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Summary: Contract staffing allows companies to hire skilled professionals on a temporary basis—perfect for project-based needs, seasonal demand, or filling talent gaps fast. Learn how this hiring model offers flexibility and reduces overhead while keeping your workforce agile.
Contract staffing is the practice of filling roles temporarily with employees sourced from third party, such as a staffing or temping agency. It is also commonly called contingent staffing or temporary staffing.
In this arrangement, the employer hires the agency to provide workers and pays it for this service. The agency provides the workers and pays them a wage for their work.
In some countries, contract staff also receive benefits for their work, like social security contributions. Workers can be provided for part-time or full-time work, and the work is normally temporary with contracts lasting days, weeks, and sometimes months.
What are the Attributes of Contract Staffing?
Contract staffing can be practiced in different ways, but most arrangements share the following key attributes:
- Temporary: Contract staffing solutions are normally meant to fulfill the temporary needs of clients. A company may have had a worker quit and need to use the services of a temporary worker while they search for a suitable permanent replacement. Other contracts last months or even seasons, especially for businesses that need specific skills to help them complete individual projects or whose labor needs are highly seasonal.
- Third-party involvement: While some businesses or individuals hire independent contractors directly for short-term work, contract staffing is provided by third-party agencies. These agencies are usually the workers’ legal employer, and their workers are lent out to other companies according to their needs. Many contract staffing agencies have exclusive service contracts with clients that let them be the sole provider of their clients’ temporary staffing needs.
- Specific needs: Many contract staffing solutions are provided for highly specific needs that may be short-term or even ad hoc. A company may have no one able or willing to perform a certain required task and might therefore bring in contract staff to take care of that need. An example might be a restaurant with grease traps that need to be cleaned a few times a year. This may not be a part of the regular staff’s duties, and the restaurant may hire a temporary worker to perform this task when needed.
- Few benefits: While contract staff are employed by staffing agencies, they’re rarely provided with the level of benefits that employers give their full-time staff. They must receive mandatory benefits from the agency, but generally don’t get any supplementary benefits for their work.
Who Uses Contract Staffing?
Contract staffing services provide employers with the staff they need for short jobs or when the unpredictable happens. Many employers use contract staffing, including:
Employers with seasonal needs
Businesses that work on highly seasonal schedules use contract staffing frequently.
Farms, orchards, and other agricultural producers may need extra help to plant or harvest crops. Bars and restaurants can see sudden increases in clientele during certain times of the year and may look to contract staffing to help them cope with surges in demand.
Events-based employers
Employers that manage events that don’t repeat regularly may have highly fluctuating staffing needs.
For example, while a catering business may have a core staff team, it may need to be supplemented with contract staff for large events.
Employers with unpredictable needs
Many employers know they’ll sometimes need lots of workers but can’t easily predict when. They may suddenly be awarded contracts and need to spring into action so they can contact staffing agencies to find workers in a hurry.
Employers that need fill-in staff
Many businesses need to replace staff temporarily when they take leave for maternity, sickness, or even holidays. To keep business operating as usual, they may use contract staff to work for them in the interim.
What is a Contract Staffing Agency?
Commonly known as a temping agency, a contract staffing agency is a service provider that hires workers on a flexible basis. These workers are vetted according to their skills and are then hired out to clients that require their services.
The agency will normally bill its clients hourly, but will only pay a portion of the fees it receives as wages to its contract staff. The agency must also use its income to pay managers, recruiters, and administrators and cover its overheads like rent, utilities, and marketing expenses. Most contract staffing agencies have non-compete clauses within their service contracts with clients. These clauses bar clients from hiring the agencies’ temporary employees as permanent employees. Other agencies, however, offer temp-to-hire arrangements that allow clients to hire workers they’re happy with for an additional fee.
Modern contract staffing agencies usually work with high-tech platforms to provide services quickly to their clients and connect workers with jobs efficiently. Gone are the days of calling staffing agencies in the morning to request workers or ask what jobs are available. Most contract staffing agencies use digital platforms that allow clients to requisition workers by easily submitting online forms. They use mobile apps to notify workers about available work and pay them through online payment applications. These digital tools make their services much more efficient than in the not-so-distant past.
Who are Contract Staff?
Contract staff are workers who work for staffing agencies and are deployed to provide services for clients, usually on a temporary basis. They usually receive fewer benefits and lower wages than full-time, regular workers in the same industries, but most have good reasons for working with contract staffing agencies.
- Many staff work with agencies because they have difficulty holding down regular jobs due to disabilities, illnesses, or personal obligations that restrict their time.
- Others may have limited work experience and use temping to help them gain experience that they can use to help them find permanent employment.
- Others still choose to work for contract staffing agencies because they want to experience many different types of work before they select a career.
Despite the limitations of temporary work, contract staffing can provide many workers with the advantages they’re looking for.
Advantages and Disadvantages of Contract Staffing
As with any type of employment, contract staffing presents a unique set of pros and cons, including the following:
- Advantages of Contract Staffing
It’s easy to find workers quickly and on flexible schedules.
There’s very little administrative burden for the client.
It allows employers to quickly scale their businesses when required.
Employees can access workers with a wide range of skills and abilities.
While hourly billing may be high, it can still be more cost-effective than hiring permanent employees.
- Disadvantages of Contract Staffing
Staffing agencies may not be able to provide the same workers consistently, leading to high turnover.
Workers have little loyalty to clients and little connection to the company’s culture.
Workers with desired skills may not be available at all times.
Clients can become dependent on external talent rather than developing their own employees.
Other Types of Staffing
While contract staffing can be a convenient way to fill positions with short notice, it is, by definition, not permanent. Other options to compare contract staffing with include:
Permanent Employees
Permanent employees can be hired on full-time or part-time schedules and work directly for the employer with no third party between them. This gives the employer direct control over the time, methods, and means of their work.
Employers must provide their permanent employees with the data, tools, and equipment they need to perform their duties. They typically also need to offer them benefits to make their employment attractive as well as withholding taxes from their paychecks and paying contributions toward social security and other schemes.
Independent Contractors
Also known as freelancers in some industries, these are workers who are self-employed and who take contracts directly from employers. They can be employed for periods as short as a few hours to months, depending on the needs of the employer.
As with contract staff, the employer doesn’t need to withhold taxes or contribute to benefits programs for contractors. Instead, they’re responsible for their own tax and benefit administration.
Thus, hiring contractors represents an effective way of accessing special skills and knowledge without creating a long-term administrative burden for the employer.
Fixed-Term Contract Employees
In most countries, employment contracts are permanent by default. However, in many places, including the US, fixed-term contracts are also permitted.
These contracts are typically used to hire full-time employees for particular projects or non-durable work. They must state the beginning and end dates of the contract, and normally, the contract is terminated when the end date is reached or the project is completed to the client’s satisfaction.
In most countries, fixed-term contracts are limited in duration and may not be renewable. While they are working for the employer, these workers are considered full employees. The employer is responsible for withholding taxes from their pay, contributing to social schemes on their behalf, and often providing them with additional benefits like health insurance and retirement savings plans.
Contract Staffing Services Summarized
When employers need workers quickly and for temporary roles, they often reach out to contract staffing agencies. These agencies employ workers directly and hire them out to employers on a short-term basis when their skills and labor are needed. This flexibility allows clients to quickly access the workers they require to address sudden changes in their needs or to fill suddenly vacant positions. Decades of use have proven that contract staffing has an important function in the global labor pool that should continue into the future.
Frequently Asked Questions
No. The language may be confusing, as freelancers are actually classified as independent contractors in most places, while contract staff are employees of staffing agencies. Freelancers are self-employed and manage their own contracts with clients, taxes, and benefits, while contract staff concerns are managed by their agencies.
This depends on the contract you have with the staffing agency that provided the temporary worker. That contract may include a non-compete clause that restricts you from hiring their worker away from them for a fixed period of time. However, some agencies are prepared for this eventuality and offer temp-to-hire arrangements. You may be required to pay an extra fee (consider this a recruitment fee) to the agency to take on their worker permanently.
Andrew (Drew) joined the Remote People team in 2020 and is currently Director, Regulatory Affairs. For the past 13 years, he has been a trusted advisor to C-Suite executives and government ministers on international compliance and regulatory issues. Drew holds a law degree from the University of Otago, a PhD from the University of Sydney, and is an enrolled Barrister and Solicitor of the High Court of New Zealand.