Contracting vs permanent job | Michael Page Indonesia

how to choose between contracting work and a permanent, full-time job

Deeply seated in our Asian culture is the perception that we need to strive towards full-time employment to be seen as responsible, full-functioning adults. Any other form of employment such as part-time, freelance or contract work seems to be perceived as unstable and somewhat less valuable.

The rise of the contract professional

This perception is gradually changing as companies worldwide are moving towards an integrated workforce model, where they are increasingly hiring more contractors and part-timers over the past few years.

In 2018, Stephane Kasriel, CEO of Upwork and co-chair of the World Economic Forum’s Council on the Future of Gender, Education and Work, said in a press release, “As skills become more specialised, companies either need to invest in reskilling to prepare workers for the jobs of tomorrow or leverage freelance professionals who are nearly twice as likely as traditional employees to proactively take reskilling upon themselves.”

Traditionally, contract employment is mainly found in the IT industry. Now, more and more sectors are moving towards an integrated workforce, employing more contractors. Deloitte’s 2019 Global Human Capital Trends study found that 33% of respondents reported extensively using alternative arrangements for IT, 25% for operations, 15% for marketing, and 15% for research and development.

While more companies are hiring more contractors, it is crucial to understand the pros and cons before quitting your full-time job and dive into contract employment. Besides the obvious benefit – having more time on your hands (to go on holiday, upskill, or look after ageing parents or children) – you get to choose the projects that interest you. Ahead, we discuss the benefits of contract employment compared to having a full-time job.

Advantages of being a contractor

1. Build your portfolio
Most companies are open to engaging contract professionals who do not have a vast amount of work experience for short-term assignments. And naturally, this situation is dependent on the type of project. Companies that hire contractors for longer-termed work, usually over six months to a year, would most likely require you to have more expertise in the specific sector. Whatever the case, you get the opportunity to buff up your portfolio as you collect different work experiences at various companies.

2. Widen your professional network
With the opportunity to work at different companies over a shorter period, you will meet different people – more people – expanding your network. The more extensive the network, the more contract opportunities. The brilliant thing is, these professional contacts are at your workplace – if you perform well at your tasks, it wouldn’t be long before they hear about it from your manager. And that will keep you at the top of their minds when they need contract staff in the future. Do keep in mind that you should be proactive and not sit quietly at your desk and expect people to notice you. Make small talk at the pantry, the lift; nothing too aggressive as that can be a turn-off for some.

3. Learn from a diverse range of organisations
The (other) beauty of being a contractor means you get to experience working for a diverse range of companies. This is a valuable and beneficial opportunity for you to observe the inner workings of various businesses, and that would add value to your experience when you move on to the next project. For instance, how family-based companies compare to small and medium-sized enterprises and multinational corporations. Also, by working on different projects, you would pick up new skills that will further improve your portfolio.

4. Builds resilience and adaptability
Moving from one company to the next also means adapting to the various work culture and processes to perform your duties. And that adds value to your professional portfolio, as employers would not be concerned about how well you can adapt. It’s another strength to highlight if you decide to switch to full-time work.

5. Trial a new job before you settle
In a way, when you work at various companies, you get to try out the role before you decide if you want to switch to a similar role in a permanent capacity. Companies are almost always on the lookout for talent. If you happen to join as a contractor during a period where they are sourcing for full-time staff, you could get an interview opportunity. If not, they might keep you in mind if you perform well. However, do not bet on that.

Disadvantages of being a contractor

While working as a contract professional may sound like a jolly ride, it comes with its drawbacks and is no walk in the park. For one, when you work on a contractual basis, you do not have the regular standing of a permanent employee. Companies can terminate contractors without documentation or recourse options, as there may not be human resource policies to follow. Also, potential employers may see contractors as being uncommitted. And it can get disorienting for contract professionals when you have to keep readjusting to new working environments after each contract term ends.

There are more factors to consider when it comes to choosing between contracting and a perm job than just the salary.

Pros and cons of contracting and permanent jobs: It is more than the money.

Advantages of having a permanent job

Most people are in a permanent position because you want a stable income, allowing you to plan for the various stages of your life – be it purchasing a new apartment, getting a pet, planning a wedding, having a kid, investing or saving up for your kid’s university fund, or retirement fund. Here are other advantages of having a full-time job:

1. Time Off: You would receive annual leave and sick leave as part of your employment package. You would be able to go on a short holiday break, get paid and not feel guilty as compared to your contracting counterparts.

2. Money Matters: As mentioned, unlike contractors, a full-timer’s salary is fixed (not including bonus payments), so you can feel secure that you would have money coming in at the end of the month. Most contractors face the issue of late payments from their clients. Naturally, full-time staff can face the risk of retrenchment, but that does not usually happen unless the company is doing poorly or facing epic losses due to economy shattering events like the COVID-19 pandemic.

3. Working Hours: Permanent staff have specified work hours, so clients and colleagues, in ordinary circumstances, will not be calling you after office hours and on weekends. While contractors can set certain work hours for themselves, they usually have to remain contactable to not miss out on any opportunities.

4. Career Advancement: Another positive factor of being a full-time staff is that the company will view you as a long-term talent investment. And because of that, they would be more inclined to invest in your development and help you advance the career ladder.

5. Credit Card Application: This shouldn’t be a deal-breaker, but it is good to know that it is easier to apply for a credit card when the bank knows you have a full-time job. In other words, the ability to pay your bills. You can still apply for credit cards if you are self-employed. However, the process is more complicated. You would need to submit various documents to demonstrate your ability to pay back the credit owed.

Disadvantages of being a full-time staff

Compared to a contracting role, being in a permanent position doesn't give you the leeway of trying various jobs or taking on different projects. And if you don’t proactively look for a new role, you can get too comfortable in your current position. You then become stagnant in your skills and knowledge of the trends in your industry. This state of job stagnation may not sound so bad since a permanent job comes with many benefits. However, it can be damaging if you find yourself retrenched due to company losses or restructuring, or fired from your job. What you can do is to make time to upskill.

Contracting vs permanent job: What is better for you?

There isn’t a definitive answer to this question. It is about weighing the pros and cons, as it comes down to which employment type will suit your stage in life, industry and if it offers career growth. For instance, if you take care of elderly folks and require flexibility in terms of work hours, then contracting may be perfect for you. Or, if you were offered an attractive one-year contract role at a top firm in your industry, you could consider leaving your full-time job for it as it would add tremendous value to your portfolio. Seeing that it is a year-long contract, it gives you sufficient time to find another job.

If you are looking to take a break from work to figure your career path, going for short-term contract jobs that run for one to three months is a valuable way to tie over periods without full-time work. However, as stated previously, anything can happen during a contracting period. It would be best if you made sure the employment terms are favourable and that you have enough savings to sustain yourself (and your family) in the event of early termination. Also, specific industries like the technology sector are more open to contractors, so you would more likely have more contracting opportunities than other sectors.

Are you looking for contracting roles? Here are the latest job opportunities for contract professionals. If you would like to speak with a recruiter, contact us here.

Simone Wu