It's no secret: the talent pool in Melbourne has become extremely competitive. IT was one of the fastest-growing industries on SEEK in 2017 with job vacancies up 22%, and since then I've noticed a huge increase in clients choosing fixed-term contracts over hourly or day rates.

The main reason for this is simple: employers want to save money.

But how is this affecting their business? Are they really getting the most bang for their buck?

Let's examine this further…

A Fixed Term Contractor

With a fixed term contract, the contractor sits on your payroll for an agreed time period, during which they accrue annual leave. It's generally a lower rate and you pay the recruitment fee up front, based on the salary.

At first, this might sound like the more cost-effective option. There's no markup, it's a fixed salary on a fixed term, and they've signed on the dotted line to serve their duties until the time is up. Perfect!

HOWEVER. The main problem here is that you're paying a lower rate in a competitive market, so it's difficult to get the top quality talent that you're looking for. You'll find that fixed-term contractors want stability, and are usually in between permanent jobs.

Don't forget the other hidden costs you'll be covering like training days, payroll taxes, workers' compensation and insurance premiums. Plus, if they leave before the length of the contract, you wear the cost of a non-refundable recruitment fee.

A Day/Hourly Rate Contractor

A study by Mavenlink found that 79% of executives believe the agility of an hourly rate contractor has a huge competitive advantage; you can simply 'plug and play'.

This type of 'plug and play' individual is an expert in their field who can hit the ground running - a big saving to your time and resources. Their aim is to optimise your business with their expertise and they've built up their rate by proving themselves in previous roles.

Now let's also consider the structure of this career choice. Say a contractor is finishing a six-month role and the after-effect of their great work is still being felt throughout the business. They leave but have to wait another month until their next position, and in this month they don't get paid a single cent. This uncertainty is the reason they charge a little extra and it's totally within their right.

So, what's the better option?

The truth is, if you want the cream of the crop in the industry, you'll have to be prepared to pay a day/hourly rate. These experts know their worth and will always prefer to work at a higher rate to balance out the risk of job uncertainty. It's a conscious career choice and their work is their reputation; if they agree to a contract they'll put in 110% from start to finish.

But, if you try to negotiate an expert contractor down in rate and into a fixed term contract, you're actually increasing the risk of them leaving early for an opportunity in line with their merit.

The day/hourly rate might seem like the more expensive option at first. But how much is it actually costing your business by compromising on quality contractors?

Give me a call on 03 8606 0393 if you need advice on hiring contract staff for an upcoming project.