This article is written by Michael Shriney from the Sathyabama Institute of Science and Technology. The article discusses various types of contract staffing, the benefits and drawbacks of contract staffing, how it benefits employees, and a lot more.

It has been published by Rachit Garg.

Table of Contents


Contract staffing refers to workers who are employed for a limited period as opposed to other forms of full-time employees who are employed on a permanent basis. Part-time work, seasonal work, and independent contracts are all examples of contractual staffing. It is approached in order to check the flexibility of the employer. The contractual staffing agency specifies that the contractors are paid directly and employed for the duration of the contract. They are entitled to receive both annual and sick leave payments. Contractual staffing helps and provides a predictable work schedule for workers to follow, and contractors are informed of the duration and deadline of their tasks in advance.

Due to the benefits acquired by both workers and employers, contractual staffing is becoming increasingly popular in our surroundings. Contractual employment often works for a certain number of months, such as three, six, or twelve months. When a contractor knows when their contract will come to an end, it will be renewed. The third-party staffing agency is often in charge of negotiating these contracts. Any company that wants to employ a contract staffing service should carefully analyse all the benefits and drawbacks of doing so in comparison to other methods of staffing. 

This article will describe the various types of contract staffing as well as the benefits and drawbacks of each.

What is contract staffing

Contract staffing is a type of recruiting strategy in which firms recruit talented employees based on a particular contract that describes the terms and requirements of their agreement. When people are expected to work for a set duration of time or until a specific project is completed, this sort of recruiting is employed. 

This contract provides the advantage of allowing employees to work more freely, with greater flexibility and more time. When a third-party agency supplies non-permanent employees for a particular client company, this is referred to as contract staffing. It relates to a naturally occurring structure in so many nations’ recruitment practices, rather than a term prescribed by the law or regulations. There are three main phases of contract staffing:

A service contract is not like an employment contract: 

When a firm employs by using contract staffing, the firm does not hire individuals as employees. Instead, the firm enters into a business-to-business agreement with a staffing agency that offers specialised services.

Set term or project-based recruit, not permanent employment:

This contract staffing relates to a connection of a fixed time period, such as for a specific month, 3, 6, or 12 months, or a contract as a specific project-based. When the period expires or the specified project is done, the contract finishes. These jobs are not like permanent jobs with full-time responsibilities for the employees.

A third-party agency:

A staffing agency generally hires or assigns employees to their client firm. These staff may be employees of the staffing agency or, in certain situations, contractors of the staffing agency, which is also known as a ‘labour-hire business,’ a ’employee leasing company,’ or a ‘contract service company.’

Types of contract staffing 

The following are the various types of staffing contracts offered by a contract staffing agency:

Part-time contract

A part-time contract is a type of contract staffing in which a person agrees to work for a specific number of hours. He or she is given the chance and guarantee of being hired as a full-time employee. The part-time contractual worker is legally obligated to work a certain number of hours and is paid properly for those hours. Typically, school and college students or those who wish to learn and get experience from such occupations choose this form of contract.

Fixed-term contract

Contracts with a fixed term are ones that are limited by conditions. These contracts are usually signed for a single project, and after the project’s needs have been fulfilled, the contract is ended. This sort of agreement may be renewed for a longer length of time. It provides workers with a set of benefits including insurance, but it requires advancement.

Agency staff

Employees will be employed by IT contract agencies, but they will work for firms in this type of contract staffing. This occurs because many firms collaborate with staffing services to acquire individuals and complete their tasks. Although the employees work for the company, they are compensated by the staffing agency or their direct recruiters.

Zero hour contract

This sort of contract staffing does not have a time limit basis or any certain time or longer term of work, such as a work project. In this sort of contract staffing, the staff is needed on an ‘on-call’ basis. When a certain task has to be accomplished, these employees are called in, and after the task is over, they are free to work or look for other opportunities.

What does a contract staffing process include

Estimation of manpower requirement: The first stage is to determine the type and number of staff that an employee needs. It is indeed important to compare particular requirements to the entire number of planned employees for a corporation. The contract staffing agency reviews the workload with the staff to determine the number of people needed and to schedule the overall number of employees needed.

Recruitment: The agency is attracting an increasing number of applicants for the position. This allows them to choose the best-qualified employees from a larger group of candidates. To find suitable individuals for the position, contract staffing organisations contact a variety of placement consultants, contractors, and recruitment agencies, as well as exchange and print advertising in local newspapers.

Selection: The contract staffing selection process comprises a thorough examination of skilled candidates who meet all of the job’s criteria. Interviews, testing, group discussions, and so on are all part of the process. The procedure’s main goal is to discover the perfect applicant for the right position.

Placement:  Placement of the applicant to the firm is the process of assigning a rank to a suitable candidate. The applicant is assigned to the job for which they were employed and may begin performing the duties and responsibilities for which they were hired. The candidate must work according to the obligations allotted to them while keeping peace with other members of the organisation’s employees.

What services does a contract staffing firm provide

  • Recruiting services or hiring skilled and eligible individuals for a client firm from within its current staff.
  • The project work tasks or responsibilities of a position of the client firm are included in the contractual conditions.
  • The contract service company will be in charge of managing the payroll for employees, including welfare and economic contributions.
  • Employees’ salaries and payroll taxes are withheld by the contract employment agency.
  • Any employment conflicts, contract renewals, or terminations are handled by the staffing agency.

Advantages of contract staffing for an employee

  • Contractual staffing requirements allow workers to control their schedules and experience with their sort of job in modern workplaces, and this contract gives workers greater freedom.
  • Employees can work under contract at intervals when there are more lines available, depending on their routines and needs.
  • Workers have an influence on their workload, the type of job they do, and even the prices they bear.
  • Workers can profit by gaining experience in one sort of job or from attempting and building a variety of other jobs on a daily basis.
  • Workers have the opportunity to earn more money as they have contract services with a variety of firms, and part-time employees generally earn more money than full-time employees.

Advantages of contract staffing for an employer, company or firm

Speed of recruiting

A contract staffing agency can provide you with a complete range of employers that are eager to work. They have existing employees in their agency to employ, and actively recruiting or directly selecting employees, as well as scrutinising and internal sign-off, takes a bit of time by the client company. A staffing agency handles this with contract staffing to guarantee that the client firm has employees in place as soon as feasible. This is especially important for firms looking to boost their growth, including startups.

Cost savings

Businesses want to hire independent contractors when people are looking for non-permanent positions. Directly employing independent contractors requires recruitment without a thorough understanding of contractor market pricing, as well as the establishment of administrative systems for handling invoicing and compliance. A contract staffing firm can search for a complete understanding of labour market rates and may already have in place a suggestion invoicing and payment system.

Multiple location hiring

Even though a company’s local labour market may be well-understood, it may wander when it comes to recruiting overseas. Most staffing businesses cover wide geographic regions both domestically and globally, allowing a single agency to handle all recruiting for a major multi-location company.

Reduce the risk of employee

When a company misclassifies a person as a contractor when they are actually an employee, it is known as employee misclassification. When this happens, the company will be responsible for unpaid taxes, social contributions, and fines to both the government and the employees. Utilising a contract staffing provider guarantees that applicable tax and social security contributions are deducted for employees, as compared to using a company that hires people directly.

Access to specialised skills

The benefits of working with a contract staffing firm to benefit from certain skilled employees include having access to the specific talents your project requires. They assist employees in identifying their abilities and the areas in which they are professionally skilled, as well as determining which companies best suit employees and benefit the firm. The contract staffing agency will locate workers in the appropriate location with the required skill set to ensure that the workers’ project is executed efficiently and on time.

Access to a larger talent pool

The main task of a contract staffing agency is to discover the best candidate in the industry; they will do thorough research and analysis in order to add top-quality applicants to their talent pool. IT contracting firms must recognise that applicants must have a thorough awareness of the technology industry and know how to approach them in the most effective manner. They may even be able to save workers from the difficulties of recruiting.

Fulfil short-term business needs

Contract staffing companies are extremely beneficial to businesses since they provide trained staff for a certain period of time without assuming any responsibility and avoid the pitfalls of outsourcing the team. Contract staffing services will hire individuals to do short-term jobs in a company.

Disadvantages of contract staffing for an employer, company or firm

Hiring directors and core management

Directors and officials of corporations take full accountability and control. The board of directors is in charge of overseeing and governing the company’s operations. Officers are appointed by the board of directors to monitor the day-to-day operations of the company. However, relying on contract staffing, recommendation suggests that officers be hired directly by the corporation.

Applying non-compete clauses

A non-compete provision in a contract prohibits a worker from working for another company, generally a competitor, for a set length of time in a specific geographic area. When the corporation doesn’t quite directly employ the employee through the contract, however, it is harder to place such conditions and enforce them. If it is done, there is a possibility that the employee may be misclassified, which implies that a contract staffing setup would offer contractors instead of employees, and non-compete agreements are frequently ineffective.

Permanent staffing resource is required

Contract staffing is a non-permanent recruiting strategy in general. Recruiting permanent and continuous employees demands different skills. Eliminating a permanent employee, for example, is harder than removing a temporary employee. When a firm still needs a full-time employee engaged through a third-party solution, the ideal option is to use a Professional Employer Organisation (PEO) rather than a contract staffing agency.

Difference between contract staffing and permanent staffing

Contract staffingPermanent staffing
1.Client requires a member of staff to work with a firm on a flexible basis.Clients require a member of staff to work for the organisation on a long-term basis. 
2. Contract employees are given the freedom to enjoy their jobs.Permanent employees do not have the freedom to enjoy their jobs.
3. Contract employees have no job-related benefits.Permanent employees have job-related benefits
4.Contract employee assignments will be for a certain period of time and will cover an increase in workload, illness, or maternity/ paternity leaveFixed-term contracts are part of the permanent employment.
5. The employees work on an hourly or daily basis and are compensated hourly.The employees work on a full-time basis and are compensated monthly.
6.Salaries are paid on an hourly basis.Salaries are paid on a salary or monthly basis.
7.When compared to permanent employees, the hiring procedure is faster.When compared to contract staffing, the hiring procedure takes longer.


Why is there a demand for contract staffing services?

Contractual employee replacement is likely to be higher, the company isn’t really loyal to these employees, and the employees are all the same. If there are better employment opportunities for temporary workers, they may leave rapidly, and the company will need to locate new staff soon. So there is a demand for contractual staffing.

Is it appropriate for a candidate to pay a staffing firm for a job?

No. The candidate is not required to compensate the staffing firm. When a company or government needs to employ, the staffing agency is normally paid by the company or government. A job applicant must either enrol on a job board or contact a staffing firm. If a position becomes vacant, the staffing firm will notify the candidate who is on their list.

What is the duration of contract workers’ employment?

This is determined by the characteristics of the employment and the employer. Before signing the contract, a candidate must be informed of the employment terms. Typically, the employment might last around a few months or longer. Even contract employees may be employed on a full-time basis by the business after their contract expires if their behaviour has been more than excellent and suitable.

What is the difference between staffing and recruitment?

The differentiation between the two is that staffing is the process of finding, hiring, and keeping workers. Recruitment is a stage in the employment process in which the focus is on increasing the number of candidates for a given position.

What does the future hold for India’s staffing industry?

In India, there is a serious lack of talent. And businesses are battling with one another to recruit the top applicants. Staffing services are undergoing a major change as a result of a variety of elements including work flexibility, technology, applicant experience, and more, together with the struggle and a lack of quality.

What kind of benefits and allowances do contract workers get?

The nature of the employment and the company will determine the allowances and perks. Contract workers, like permanent staff, are paid on a regular basis and are covered by Employment Provident Fund and health insurance programmes. However, bonuses, incentives, and other advantages are all optional.

Choosing a staffing firm might be difficult. Is there a guideline that may be useful?

Yes, it may be difficult. This is especially true when there are a variety of staffing suppliers in the industry. When it comes to making the final decision, there are several factors to consider before selecting the best staffing provider for their company, such as the provider’s dependability and reputation, their recruiting procedure, their expertise, and so on.

Apart from assisting with the recruiting of contract employees, what other services do staffing firms provide?

Companies should be able to provide more than just contract staffing services. Regardless of the type or size of the business, their services have to be adaptable. Their strategy must be rigorous and professional in nature. A staffing provider has various duties and responsibilities; if you’re looking to expand on any given day, choose a company that offers full staffing solutions.

5 things to keep in mind when hiring contract employees

Review current business operations: When contractors decide to recruit contract employees to work for the firm, the first step is to assess current business operations. When employing a temporary employee, it will be evident that employees are dealing with only an independent contractor rather than recruiting an employee.

Create the right job description: After contractors have a firm grasp of business processes, the following step is to begin developing the job description. They must clarify their connection with potential applicants at this time. Include this information in their job description so that they may identify an applicant who is on the same level as them.

Don’t take shortcuts in the hiring process: The hiring procedure is now the most challenging part. When working with contract employees, they must approach each individual as if they were a genuine candidate. Before deciding whom to hire, make sure to investigate a possible candidate’s qualifications and references. Learn about previous applicant reviews to get a sense of who they’re working with.

Have the right tools in place: Contractors must have the proper equipment in place if they are going to hire someone remotely. This will assist in the establishment of trust with contract staff that is hired. Cyber insurance, a fast computer, and employee tracking and management are the tools that are advised to use.

Put everything in writing: Contractors must have an independent contractor agreement in place before they begin hiring the contract staff. This is a formal contract that outlines the connection between the firm and the employee. Everything must be in writing, and the contractor must ensure that everything is covered and nothing is left out.


As a result, contract staffing is a non-permanent recruitment technique that involves employing individuals from their existing staff to work for their client business. It’s either a part-time job or a specific project job. Employees work for the chosen firm for a set amount of time or until their job gets completed. The employees are compensated for the services they provide to the organisation. 

The contractual staffing company does a thorough analysis to determine which work is most suited to the concerned employees’ skills. Workers have the freedom to work in any place and can gain experience in a variety of occupations in order to develop the skills necessary for the organisation.


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