Full-time employee, part-time employee, or contractor? What they all mean and which one’s right for your business

Should I Hire An Employee Or Contractor? editorial illustration
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If you own or manage a small business, a big part of your job is hiring. And choosing between full-time, part-time, or contract employee is a considerable undertaking, each coming with its own pros and cons. There are many questions when considering bringing on new employees, "should i hire an employee or independent contractor?—should I hire an intern?—which employee type is right for a small business?”


Let’s shed some light on how each of these options differ and help you decide which one is right for your business. To make things easy, we’ve also included a handy flow diagram to guide your decision, so if you’re short on time, jump straight to it.

The four main types of employment

Full-time employment

A full-time employee is a permanent part of your company’s workforce. These are employees that work more than 30 hours a week at your business. They’ll also have detailed contracts that entitle them to everything from holiday to maternity leave.


Pros

  • Full-time employees can forge long-term relationships with clients, customers, and internal teams
  • They will develop institutional knowledge
  • They will likely look to forge longer-term careers within your business

Cons

  • There are more overhead costs associated with full-time employment
  • The onboarding and training process will likely be longer for full-time staff

When and why you’d hire a full-time employee

Put simply, the best time to hire a full-time employee is when you have so much work that it will keep them busy for 30-40 hours for the foreseeable future. It is also a good idea to hire full-time employees when positions require particular knowledge, specific experience, or when they’ll be working on projects that require internal collaboration and relationships.


Full-time employees can add a lot of value to your business. With more stable and structured employment, they know what to expect, so you know what to expect of them. And while it’s more expensive to hire someone full-time, you can set higher goals and more ambitious expectations than a part-time or contract worker.

Part-time employment

This is someone who will typically work at your company in a permanent position for less than 8 hours a day, or for just one or two days a week. Sometimes a company will only need a few hours each week to get the results they need. In other cases, if an employee is a busy parent or has other important commitments elsewhere it may be that they choose part-time—this is a great way of retaining top-tier talent. Either way, they’ll have access to most of the same benefits as a full-time employee.


Pros

  • Employees and employers alike have more flexibility with part-time staff
  • Businesses can save on overhead costs, compared to full-time employees
  • Possibility to retain valuable talent who wish to reduce hours due to parenthood or other commitments

Cons

  • There’s a risk that an employee may leave for a full-time opportunity—leading to greater recruiting and training costs
  • Part-time employees may not be able to foster relationships as quickly or consistently as full-time staff


When and why you’d hire a part-time employee

Hiring a part-time employee is a good choice when you’re testing expansion. You may want to start extending your opening hours or see how much revenue a part-time salesperson can bring in before committing to someone full-time.


A big benefit of hiring part-time employees is that they can fill a gap and get valuable experience at your business. And if you need extra help further on down the line, they make an excellent choice to make the transition to full-time.


Alternatively, taking a full-time employee down to part-time when necessary is a great way to ensure you don’t lose their valued experience and have to start your talent search from scratch in you have the need for their full-time skills again in the future—especially when the cost of replacing an individual employee can range from one-half to two times that employee's annual salary.

Contract employment

Freelancers or contract employees are workers that are employed on an ad-hoc or temporary basis as and when the need arises. As they’re technically self-employed, you won’t have to offer them holiday or any of the other benefits that come with part- or full-time employment at your business.


Pros

  • Businesses can access high-level skills without overhead costs like benefits, payroll, or training fees
  • Businesses can control exactly how much they’re spending, and for how long
  • Can act as a temporary solution to short-term resourcing issues, or as a probation period before hiring staff into the business permanently

Cons

  • Employees have less control over freelance employee’s availability
  • Freelancers usually charge a more expensive hourly rate

When and why you’d hire a contractor

Contractors are best when work is temporary but requires skills or experience. If you’ve got a project with a fixed timeline or are in need of specific skills only on a one-off basis, contractors are a smart way to go. “If things are great, employers can renew the contract, or they get to say, ‘You know what? Things are better than we thought, so we’re gonna bring you on as a full-time employee, if you want to do that.’ So it gives the employer some flexibility,” HR analyst Ben Eubanks explains.


If you’ve got a big project coming up, contractors can be a great way to enlist extra help without committing resources over the long term. Likewise, if you just need a bit of additional expertise then you can get it quickly without jumping through lots of unnecessary hiring hoops.

Internships and student work placement

One great way for businesses to gain more hands on deck in a cost-effective way is to hire interns or co-op students. These candidates will usually be enrolled in full-time education and looking to gain practical experience in your industry.


Pros

  • Businesses have access to a new junior talent pool that may consider applying permanently in the future
  • There are few overhead costs as businesses do not have to pay for benefits, payroll, or training
  • A cost-effective way to handle low-level or administrative tasks

Cons

  • Interns/students are unlikely to have relevant experience
  • Hours/flexibility may be limited due to educational commitments

When and why you’d hire an intern or co-op student  

When there is work available that does not require a lot of previous experience—administrative tasks or research-based projects. If your business needs a ‘helping hand’ but isn’t quite ready to hire somebody on a full-time/part-time basis or spend money on an experienced contractor, hiring an intern for a small business could be the way forward.


The biggest benefit of internships are that it they be done without spending a huge amount of money on labor, training, or overhead costs associated with onboarding. Hiring an intern is often a win-win for students and businesses alike—you get valuable help in and around your business while they get an insight into the world of work and a valuable addition to their resume. Some businesses find this type of employment so mutually beneficial that they make it an ongoing program as a means for training in their industry or fostering culture.

Should I hire a full-time employee, part-time employee, contractor, or intern?

Let's simplify things into a visual.

A graph showing the decision making process for hiring a new employee. The start says "are you hiring for growth or to keep up with demand?" If growth, ask "Will there be enough work to keep an employee busy?" if yes, full time employee. If no, part time employee. If hiring for demand, ask, "Does the role require strong internal relationships?" if yes, follow the same path as for growth. If no, ask, "are you hiring for a specialized skill set?" if yes, ask "do you need those skills on a permanent long term basis?" if yes, return to the busy work question flow. If no, hire a contractor or freelancer. If you are not hiring for a specialized skillset, ask, "does the work require a lot of experience?" if yes, contractor or freelance. If no, student or intern.
Flow chart to determine if you should hire an intern, full-time employee, part-time employee, or contractor

Make hiring easy

Now that you’ve identified what kind of role you need to hire for, the next step is getting it done.


For a small business, the logistics of hiring and onboarding a contractor or full-time employee can be tricky to navigate alone. For more information about how to onboard successfully, check out our HR solutions.  

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