needs to constantly be injecting energy into the environment so that the procedural tasks that can slip don’t.
How We Can Help
Here at The Renaissance Network, we help Education and Technology companies navigate the murky waters of the modern labor market, assisting with organizational strategy, permanent and interim recruitment, and compensation approaches across a variety of different contexts. If this is something that you’d like to explore, be sure to get in touch today, and let’s see how we can work together to help you optimize your organization.
