Main image of article Is It Better to Hire Contractors or Full-Time Employees?

As recruiters and hiring managers know, the conversation around tech employment tends to focus on the linear process of interviewing and hiring full-time employees. But contractors (or "gig" workers) are also a huge issue; many tech professionals are afraid that companies’ use of contracted engineers and developers is hurting full-time hiring. Are those contractor fears justified?

Let’s start with contracting itself. Hiring managers know that contractors are a flexible option for completing projects, especially when the budget isn’t there to hire a full-time worker. Indeed, employee-placement service Adecco once posited in their blog that hiring budgets are the root cause of companies’ embrace of contract workers.

Many jobs also don’t have enough of a workload to justify a full-time employee; for example, if a company’s mobile app only needs an occasional tweak or bug-squash, a manager may hire a contractor to check the code out on a periodic basis, as opposed to onboarding someone to sit at a desk full-time.

As Adecco’s posting also pointed out, companies may leverage contractors in a temp-to-hire situation: “They want to make sure that a candidate has the necessary skills and is a good culture fit before employing them directly… Employee turnover is expensive – and if a contractor is terminated, the staffing agency is responsible for the unemployment costs.”

In some ways, contracting with an eye toward a full-time position is more effective than the traditional interview process, which is long and possibly unattractive to teach pros, who often don’t feel like the rigmarole of a whiteboard interview is worth their time. On paper, it’s a win-win scenario for the employer: a company gets talent, quickly, but doesn’t have to immediately offer benefits to a new contractor hire.

However, recruiters and hiring managers must remain aware of contracting’s potential downsides. A recent Wharton School paper titled ‘Is the Rise of Contract Workers Killing Upward Mobility?’ touches on this issue. It argues that contract workers are attractive to companies because they’re not a fixed cost: Instead of maintaining an employee indefinitely, a firm can bring in a contractor for a task, then allow the contract to end whenever the time is right. But that just leads to uncertainty and instability for the tech pro, including (but certainly not limited to) a lack of opportunities for promotion.

Wharton professor of management Claudine D. Gartenberg paints an unflattering picture: “This is what the American Dream is built on — upward mobility. Contract work and outsourcing, among other factors, appear to be disrupting that engine, and it is not clear what the best policy response, if any, should be.”

Whether or not more Americans are being promoted, all signals suggest that hiring as a whole is up. In fact, the number of job postings between Q1 and Q3 of 2018 and 2019 is up 45%. A combination of old technologies (cloud, virtualization) and new ones (artificial intelligence, machine learning) are breathing new life into the tech industry and the demand for professionals that are proficient in those skills is following.

If the core question is whether contractor employment hurts traditional hiring practices, the answer seems to be no: tech jobs are still being added, a healthy portion of them full-time positions. But how many people within the overall pool have the opportunity to climb to the upper-level positions they want? And what sort of impact does that have on company morale and employee effectiveness?