Why Large Companies Prefer Hiring Contractors vs. Permanent Employees
Aug
2
2017
Independent contractors are the wave of the future for the US. This article does a great job at explaining the benefits of contract hiring. Conduuit's Lone Eagle™ workforce offers an answer to your contract needs. Free to post and free to hire!
Here at Profiles, about 75% of our clients are Fortune 250 companies, and people who approach me looking for a job are always surprised that these clients prefer to hire contractors over direct hires (full-time roles).
I guess people assume that big companies can “afford” to hire their employees immediately, but that’s not why they prefer contractors; it actually has to do with the cost to employ someone full-time.
Full-time employees are very expensive to a company. Let’s say a company hires you for $50,000 in a permanent position, it actually costs them almost 50% more to employ you. Let me break it down.
True Cost of Hire:
• $50,000 for a base salary
• $7,500-12,000 in benefits (based on packages and PTO)
• $3,825 in Social Security and Medicare Taxes
• $3,000 in Federal Unemployment Tax
• $2,500 (estimated) in State Unemployment Tax
TOTAL: Approx $70,000
(not even including overhead: computer, phone, heat, building, paper, pens, training, etc.)
Taxes and Headcount
Did you know that companies are required to match your social security and medicare tax dollar for dollar? It’s expensive to hire a person as a full-time employee; this could contribute to the fact that the US unemployment rate is steadily 7.9%. [1]
And then there’s the dreaded word, “headcount”. When dealing with any public company, it is critical that they prove to their investors that they have maximum productivity using the least amount of employees. This is because employees are considered the most expensive cost to any company, and the most risk.
Low-Cost Option = Contracting
Therefore, a way for a company to get around this is to hire long-term contractors. By contacting a professional, a staffing and recruiting agency like Profiles takes on the risk, finances their benefits and matches all taxes.
Contract to Hire Possibility
As a recruiter, I often explain to job seekers that working as a long-term contract is a great way to break into a large company. Our contract positions often convert to full-time, direct hire roles. It allows for each side the chance to make sure it’s the right fit, and allows the contractor to shine in a competitive job field.
In summary, as you’re looking for your next dream job and targeting major corporations, consider working on a contract basis. It may be your window to opportunity.