A Guide To Contract Staff: Definition, Benefits and Examples

What are contract workers? A contract worker, also known as an independent contractor or 1099 employee (based on the 1099 tax form they receive), is an individual who enters into a contractual agreement with a business in order to provide a service in exchange for a fee.

Contract Staffing & What You Must Know

Contract staff vs salaried employees

You should have a basic understanding of the distinction between salaried employees and contract staff, whether you’re deciding what kinds of jobs to pursue or are on a company’s hiring team. Someone’s employment classification is influenced by both the nature of their work and their relationship with the organization. The following are the main distinctions between salaried employees and contract workers:


Employees who are paid a full-time salary are entitled to benefits like pension plans, health insurance, paid time off, workers’ compensation, and disability payments. Even part-time workers are eligible for some or all of these advantages. Because they are self-employed and their work is focused on finishing important tasks rather than their ongoing relationship with the company, contract employees typically do not have access to these benefits.


Contract workers commonly submit a 1099 tax form as independent contractors, whereas salaried workers submit W2s. Employers who hire salaried workers are accountable for deducting and contributing to their employees’ tax payments as well as social security, Medicare, and other company tax obligations.


Employees who are paid a salary receive a set pay rate, which determines how much they make annually. Contract employees can decide on an hourly rate for a specific period of time or accept a lump sum payment in exchange for a specific service.


Businesses offer salaried workers training and onboarding to assist them in becoming familiar with how to perform their jobs at that particular company. Contract employees require much less extensive onboarding because they are already skilled workers with their own methods and tools for completing work.


In terms of how they carry out their duties, contractors are subject to very little oversight. Although the business that hired them might offer suggestions and ask for changes to the finished product, the contractor is typically in charge of when, where, and how they complete a task. Regardless of the quality of the work they produce, salaried employees may be subject to internal reviews of how they perform their duties and the tools or methods they must use.

Job security and length of employment

When a company hires a contract worker, they establish specific conditions of employment based on the anticipated length of their work. There is no assurance for the contract worker that they will continue to work for the company after the contract expires. If they continue to meet their employers’ expectations, salaried employees anticipate remaining employed by the company indefinitely.

What does contract staff mean?

Those who are self-employed and sell their services to employers on a contract basis are referred to as contract staff. At the beginning of their employment, contractors negotiate a set amount of time and pay rate for their work with businesses. While some contractors work concurrently with several client companies, others focus solely on one company for the duration of a project. Contract employees are legally their own employers, so they are in charge of their own tax withholdings. Additionally, they exercise a great deal of autonomy in how they complete their work.

Disadvantages of hiring contract staff

While having contract employees on your team has many benefits, there are also a few drawbacks to take into account before making the decision to look for a contract employee to hire. Some of the common disadvantages are:

Lack of consistency

It can be challenging to maintain consistent standards in the work of contract employees because they are typically short-term or temporary workers. You might not be able to duplicate a contractor’s work if you hire another contract worker if they decide not to renew their contract for a future project.

Communication challenges

Communication may be difficult because contract workers may not even be present on the same premises as the rest of your team. Contract employees’ independence from their employer also causes them to interact with the rest of their team less. While some contract workers work independently and provide frequent updates, others may be more communicative and only check in with others when absolutely necessary.

Decreased loyalty

Short-term, part-time contract positions may result in a workforce that is less devoted and committed. A contractor who serves more than one client won’t be able to give one company top priority, and they are under no obligation to stay on as employees of the company after their contract has expired. Additionally, they spend less time with their coworkers, which can limit their opportunities to foster loyalty and trust among them.

Legal considerations

Advantages of hiring contract staff

Contract workers have a number of distinct advantages over traditional salaried or hourly workers that they can offer a business. The following are some of the top advantages of adding contract employees to a team:


Businesses have a great deal of flexibility over their workforce when they hire contract workers to complete specific projects. They can decide not to renew the contracts of independent contractors who weren’t a good fit while extending the contracts of those who got along well with their team. You can easily hire new contractors as a project develops and changes without having to reorganize internal responsibilities.

Fast turnaround

Employing contract workers enables businesses to quickly launch new initiatives and products. Building a team of full-time workers and preparing them to achieve a new objective can take a lot of time and money. To increase production, expand quickly, and meet deadlines, you can quickly hire qualified contract workers.

You can set strict deadlines without worrying about rising labor costs because contract workers aren’t constrained by a set number of hours per week and aren’t eligible for overtime pay.


It can be simpler to assign tasks to team members based on their priority when you have contract employees on your team. When you have access to contract workers who complete jobs as they are assigned, you can assign tasks quickly and have a timeline for when they will be completed. Contract workers can handle tasks that are outside the scope of other employees’ responsibilities and resolve conflicts over who is in charge of handling an increased workload.


Hiring contract workers may be the best option if you need access to highly specialized skills, knowledge, or equipment for a project. Employing industry experts full-time can be expensive, and it might not be worth it if you don’t plan to need them in that capacity for an extended period of time. You can access specialized knowledge and resources by working with a specialist on a contract basis without having to make a direct investment.

Low overhead

Hiring contract staff typically has lower startup costs than hiring full-time staff because companies don’t train them or provide benefits. Despite the fact that their hourly rate may be higher, contract workers are not guaranteed a full-time salary or other benefits. Paying a flat rate rather than hiring someone on a part-time or full-time basis as a salaried employee is much more cost-effective if your project only needs them for a few hours per week from a particular role.

Types of contract staff

Businesses can add two main categories of contract workers to their permanent workforce: Although both kinds of contract workers are employed on a temporary or project-basis, they do differ in certain key ways:

Independent contractors

Contract employees known as independent contractors are parties to a direct agreement with a client company. They agree on their roles and compensation with each company, and they are entirely responsible for their own work and tax obligations.

Agency temps

When should businesses hire contract staff?

If you are aware that your team requires additional assistance, you should think about whether contract workers or regular employees would better meet your requirements. There are a few crucial circumstances where using contract workers is especially beneficial:

Completing project-based goals

Employing contract workers can be the best option when working on a project with a clear start and finish date. Contract workers don’t anticipate continuing to work after finishing their portion of a project, in contrast to salaried employees who need a commitment beyond the project’s end. As a result, you can focus everyone’s efforts on achieving a clearly defined goal and set reasonable expectations.

Expanding and scaling operations

Contract workers can help you meet production demands if your business is rapidly growing while you build the internal infrastructure of the organization. You can hire contract workers to fill roles in your company to meet immediate demand, then switch to a full-time workforce once you have the systems in place to support it. This makes it simpler to test the effects of new workflows and initiatives before implementing new company policies and reorganizing your organization.

Improving current practices

A contract-based consultant can give your team crucial insights to enhance current workplace behaviors by providing an outside perspective. Employing contract workers to provide an unbiased viewpoint on various team members’ performance facilitates improvement and aids in aligning staff workflows with best practices in the industry.

Training employees

The best people to train current employees and give them new skills are contract employees. The current workforce might not have the tools necessary to adapt as a company changes. Without making significant staffing changes or commitments, you can transform your current team by hiring contract employees to serve as mentors and trainers.

When should businesses hire temporary workers from an agency?

A temporary employee from an agency might be the answer you need if your team needs more support but you aren’t interested in looking for the ideal contract for the job or committing to a full-time employee. The following are some situations where hiring temporary workers is ideal:

Covering empty roles

There are many positions in businesses that are crucial to its operation. In the event that a worker leaves, you’ll need to hire someone to fill the void while you look for a replacement. Until you find a permanent solution, temporary employees from an agency can arrive at work immediately and assume urgent duties.

Fulfilling administrative duties

Regardless of the employer or industry, temp agencies frequently focus on matching workers with administrative roles that have comparatively uniform requirements. The temp agency will match you with a qualified individual who is familiar with how to carry out those objectives if you let them know what tasks you need covered.

Filling seasonal roles

An agency can assist you in finding seasonal workers if you know that you will only require additional assistance for a brief period of time. By doing this, the company can reduce the amount of paperwork associated with new hires while maintaining a committed group of seasonal employees.


What is the difference between a contract employee and a regular employee?

An individual or organization that is compensated to provide a service is referred to as an independent contractor and is classified by the IRS as a 1099 employee. Examples include contractors, medical professionals, attorneys, etc.

What are the benefits of a contract employee?

An employee is paid a salary and receives benefits from a company in exchange for adhering to its rules and showing loyalty. An independent worker with flexibility and autonomy who does not receive benefits like health insurance or paid time off is referred to as a contractor.

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