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Contract Employment: Types, Advantages and Disadvantages


Contract employment is a situation when employees are hired for a particular job and they are paid at a specific rate.

Contract employment is for a particular time duration and does not extend beyond that. It is related to a specific kind of work which asks for skills or expertise in that job.

Mostly contract employment is seen as a great opportunity and employees learn a lot on job but the temporary nature of it creates doubts in the mind of the employees.

When one goes through the nature and type of them, it will help in taking a decision which is beneficial for the ones looking for employment.

Contract Employment Advantages Disadvantages

What is Contract Employment?

Contract employment can be defined as a temporary time period of employment done on a contract basis. It is seen that many times only the temporary nature of it is attached to the definition of contract employment.

It is much more than that. The different type of contract employment will provide an indebt look inside the options.

These employment opportunities have their own pros and cons. Employees can check which one is for them, which one will provide them, what they are looking for-

Types of Employment Contracts:

1. Part-time contract:

Part-time contract has work responsibility and protection like that of a full-time employee, the difference is of the number of working hours.

A part-time employee generally has limited working hours that are defined at the time of employment. They also have a fixed rate of payment. This can be decided based on the number of hours an employee work or work completed against the project.

Part-time work gives employees a good opportunity to work on other things in parallel.

Education, skill development, personal development could be some parallel tasks that employees are seen pursuing when they opt for the part-time contract.

2. Fixed-term contract:

A fixed-term contract has specified contract requirements which when completed leads to termination of the contract.

The employees here have a predetermined salary or compensation that they receive. The number of hours is not specific here which makes it different from a part-time contract.

The fixed-term contract is mostly based on expertise and single project, they can be extended in terms of time but never go beyond the task or the project undertaken.

Fixed-term employment ensures work surety and pay opportunities but lack in continuities. Employees when looking for such employment opportunities should always be aware that they will have to look for new contracts soon enough.

3. Agency staff:

This is an employment opportunity when you are fully employed by the agency you work with but are working for other business organizations.

Many organization hire agencies for specific work generally maintaining paperwork, administration or even training. These agencies ensure that the work is completed on time and the employment opportunities are available here.

The employees work for other organizations even sometimes in their office space but are on the payroll of the agency and not that organization. This could be a good opportunity to learn and get in the desired organization.

4. Consultation or freelancing:

This calls for expertise in the job profiles when employees have specific skills which are in demand and they like work flexibility this is what they opt for.

Even organizations are keen on hiring them given the quality of work and turnaround time is honoured. Here the employment opportunities are open and employees can work with more than one organization managing their own time and tax requirements.

This is similar to self-employment and working with clients. Here the main attraction is flexibility and control that employees prefer.

5. Zero hour contract:

This calls for skilled labour and is on-call work. Here employment opportunities are available from time to time and the employees are called for a job pending.

Once the work is done, the employees are free to search for other employment opportunities.

Safety is the major benefit employees receive when they are working. This kind of employment allows employees to look for other work due to temporary and uncertain nature of work.

6. Voluntary employment:

This is another type of employment where employee work according to their own will.

Most volunteers are not compensated but appreciated for their contribution towards the work. Volunteer work is generally looked in the areas that interest the employees and the hours are also decided by the employees.

Volunteering work also brings accolades and rewards which might not be financial in nature but highly satisfying.

Advantages of Contract Employment Disadvantages of Contract Employment
Abundance of work Job security
Less competition Tax information
Higher gross salary Creating a brand
Flexibility Burden
Continuous growth Time management issue
WordPress Table

Advantages of Working as a Contractor:

Contracting provides skilled workers with great benefits like improved job satisfaction, great pay, higher flexibility, etc. But not everybody prefers contract jobs, as they feel comfortable and secure in full-time jobs.

If you are a skilled candidate then you need not worry and can easily take up contract jobs, as taking up new jobs at newer places help you grow in your career.

Advantages of Being a Contractor:

Challenges of Working as a Contractor:

Along with the advantages of working as a contractor, there are few challenges that come along with contracting jobs.

Some of the Challenges associated with contracting are

  • Being in the contract
  • Safety cover
  • Skills and development
  • Downtime between contracts
  • Time spent running your business
  • IR35

What Needs to be in a Contract of Employment?

The contract of employment can also be referred to as an employment contract or employment agreement. The documentation mostly comprises of the rights and responsibilities for an employee as well as employer specifically. Some of them are,

  1. Salary or wages
  2. Employment duration
  3. Basic responsibilities
  4. Effective communication
  5. Scheduling
  6. Confidentiality
  7. Advantages
  8. Future competition

Advantages of Contract Employment:

Contract employment shows that there is so much flexibility in the work that employees can do so much while they earn.

This sounds a great opportunity for ones who are creative, interested in completing their education, support their families early, have the expertise and want to work. Below mentioned are few of the advantages in detail

1. Abundance of work:

Contract employment is available in so many different ways as stated above. The situations clearly show that there is no dearth of work.

Employment opportunities are available all the time and thus this provides options and choice to the employees.

If employees are looking for a specific job they can opt for freelancing which will give them a chance to chose their kind of work if the idea is to lock the number of hours you work then the best is to opt for part-time employment.

Each of them has the option of a huge amount of work available and thus employees never find themselves in a fix.

Even when there is not a particular opportunity available they can opt for some other kind just for the time being.

2. Less competition:

This is another advantage of working on contract-based employment. The employees do not have to face cut-throat competition which is generally the case in full-time employment.

Fresher can this way find employment opportunities and then prove their worth. This also adds to the experience that one could use to analyze what they plan to do for their future.

Since there is less competition it also employees to see what they are good at and how well they perform on a given task.

This way they become confident, know more about themselves and when they move out in search of full-time employment they have more options.

3. Higher gross salary:

Contract employment may seem like an opportunity where employees do not get paid well. This is not true for all cases.

Contract employment, in fact, present opportunities to employees where employees can earn as much as they like.

Part-time employment allows more than one job opportunity if the laws permit, freelancing is another option where employees can get as many jobs as they can handle and there is no need to be stuck to a single salary.

Many opt for contract employment for the freedom to maintain their own earning options and maintaining their own tax. Here the employees can make changes to the type of income they earn and create benefits out of them.

4. Flexibility:

The flexibility of work hours is the reason why contract employment attracts everyone for the first time. The rest of the benefits are enjoyed or realized later.

Flexibility in choosing the employment opportunity is also very important, in a fixed job given the structure it becomes impossible to make any amendments to what is being offered.

In contract employment employees get an opportunity to choose how they would want to work on a particular project, decide the working hours and can even design their work delivery structure which of course should work for the employer too.

The flexibility to work on new options is an added perk in the same league.

5. Continuous growth:

It is often seen that one gets stuck in a single profile or work type. The situation leads to disinvestment in the job and lack of growth.

Working on various projects and the flexibility that contract employment provides of working with various employers allows a great opportunity to grow.

Employees can work on projects which are related to the skills they want to develop or strengths that they want to demonstrate.

Working on different projects allows employees to learn time management, create a work-life balance which helps in the long run. Thus contract employment allows the employee to grow in a balanced manner.

Disadvantages of Contract Employment:

Contract employment may seem all glows and no grows with the above-mentioned points which are not true.

Most of the time there comes a tricky situation where employees feel themselves trapped and do not like the employment opportunities presented to them. These situations are due to certain disadvantages faced by them.

1. Job security:

Even though there is no dearth of opportunities available for contract employment. The situation of the security of current employment is missing.

The employees find it a little stressful to be working for an organization that does not give job security. Even though one knows that other options are available, sometimes it becomes taxing to look for them when you are currently occupied with work.

This means that the work efficiency decreases as there is always something at the back of their mind. This also gets stressful and most often decreases the morale of the employee.

2. Tax information:

This is the part of legal obligation fulfilling which sometimes becomes difficult for employees. When you are a full-time employee then you are constantly reminded of your tax obligations.

In fact, most employers cut the taxes before paying salary, or in most cases, it is calculated and shared with the employees which mean that employees do not have to spend the year-end making long calculations.

Even when someone is particular and remember the tax obligations with part-time employments and many employers in a given year, it becomes a tedious job making all those calculations and filing the return at the end.

A detail of all the accounts has to be maintained which is not easy and being single-handedly handling things is greater a task than the work undertaken.

3. Creating a brand:

One can get maximum benefit in contract employment only when they are able to create a brand for themselves.

This is not easy and they have to work more for less pay to create the name in the market. This may sometimes take a lot of time and till then they have to work for less pay especially in the case of consulting and freelancing.

One finds it very heartbreaking to not be recognized for the work they do. The motivation level goes down, so one has to work by himself to stay strong in order to stay long.

4. Burden:

Adherence to the company’s policy and keeping a track of them is not easy. Different organizations have different confidentiality expectations.

When you work for them a simple error in following some could lead to sudden termination and in serious cases lawsuits.

Even though it might turn out in your favour at the end due to the lack of written confirmations they are stressful and time-consuming. Also, it decreases the motivation level and hampers the brand that you have created.

5. Time management issue:

When one works part-time and takes other tasks in hand as well – time management becomes the biggest problem.

It is often seen that employees often waste time and resources and at the end do not find value in what they are doing.

Time management is a skill that is developed over time and if not developed may create serious repercussions. When employees manage time well, the work goes on smoothly without any problem.

Independent Contractor Rights:

Independent contractors need to be classified and the responsibility of the employer who engages them as workers. The Internal Revenue Service (IRS), Department of Labor (DOL) and individual states have various factors to analyze and consider to determine whether a worker is an employee or an independent contractor.

This misclassification is a big problem for the workers and can also block their way of accessing their basic rights.

According to the IRS, millions of workers have been misclassified and state-level studies have found that 10% to 20% of employers misclassify at least one worker as an independent contractor

General rights of an independent contractor:

  • Right to Control
  • Right to Market Your Services
  • Right to Work the way you want
  • Right to Your Own Business Management
  • Right to a Contract
  • Right to Engage Other Contractors


It is clear that every situation has two sides, what the employees should do is find a balance between the situation so that their contract work gets them what they want.

Employees should be clear as to what they are looking for and how much are they willing to compromise. The contracts should be taken seriously and it is always in the best interest that documentation is done.