Contract Staffing vs. Permanent Staffing: Which is Best for Your Business?

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Miriam Groom, VP Sales & Marketing
Miriam Groom

31 May 2023 • Estimated reading time : 9 mins

In today’s competitive business environment, companies must navigate the complexities of finding the right talent to drive growth and success. One critical decision organizations face is choosing between contract staffing and permanent staffing to meet their unique needs and objectives. 

This article aims to help businesses make informed decisions by outlining the advantages and disadvantages of both staffing types, highlighting the factors to consider when choosing between them, and providing examples of when to use each approach. 

We begin by defining contract staffing and permanent staffing and briefly explaining their key differences.

What is contract staffing ?

Contract Staffing, also known as temporary or contingent staffing, refers to the practice of hiring employees on a short-term, project-based, or seasonal basis. 

These employees work for a specified period, typically ranging from a few weeks to several months, or until the completion of a project. They may be employed directly by the company or through a third-party staffing agency

Contract staffing is particularly popular in industries where workloads fluctuate, or where specialized skills are required for a specific project or task.

What is permanent staffing ?

Permanent Staffing, on the other hand, involves hiring full-time employees who are expected to work for the company indefinitely. 

These employees receive a comprehensive compensation package, including salary, benefits, and job security. They are typically more integrated into the company culture and participate in company-wide initiatives, such as training and development programs. 

Permanent staffing is a common approach for organizations seeking long-term stability, as well as those focused on fostering a strong company culture and building a cohesive workforce.

What are the key differences between contract and permanent staffing ?

The key differences between contract staffing and permanent staffing lie in the duration of employment, the level of integration into the company, and the nature of the employment relationship. 

While contract staff work for a fixed term and may have limited engagement with the company’s culture, permanent staff are employed indefinitely and are often more deeply involved in the organization’s day-to-day operations. 

The choice between contract and permanent staffing ultimately depends on a company’s unique needs, goals, and circumstances, which will be explored further in the subsequent sections of this article.

What are the advantages and disadvantages of contract staffing ?

Contract staffing offers several advantages to businesses, including flexibility and adaptability. 

Companies can quickly adjust their workforce size in response to fluctuating workloads or changing business needs, making contract staffing particularly beneficial in industries with seasonal demands or during periods of uncertainty. This ability to scale the workforce up or down as required enables organizations to operate more efficiently and effectively. 

Another advantage of contract staffing is its cost-effectiveness. Businesses typically only pay for the work completed by contract staff and are not responsible for providing benefits such as health insurance, paid leave, and retirement contributions. Furthermore, the costs associated with hiring and onboarding contract staff are often lower, as these employees usually require less training and development. 

Contract staffing also allows companies to access specialized skills and expertise on an as-needed basis, without having to commit to a long-term employment relationship. This can be especially valuable when a business requires niche expertise for a specific project or task, enabling organizations to complete projects more efficiently without hiring full-time specialists who may not be needed long-term. 

However, there are potential drawbacks to contract staffing that businesses should consider. These include a lack of loyalty among contract staff, which can lead to higher turnover rates and a decreased sense of job security; reduced employee engagement, which may hinder the development of strong working relationships and a cohesive workforce; and a short-term focus, as contract staff are typically hired to address immediate needs and may not be involved in long-term strategic planning or decision-making. 

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Advantages and Disadvantages of Permanent Staffing

Permanent staffing offers long-term stability and commitment, which can be an advantage for businesses seeking to build a strong foundation for growth and success. 

Full-time employees often have a greater sense of job security, leading to increased dedication and loyalty to the company. This long-term commitment can translate into a workforce that is more focused on achieving the organization’s goals and objectives, as employees are more likely to feel invested in the company’s future. 

Furthermore, permanent staffing fosters employee engagement and a strong company culture. Full-time employees are more likely to be immersed in the organization’s values, norms, and practices, which can contribute to a unified and cohesive workforce. This heightened sense of belonging and engagement can lead to increased productivity, collaboration, and innovation within the company. Additionally, permanent staffing allows businesses to develop and retain top talent, as they can invest in employee training, career development, and advancement opportunities. 

However, there are some potential drawbacks to permanent staffing, including higher costs, reduced flexibility, and the potential for complacency. Employing full-time staff typically involves higher expenses, such as salaries, benefits, and training costs. Permanent staffing can limit a company’s ability to adapt quickly to changing business needs, as it may be more challenging to scale the workforce up or down in response to fluctuations in demand. 

Finally, the sense of job security associated with permanent employment could potentially lead to complacency among employees, negatively impacting productivity and innovation.

Factors to Consider When Choosing Between Contract and Permanent Staffing

When choosing between contract and permanent staffing, businesses should carefully consider several factors, including budget and financial considerations. Companies must evaluate their financial resources and determine the most cost-effective staffing solution for their unique circumstances. 

While contract staffing may offer short-term cost savings, the long-term value of investing in a dedicated, full-time workforce should not be underestimated. Balancing immediate budget constraints with long-term financial goals is crucial in making the right staffing decision. 

Another essential factor to consider is a company’s long-term growth plans and strategic objectives. Depending on the organization’s vision for the future, permanent staff may be better suited to help achieve long-term goals, while contract staff may be more appropriate for addressing temporary needs or specialized projects. 

Companies should assess their long-term goals and the staffing solutions best suited to support these objectives. Company culture and values also play a significant role in choosing between contract and permanent staffing. Organizations with a strong company culture and a focus on employee engagement may find it beneficial to invest in permanent staff who can fully immerse themselves in the company’s values and contribute to a cohesive, collaborative work environment. On the other hand, businesses that prioritize agility and adaptability may find that contract staffing better aligns with their values and operational approach. 

Lastly, businesses should consider industry trends and economic conditions, as well as legal and regulatory considerations, when making staffing decisions. Economic fluctuations and changes in the competitive landscape may impact staffing needs, making it essential for companies to remain adaptable and responsive.

Additionally, businesses should be aware of any legal and regulatory requirements specific to their industry or region that may influence the decision between contract and permanent staffing options. 

Examples of When to Use Contract Staffing

Contract staffing is an excellent solution for businesses with short-term projects or temporary workforce needs. This approach allows companies to employ skilled professionals for a limited duration without long-term commitment, ensuring that projects are completed efficiently while maintaining the flexibility to scale the workforce according to business requirements. Seasonal demand and fluctuating workloads can also be effectively managed through contract staffing, as businesses can adjust their workforce size as needed.

When specialized skills or expertise are necessary for a specific task or project, contract staffing enables companies to engage niche professionals to complete the work without entering into a long-term employment relationship. This provides businesses with access to valuable knowledge and skills for the task at hand while maintaining a lean workforce.

Furthermore, contract staffing can serve as a trial period, or contract-to-hire, allowing organizations to evaluate a candidate’s fit and performance before offering permanent employment. This strategy reduces the risks associated with hiring full-time staff and ensures that the candidate is well-suited to the organization’s needs and culture.

Examples of When to Use Permanent Staffing

Permanent staffing is an excellent option for businesses seeking to fill roles related to their ongoing operations and core functions. Investing in full-time employees ensures stability and continuity within the organization, enabling consistent execution of essential tasks and responsibilities. As a result, a reliable workforce is established, dedicated to accomplishing the organization’s long-term goals and objectives.

A crucial aspect of permanent staffing is its role in building and maintaining a robust company culture. Full-time employees are more likely to embody and engage with the organization’s values and practices, fostering a sense of belonging that can increase productivity, collaboration, and innovation. Moreover, permanent staffing is vital for businesses with long-term growth and expansion plans, as it supports the development and retention of top talent.

Investing in employee training, career development, and advancement opportunities enables companies to create a strong talent pipeline to support their growth objectives. Retaining top performers through permanent staffing contributes significantly to the organization’s overall success, making it a valuable staffing strategy for businesses with long-term aspirations.


In conclusion, both contract and permanent staffing offer distinct advantages and drawbacks that businesses must carefully weigh when making hiring decisions. Contract staffing provides flexibility, adaptability, cost-effectiveness, and access to specialized skills, making it ideal for short-term projects or fluctuating workloads. Conversely, permanent staffing ensures long-term stability, employee engagement, and the ability to establish and maintain a strong company culture, all of which support growth and success.

Ultimately, the optimal staffing strategy for a business will depend on its unique needs, goals, and circumstances. It is crucial for organizations to carefully evaluate their staffing requirements and select the approach that best aligns with their objectives, financial resources, and company culture. By consistently assessing their staffing needs and adapting their strategy as needed, businesses can effectively leverage their human resources to achieve their goals and maintain a competitive edge in today’s ever-changing business landscape.

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Miriam Groom, VP Sales & Marketing
Miriam Groom

Miriam Groom is a nationally renowned Industrial & Organizational Therapist and HR Strategist specializing in strategic and innovative talent management & workforce transformation strategies that are highly employee-centric.