Should You Hire a Contract Recruiter Or a Permanent Recruiter?

Where to Start When Hiring a Recruiter

It’s an exciting time in a company’s journey when you’re considering hiring your first recruiter. And if you’re familiar with working with recruiters but reconsidering your hiring strategy is what led you here, it’s the right time to reconsider. Recruitment is experiencing an evolution. It has been for a while but the recent few years have been more of a revolution. 

Today, more than ever before, the options available to hire dedicated recruitment support makes it possible for almost any business. And with how difficult finding talent has become, it’s increasingly a need for businesses of any size. While there are a lot of options to hire a recruiter, the first step is deciding whether you should hire a contract recruiter or a permanent recruiter. Eventually, most companies will need a permanent recruiter but permanent hires are a commitment, a permanent cost and require a consistent workload to justify. 

Before you’re certain it’s time, it’s important to explore your options.

Key Differences: Contract Recruiter vs. Permanent Recruiter

The type of recruiter to bring into your team, all depends on the team you’re trying to build. Recruitment is a nuanced profession, whether you’re hiring a contract recruiter or hiring a permanent recruiter. 

Think about your existing team and the one you’re trying to build. Sometimes it’s simple. You need a team of customer support agents to work in your office in one city— volume hiring.  Location, role, industry, legalities, seniority - all the same. But when your business is opening a new office, in a new market for the first time, not so simple. Now you have a new region you don’t have a network in, you don’t know the legalities of, you need ten different roles in ten different fields and they’re all at different seniority levels. 

Would you hire a permanent recruiter or a contract recruiter for these scenarios? Let’s break it down into a few simple points for when which is right: 

When You Should Hire A Contract Recruiter

• You’re hiring for a one-time recruitment project. For example, building a new team or opening an office in a new country 

• You need specialized skills for a short period of time. Specialized skills in these areas should be considered:

• Industry and/or field (e.g. software developers in fintech industry)

• Locations (e.g. you’re expanding into a new country you’ve never hired in)

• Seniority (e.g. executive hires)

• You’re experiencing a hiring spike and you either know it won't, or you’re not certain it will stay consistently high

• You are hiring seasonal employees

• You’re not ready to invest in the additional operational costs (new integrations, subscriptions, etc.) 

• You have, or don’t need, a recruitment strategy. You just need hiring execution

When You Should Hire a Permanent Recruiter

• You have a consistent volume of hiring 

• Your hiring frequency is consistent

• You generally hire in one specialized field or you can rely on your recruiter to be a generalist 

• You want to invest in recruitment, including the operational costs 

• You want to build and maintain a long-term talent strategy 

Contractor vs. Employee: The Other Considerations

The Legalities of Employee Classifications

Most people understand that a contract hire is for a short duration and a permanent hire is a long-term hire. But it’s not quite that simple, and the laws certainly aren’t either.

Employee classification refers to the type of employment relationship a company has with the individual they’re “employing”. And we’re using “employing” very loosely there. A contract recruiter can be an employee, but they aren’t always. There are a variety of ways to enlist the help of a recruiter. 

Some of the key employee classifications: 

• Permanent: The company and the individual have a direct contractual relationship without an end date and the employee is entitled to all legal benefits such as medical insurance, paid time off, etc. Permanent recruiters can be employed full-time or part-time and you can contractually agree whether they are allowed to work exclusively for your company or if they can take on additional work.

• Contract: The company and the individual have a direct contractual relationship with an end date and the employee is entitled to some legal benefits. This usually excludes benefits such as medical insurance but often includes limited paid time off and social insurance. Contract recruiters can work full-time or part-time and you can contractually agree whether they are allowed to work exclusively for your company or if they can take on additional work. They are considered employees. 

• Temporary: A temp (temporary) recruiter is a term that is interchangeable with a contract recruiter.

• Independent Contractor/Consultant: The company and the individual usually have a direct contractual relationship but not always. Agreements can be made through the consultant’s registered company or through a third party. Independent consultants are not eligible for employee benefits like medical insurance, paid time off, etc. They are not required to adhere to your company's ways of working (working hours, communication styles, etc.). Essentially everything about your relationship can be negotiated. They are not employees and can work for other companies. 

• Sole Proprietor: A sole proprietorship is a type of business structure where an independent consultant operates their registered business under their own name. The company and the consultant’s company have a direct contractual relationship. There is no employment relationship and everything is dictated by the service agreement. This is the same as hiring any other company where there’s a clear service offering that you’re paying for. 

• Freelancer: Freelancers are technically also a type of independent consultant but generally they take on smaller projects (e.g. you may hire a freelance recruiter to hire one role but an independent contractor for building a new team). Freelancers often dedicate less time a day to one client than independent contractors and are very unlikely to be willing to work on-site. They are legally the same, but in practice, they refer to different ideas. 

• Self-employed: Self-employed is an umbrella term used to describe all independent consultants and freelancers.

To add another layer of complexity, these classifications are generally how they work but every country has its legal system and they’re not the same. For example, in some countries, if an independent contractor gains most of their income from one client over a certain amount of time, they’re automatically considered an employee, regardless of your agreement. In other countries, if someone is a contract employee for more than a certain amount of time, they immediately become classified as a permanent employee and they have the same legal benefits as one and again, regardless of your agreement.

You need to explore the laws in your own country to fully understand this. And if it sounds confusing and complicated, unfortunately, that’s just because it is. Even companies like Uber get it wrong and have almost faced serious legal consequences for misclassifying their drivers as independent contractors instead of employees. They didn’t, not because they were in the wrong or in the right but because the judge dismissed their case after two different juries couldn’t come to an agreement on whether they were right or wrong. 

The Cost Efficiency Debate

There’s a big tendency to claim that contract recruiters are more cost-efficient than permanent recruiters but whether or not it is in practice, is truly more of a debate. Understanding the cost of recruitment can be a challenge. At the surface level, it’s easy to see why this claim is made and yes, if your need is truly for a contract recruiter then it may well be but if you’re misclassifying your own need, it may also not be.

Contract recruiters are cost-efficient in the sense that they aren’t a long-term investment. However, contract recruiters do generally charge more per hour than a permanent recruiter would. Therefore, if you find yourself making use of contract recruiters frequently, you’re not saving money or you’re saving a lot of money. And you’re paying more for a less reliable type of support. 

In contrast, contractors don’t require permanent equipment provision or access to systems and platforms. But they do also require a time investment to onboard as permanent recruiters do, but your return on that investment isn’t quite as rewarding. 

The truth of it is that if you choose the right type of recruiter for your business needs, that will be what will be most cost-efficient. Hiring a contract recruiter when you need a permanent recruiter or vice versa, is where you start spending money efficiently. 

Contractors tend to charge more (if you hire locally but less if you hire from low-cost regions). Longer-term having hired a full-time recruiter when you don’t have the volume or consistency in hiring you expected. The cost of onboarding someone for a short-term return, etc. Also consider the type of salary structure: contractors often work on incentives which can be equal to agency fees.

One Isn’t Better Than The Other

And that’s the best part. Companies go through phases and changes and regardless of where you’re at in your journey, if you need a recruiter, you’re growing and evolving. And that’s always exciting. Even if it feels overwhelming right now. That’s why a contract recruiter or a permanent recruiter not being better than the other is a great thing. If you’re hiring your fifth employee or your 50,000th employee, you don’t have to handle it on your own.

Get Started: How to Hire a Recruiter​