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Contractors vs permanent employees - which is better?

One business area where contracting has had a huge impact is our own com-puter industry. Today companies are well versed in hiring and managing short and long term contractors and this role is a way of life for many professionals.

But what are the differences, from both the employer's and employee's perspective? Is there a certain type of person who wants to contract, or a certain type of role that is ideally suited to being filled by a non-permanent employee?

Stuart James has been an SAP contractor for seven years, having previously held perm-anent roles in management positions both here and overseas. In his opinion there were con- flicting emotions when taking the decision to go contracting.

"On the one hand it's exciting to be in charge of your own destiny, but at the same time you're nervous about the uncertainty of getting employment. If I had a young family I wouldn't think of it, unless I had other security."

Some of the factors to be taken into consideration include providing for your own superannuation, salary continuance should you fall sick, training and annual leave. Interestingly, James made the point that a contractor, "needs discipline to plan for and to take annual leave. The temptation is to say 'I'm losing money', but you can't afford to do this. You need to put money aside, even notionally, to cater for a break."

This is especially so because many contractors work longer hours than they would otherwise do, not only because the work needs to be done but because they, in Stuart's words, "like to feel that we deliver value for money". Daily rates are common, so the actual hours worked do not necessarily play a factor in earning large dollars, but a professional and diligent contractor does not work to the minute.

How well are contractors treated, both by management and peers?

In Stuart's opinion there is very little difference. "In the beginning there was a little caution about who or what I was, but that dissipated very rapidly. I've faced zero animosity from my peers, and have had professional and competent management from my boss."

Angelina Woon and Paul Chapman of the Australian Stock Exchange (ASX) had a similar story to tell from the "other side of the fence". The ASX is currently developing a highly strategic and comprehensive system to a tight time schedule, and contractors are playing a significant role.

The pros & cons

"We hire contractors when we have a fixed life activity where we know we need someone for a finite period of time. Naturally we always look for the right person for the job, and may be prepared to fill a permanent position with a contractor under special circumstances, but contractors and permanent staff are always treated in the same way - in fact we challenge new employees to pick which are the contractors and which are the permanent staff."

Naturally there are some differences, other than the obvious financial ones highlighted earlier on. Paid training is provided where necessary, but the contractor is not expected to charge their daily rate whilst attending this. Obviously this training would be of a specialised nature only, otherwise why pay the premium for the contractor in the first place?

"One to three months would be the learning curve to expect from a permanent employee, whereas you expect a contractor to 'hit the ground running'."

One of the hot issues is employee termination and unfair dismissal suits. Is this any easier with contractors?

"We typically have a one week probationary period for contractors, and if there is a performance issue you can end the relationship more cleanly, but you still need to be careful that the contractor is treated fairly and professionally."

Obviously the same caution should be exercised when recruiting and interviewing contractors, with reference checking being as important as ever. If you are working with a reputable contracting company then of course you have additional safeguards and guarantees, but many high- performing contractors prefer to be in control of their own destiny, secure in the knowledge that their reputation will stand them in good stead when seeking the new role.

So, provided you have marketable skills, a good work ethic and strong self-discipline, contracting is certainly worth considering. There seems no end to the demand for good temporary staff, and with the Year 2000 issues currently so high on most sensible IT professionals' agenda, even the "older" talents of COBOL programming are in high demand.

And for certain jobs, from programming through to operations, project management and general management, contractors are a logical and cost- effective way to go.

Graham Young is the managing director and co-owner of recruitment agency Anagram Inter-national, which special-ises in the IT industry. He has 20 years of experience in various sales and management roles in the IT industry.

Anagram International

Tel (02) 9144 3499 Fax (02) 9449 5884