The difference between Contract and Permanent Employment

When you accept a job offer, you don't only think about salary, but also employment status, benefits, and intended career path. There are many considerations when you get a job offer. This is also different for each employee candidate.

Both contract and permanent jobs have their pros and cons. This is usually determined by career preferences and life goals. Choosing one of these two options can also be negotiated when accepting a job offer.

Difference between Contract and Permanent Work

Depending on the perspective, taking on a contract or permanent job can be advantageous and there is no need to compare it to others. This is driven by factors. In general, here are the differences between contract and permanent work based on each consideration.

1. Business risk

Generally, permanent jobs offer a sense of security compared to contract work. Even if a project gets canceled, you can still have a job and income. Unlike the case with contract work that can be terminated when the project is cancelled.

Knowing the risk of uncertainty from work with work contracts encourages you to continue to spend time maintaining relationships. If you do well and are respected in your current industry, it shouldn't be difficult to find a new job even if your contract expires.

2. Goals and lifestyle

Contract work offers greater flexibility and freedom. For example, when you can choose a contract assignment based on the job of interest, not on the authority of the boss or manager. You can also select projects based on time, scope of cooperation, and co-workers.

However, the nature of project-based contract work often limits a person's access to long-term development and career advancement opportunities like a full-time employee. In addition, many organizations prefer to do internal promotions and will give priority to permanent employees.

For those of you who have started a family and plan to own a home, a sustainable source of income provides a sense of security. This will provide greater loan opportunities from banks. You may get paid time off if you have worked for a certain period of time.

3. Market conditions

If the labor market is strong or stable, contract work is less risky. Less likely to terminate the project prematurely. Even if it does, there will be more opportunities to secure a job because more jobs are available.

It's also important to understand how much demand there is for the skills you have. Consider the current market situation and predict the future for long-term contracts. Fields such as IT development & security, data, IT, or project services are some of the skills most needed in the technology industry.

4. Salary and compensation

When comparing the differences in earning potential, consider setup costs such as company stability and getting relevant insurance. You also need to consider the time and cost of managing payroll, taxes, and retirement. Take into account the value of paid leave entitlements and other inaccessible benefits when contracting.

As outlined, the contract allows you to rest longer. When choosing a contract or permanent role, it is also important to assess whether you can meet your obligations and financial goals. A common practice in contracting is to set aside a third of income for an emergency fund.

5. Administration and taxation

For someone who is an expert in either field, you are usually wanted by companies in your industry. However, contract work also provides opportunities to sharpen skills and work in a variety of sectors. This allows you to broaden your experience and possibly gain new skills in other industries.

You are free to choose the skills you want to further develop in other industries, allowing you to increase your CV and marketability for future jobs. It can also be part of your story when explaining job gaps to potential employers.

When the contract period expires, the employer can choose to extend the contract for a specified period of time if agreed. The company also has the authority to change the status of a full-time employee if only temporarily to a permanent position or terminate the contract when the job has been completed.

If you need work flexibility or are looking for a quick career change job, contract work can be a great option. You could learn a new skill or work in a completely different industry. In the end, everyone's needs and goals are different so the decision is yours.