By Robert OWUSU (FCIB)
In the dynamic landscape of human resources (HR), contract employment has become an increasingly popular strategy for organizations to meet their staffing needs.
Furthermore, with the rise in globalization and digitalization, the organizational environment has also become more and more vigorous and fast-paced.
Due to this, it has become more difficult for employers to bring talents on board. Hence, these challenges have led organizations to rethink their staffing patterns.
If we take a look at today’s business scenario, business owners are more prone to maximize their profits and want to manage their working time efficiently to add value to the growth of the business.
No doubt that the workforce of any organization is its pillar that will make or break the business but sometimes it is necessary to hire employees who are ready to work for a short duration of time on a specific short-term project.
If this kind of short-term hiring is laid on the HRS of business, not only will it add an extra burden to increase their already piled up Key Results Area (KRA), it will also affect their smooth working processes. Thus, there comes a need for contract staffing agencies to help the business owners to tackle the problem of short-term or contract-based employment recruitment.
WHAT IS CONTRACT STAFFING
Contract staffing refers to the provision of hires for an organization by a third party based on a contractual requirement for a limited period, with the terms of the contract being decided by the hiring party and the organization (Source: – alp consulting).
In other words, contract staffing is the practice of hiring employees on a temporary basis through a contractual agreement for a specific period or project (Source: – Professional HR Services).
For example, if any business owner needs an accounting person for say three (3) months then recruiting the full time will not only add to the cost of the business but also the accountant will be liability for the business once the job of three months is completed.
To handle this kind of scenario temporary staffing plays a very important role. Therefore, a contract employee is an individual hired to perform specific tasks or projects for a predetermined period under a contractual agreement (Source: Multiplier).
CHARACTERISTICS OF CONTRACT STAFFING
Below are the key characteristics of contract staffing: –
- It is a temporary employment for fulfilling particular project requirements
- Specific roles or projects
- It is flexible in nature
- No long-term commitment is needed
- Third – party agencies are hired for the supply of manpower
- Cost-effective
- Includes specialized skills
DIFFERENCE BETWEEN CONTRACT STAFFING AND PERMANENT EMPLOYMENT
It’s essential to understand the distinctions between contract employees and permanent employees in the various aspects detailed below: –
- EMPLOYMENT STATUS AND LEGAL CONSIDERATION
Contract employees are hired on a temporary basis typically for a fixed duration or until the completion of a specific project. Permanent employees on the other hand, are hired with the expectation of an ongoing employment relationship. Contract employees are usually classified as independent contractors, which has implications for employment laws, taxation and legal obligations.
- COMPENSATION AND BENEFITS
Contract employees are often compensated on an hourly or project-based rate, which may not include benefits such as health care, retirement plans or paid time off. Permanent employees receive regular salaries or wages along with a comprehensive benefits package that may include healthcare, retirement plans and various paid leave options.
- JOB SECURITY AND STABILITY
Contract employees do not have the same level of job security as permanent employees. Their employment is contingent upon the terms of their contract and the specific project or duration. Permanent employees generally enjoy more stability in their employment, with the expectation of encouraging work and potential career growth opportunities within the organization.
- EMPLOYEE ENGAGEMENT AND ORGANIZATIONAL CULTURE
Contract employees may have limited involvement in the organizational culture and may not feel as connected to the organization’s culture, values and long-term goals, fostering a deeper sense of loyalty and commitment.
- EMPLOYER/EMPLOYEE RELATIONSHIP
The employer/employee relationship with contract employees is typically defined by the terms and conditions outlined in the contract agreement. The employer/employee relationship with permanent employees is more formalized, often guided by employment contracts and organizational policies that govern various aspects of the employment relationship.
ORGANIZATIONS WHERE CONTRACT STAFFING IS COMMON
Many types of organization hire contract staff, often for specific projects or to meet fluctuating demand. Here are some common sectors that frequently utilize contract labour:
- CONSTRUCTION
Construction firms often hire workers for specific jobs or phases of a project, such as electricians, plumbers or general labours.
- HEALTHCARE
Hospitals and clinics may hire contract nurses, medical technicians and administrative staff to cover temporary needs or specific projects.
- TECHNOLOGY
Software development, IT support, and cybersecurity often require specialized skills for short-term projects.
- FINANCE
Institutions in the financial sector like, the banks, insurance and investment companies mostly hire contract staff to provide front line services.
- RETAIL AND HOSPITALITY
Businesses in these sectors may hire seasonal or temporary staff to handle peak times, such as holidays or events.
- MANUFACTURING
Seasonal demand may lead manufacturers to hire temporary workers for assembly lines or logistics.
- EDUCATION
Schools and training organizations might hire adjunct instructors or tutors on a contract basis.
GHANAIAN LAW ON CONTRACT STAFFING
The law governing contract staffing is found in sections 73-78 of the Labour Act 2003 (Act 651). According to section 12 of the Labour Act, for an employment agreement to be deemed official and legal in the Ghana Labour laws, there has to be a written agreement that states every little detail agreed upon and they should be as listed in schedule 1 to the Act.
The details that must be captured in an employer’s contract agreement are the period the contract shall last, the amount to be paid, the working hours, arrangement on the leave and off days and any allowances that the employee is given.
All the employee’s details are captured and the company’s policy is attached. Also, a guideline on sick offs, public holidays, overtime and other special days are given.
This is with the exception of casual labourers and temporal workers. While the former is given daily tasks and daily pay or working periods as short as a week, temporal workers sometimes work for longer periods but these opportunities are irregular.
Most times they are called upon to help during peak office periods or when there is a specific ongoing activity that is causing a toll on the company’s current staff.
When a temporary worker stays with the same employer continuously for six months or more, the Labour laws of Ghana recognize this person as a permanent employee of the organization in question.
Although temporal workers have no written contracts, sections 74-75 and schedule 1 of the Labour Act 2003 state that they are entitled to the Labour Act’s minimal provisions. This means they too must have rest, overtime pay, paid public holidays and sick leaves.
WHY USING CONTRACT STAFFING
The significance of contract employment in human resource (HR) cannot be overstated, as it serves as a strategic staffing solution for organizations. The major reasons why organizations use contract staff include: –
- COST EFFECTIVENESS AND BUDGET CONTROL
In a competitive business landscape, managing general cost is vital. Contract staffing allows organizations to control expenses by avoiding the long-term financial commitments associated with permanent hires.
Organizations can also budget resources more efficiently ensuring that funds are directed towards areas that deliver the most value to the organization.
- REDUCE ADMINISTRATIVE BURDEN
Compared to managing permanent employees, organizations’ administrative responsibilities are typically lighter with contract staff. These individuals are not entitled to the same benefits or entitlements as permanent staff reducing the workload associated with payroll benefits administration and compliance management.
- FLEXIBILITY IN WORKFORCE MANAGEMENT
Contract staffing provides organizations with the flexibility to manage workforce fluctuations. During peak business periods, organizations can quickly onboard contract staff to fill temporary talent gaps and meet increased project demands. Conversely, organizations can scale back during slower times to avoid unnecessary personnel costs ensuring resource allocation is optimized.
- TALENT PIPELINE DEVELOPMENT
Contract staff can serve as a talent pipeline for future permanent hires. Organizations can identify high-performing contract workers who demonstrate alignment with the organization’s values and culture. These individuals may be considered for full-time employment opportunities, ensuring seamless transition for valuable talent.
- ACCESS TO SPECIALIZED SKILLS AND EXPERTISE
Certain projects or tasks may require specialized skills or knowledge that may not be readily available within the existing workforce. Contract staff bring a wealth of expertise to the table filling knowledge gaps and providing invaluable insights to solve complex challenges.
WHY CONTRACT STAFFING IS EXPENSIVE
It is worth noting that, in spite of the above-mentioned factors or benefits that serve as motivating elements with regards to this form of employment strategy, organizations face several critical challenges during contract staffing solutions implementation.
Understanding these challenges is therefore, significant to implementation of contract staffing. The challenges include: –
- LACK OF LOYALTY
As the name suggest, contract staff are not permanent members of the organization, so they may not feel the same sense of loyalty or commitment to the organization as full-time workers. This can make it more difficult to build a strong culture and may lead to lower levels of engagement and productivity.
In addition, these are staff who usually man the front office, providing frontline service and have first hand interaction with clients.
The danger here is that, because of unattractive contract fees, lack of motivation and recognition, there is the likelihood of getting involved in any fraudulent activity. Besides, they are easily bribable and may leak confidential information of the organization after all, they have nothing to lose.
- TRAINING TIME
Contract staff are often hired for their specific expertise. Thus, they may require additional training or onboarding time to get up to speed on the organization’s processes and systems.
This can be time-consuming and may result in a temporary reduction in productivity. Also, the organization will be faced with a situation where cost is incurred in training people who in the long-run will not be their staff.
- POTENTIAL FOR HIGH TURNOVER
Contract staffing faces a major challenge with employee turnover. This staggering turnover rate: –
- Drives up recruitment and training expenses
- Reduces client satisfaction levels.
- Hurts the company’s overall performance.
- INTEGRATION WITH PERMANENT STAFF
Contract staffing integration creates several unique workplace challenges. These workers often feel isolated and struggle to understand their role expectations. Building relationship with the core team becomes difficult. Several communication barriers emerge: –
- Restricted internal resource availability
- Permanent and contract staff’s distinct communication approaches
- Collaboration hurdles due to multiple time zones
- Separate information channels between different employee groups
- LEGAL RISK
There are some legal risks associated with hiring contract staff. If a contract employee is misclassified as an independent contractor when he should be considered an employee, the organization may be liable for back pay, benefits and other legal damages.
It is important for organizations to carefully review the terms of their contracts and ensure that contract employees are properly classified.
MANAGING CONTRACT STAFF – BEST PRACTICES
To optimize the management of contract staff it is imperative to implement best practices. These include: –
- CLEAR CONTRACT DOCUMENTTION AND EXPECTATIONS
- Clearly outline the terms and conditions of the contract in a written agreement.
- Define the scope of work, deliverables, timelines and any other relevant contractual provisions to avoid misunderstandings or disputes.
- EFFECTIVE COMMUNICATION AND COLLABORATION
- Establish regular channels of communication to keep contract employees informed about project updates, changes and expectations.
- Foster collaboration between contract employees and permanent team members, encouraging knowledge sharing and team integration.
- REGULAR PERFORMANCE ASSESSMENTS AND FEEDBACK
- Regularly assess contract employee performance against established metrics and goals.
- Provide constructive feedback and recognition to enhance performance and encourage professional growth.
- CREATING AN INCLUSIVE WORK ENVIROMENT
- Foster an inclusive work environment that values the contributions of all employees, including contract workers.
- Encourage contract employees to actively participate in team activities and contribute their ideas and perspectives.
- BUILDING LONG-TERM RELATIONSHIPS WITH CONTRACTORS
- When appropriate, build long-term relationships with high-performing contract employees who consistently deliver quality work.
- Cultivate a pool of trusted contractors who can be called upon for future projects or temporary staffing needs.
CONCLUSION
When looking for contract staffing services be sure to find the right company and get a detailed catalogue of the services they offer. Make sure they meet your requirements; the company is a reputed one and that they back their services with a guarantee of retention.
Contract staff play a crucial role in modern HR strategies. By applying the insights and guidelines shared in this write up, you can leverage contract employment to optimize your workforce and achieve your business objectives effectively.
ROBERT is a Fellow of the Chartered Institute of Bankers (Ghana). A seasoned banker with wide experience in Retail Banking, Internal Auditing, Project Management, Electronic Banking with high specialty in Internet Banking. He is also a Consultant and a Supervisor of Chartered Institute of Bankers (Ghana) examination.
CONTACT
E-mail address: kwa [email protected]; Tel. 0240 821597 & 0546 907904
