At one point in time, when a person was hired as a permanent employee it meant that person would spend their whole career with the same company and did not have to fear being fired if they met expectations and kept up with their workload. However, in a world of mergers, acquisitions, and occasional financial crises, no one should view their job as 100% secure all the time.
Even so, when a company extends a permanent full-time employment offer to an individual, it is typically understood by both parties that if things go according to plan, the individual will be an employee for the long-term. Long-term in today's market means staying at a job longer than the national average, which, as of 2020, is 4.2 years.
The benefit of hiring a full-time permanent employee is that person is completely a part of your team. They are recognized as a staff member, a team player, responsible for serving extra in time of crisis, and they receive all the perks of other permanent employees. The best time to hire a person as a permanent employee is when a hiring manager can justify the need for the person who does not have a foreseeable term limit. Hiring people as permanent employees means the company is taking on the additional overhead costs that come with hiring a permanent employee.
At the end of the day, if the hiring manager has the budget and longevity of the need to bring on a person as a permanent employee, they should. This also puts ease on the person being hired knowing that the company believes in them for the long haul.
Hiring a contractor to work for a company is similar to hiring an electrician to install new wiring in one's house. Once the electrician is done, they leave, and hopefully, they do not have to come back to fix anything. Often the electrician is paid a premium hourly rate because they are certified, taking on the risk of getting shocked, won't interfere with the ability to accomplish other household chores, and they can complete the project faster than likely would have otherwise. Likewise, the timing of when a company should hire a technical resource as a contractor often revolves around the temporary nature of their need. Short-term projects, like implementing a new HCM, may require hiring contractors or an outsourced team of contractors to complete the back-end configuration before training the end-users.
The benefit of contractors is that they tend to be experts in their field and although their hourly rate may seem high they often are able to complete things quicker and cheaper than if an internal employee took the responsibility on their own. In ideal situations, outside contractors will not cause daily business productivity to slow, whereas if a permanent employee took on the responsibility, a certain business process could come to a halt. If the hiring manager is able to answer yes to the temporary nature of the need and is looking for a person with a special set of skills, then it is likely they should hire a contractor.
Bringing on a person on a contract-to-hire basis is like getting to test drive a car before purchasing. When buying a car, a person will often do research and calculate the cost of the make and model they want before going to the dealer to test drive the vehicle. In a similar manner, hiring managers interview and review candidates before extending an offer to the person they believe is the best fit. No matter how much research a person does about their dream car, no one can know for certain that they will actually buy the car without doing an appropriate test drive.
Hiring a person on a contract-to-hire basis is effectively a long test drive for the company and the employee. Managers get real-life examples to see how a person responds in various corporate situations and if the person is able to maintain the workload. The individual gets to see if the company does truly possess the work-life balance they boast about and if they click with the manager's leadership style. Hiring a person on a contract-to-hire basis can allow a company to shrink its interview process timeline and have a person on-site sooner. If the contract portion works out well, then the company avoids a hindrance to business flow. If the contract is completed, but either party decides not to move forward, the company still has coverage during the time of the contract.
Finally, if a company concludes during the contract period that a person is not the proper fit, they are able to move forward by bringing on another person and do not lose any production or additional overhead costs. If a hiring manager needs to fill an open position fast and does not want to take on the additional overhead burden of an annual salary employee, then hiring on a contract-to-hire term is probably the best fit.