Contracting VS Permanent : The Pros & Cons of Permanent Employment

SAP, Oracle and IT Professionals have two options to bring the money in. Permanent employment or Contracting – What is the best option for me? To make the right decision to suit your needs and lifestyle, make sure you are clued up on both the benefits and downfalls of each. Having already discussed the pros and cons of contracting, lets now go on to discuss a Consultant’s alternative method of employment- permanent.

The most obvious difference between Contracting ad Permanent employment is that Permanent is…well permanent, and contracting is temporary. Typically contractors earn substantially more money per hour worked, whereas permanent employees get a whole host of additional benefits. It is either job security or these benefits that normally determine a  Consultant’s decision to go perm or contract (depending on which option suits their lifestyle.)

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The Pros of Permanent Employment

Job Security & Stability

Permanent employment, in almost all cases, gives substantially more job security than in contracting. This is because there are high costs involved with dismissing permanent employees and is therefore a deterrent for employers to do so. With a Permanent  position, you will be completely aware of your monthly income, number of day’s holiday remaining, sick pay entitlements and any additional benefits that are within your employment package making your lifestyle easier to plan as a whole. This leads nicely onto the next point:

A guaranteed Income

As a permanent  Consultant, your take home pay will be the same every month until you receive a pay rise, you get promoted, or you move companies. Knowing you financial situation over the long term can be hugely beneficial for planning for the future. In addition, if you have a family and aim to have good work-life balance than it is generally easier to achieve this if you are a permanent employee.

Certification & Training

Companies are often willing to pay you through certification and training -They see it as a long term investment. For the employee, you are both advancing your career and also getting training/certification at no cost. For example, SAP Success Factors is a skill that is very hard to learn at the moment. Certification and training for the module is hard to come by as you can only obtain it if a company puts you forward. An individual cannot just seek SAP SF training and certification independently. (Correct at time of writing: Nov 2013)

Permanent Package Benefits 

It is important to note that all companies have their own differing benefit packages in place for their permanent staff. When joining a new company, you can negotiate additional benefits as part of the package and/or a higher base salary – although this isn’t always possible. Below are a number of benefits that can complement an employee’s salary to make permanent SAP, Oracle and IT roles more appealing.

  • Private Healthcare

One of the most common advantages of permanent employment is company paid healthcare. This can include general health, life, dental, vision amongst others. You may also be able get healthcare to cover your family. Depending on the company, they may also offer some forms of insurance as well, such as holiday insurance.

  • Annual Holiday & Sick Pay

In the UK, you are entitled to 5.6 weeks holiday pay. A permanent employee working 5 days a week is therefore entitled to a minimum of 28 days holiday paid per year. This can include bank holidays however. Typically, employees are also entitled to a number of sick days paid in full, although this varies from company to company.

  • Retirement

Another significant advantage to permanent employment is the retirement benefits. Often employers incorporate a pension scheme into the package where they will either pay a percentage of your salary into your own private pension, or will match your personal contribution to it.

Now you’ve heard the benefits, what are the downfalls?

The Downfalls of Permanent  Employment

Monetary

It goes without saying that the biggest drawback of permanent employment is the lower salaries in comparison to the very high contractual rates. This is where you should weigh up the option of stability vs. earning a lot of money (with no certainty.) Obviously the better the job market and the more experience you have, contracting becomes less and less risky.

Additionally, Permanent Consultants may have to wait a long time for pay increases, and when they happen, may not be higher than the level of inflation. This has been apparent over the last few years; however with the job market evidently booming again, this should be less of an issue. (Click for SAP UK Permanent job market conditions.) What are noticeable are salaries and packages becoming tighter than ever. Cost reductions seem to be the biggest priority among our clients who are willing to rule out candidates for being £1 over budget. Our experience in the market show a cap at 10% in salary hikes when moving companies as well.

This lack of flexibility from clients is, in our opinion, the reason for the apparent shift where more and more permanent SAP consultants are moving over to contracting. This isn’t just happening in certain modules of SAP, it seems to be happening across the board.

Bench Marked Salaries

Although our clients are sometimes willing to pay big for very niche skills, such as BPC, generally they use level benchmarking for salaries meaning that those that boast niche skills but only a limited amount of experience are suffering. Client’s benchmark based on the number of years’ experience you have as opposed to the specific skill set. As a result, you will reap the rewards of niche skills providing you have plenty of industry experience to coincide – otherwise your salary will match consultants specialised in more generic modules that have a similar number of years’ experience.

Less Control

As an employee of an organisation, you have a far lower level of control over what technology to implement and at times can be stuck doing less interesting work than contractors. (Unless of course you are extremely senior.)

The company decides on the projects that are going on, what implementations/roll outs are happening and not you. A Contractor works only on projects that they want to whereas a Permanent employee completes the work that aids the goals of the organisation over the long term.

Make Your Decision Based On What You Are Looking To Achieve

In our opinion, Permanent Employment is a more suitable for those that want to be settled. Contracting is for those that are happy to move around more and in exchange for higher pay rates. The points above are not exhaustive, so please feel free to add you opinions, experience and advice using the comment box below.

To discuss your specific  job requirements, give us a call on +44 (0) 1206 212101.

Have a look at our current permanent and contract jobs

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