Temporary v Permanent Contracts
Resources for Unit 6: Principles of Management. BTEC Level 3 Business Studies
Temporary contracts are work agreements between an employee and an employer for a fixed period of time. This may be to cover a period of absence for another member of staff, to work on a specific project or for a seasonal period of higher demand.
Permanent contracts are employment agreements without a specified end date. Employees on permanent contracts enjoy job security as the contracts can only end if the employee chooses to do so, if they break the terms of their contract, are unable to perform their duties or the business closes.
Benefits and Drawbacks of Temporary Contracts
Benefits of Temporary Contracts
Flexibility: Employers can adapt their staffing levels based on demand by hiring temporary staff to manage increased workloads. This approach ensures that they can keep customers satisfied during busier periods without overburdening their core staff.
Cost effective: Employers do not need to keep staff longer than they are required ensuring they only pay for time when they are productive. This is in addition to reduced obligations to pay benefits such as pension contributions, holiday pay and health insurance.
Specialised skills: Employers can recruit staff with the specialist skills required for short term projects without having to commit to them long term. This allows them to adapt their staffing for each project in a way that ensures the appropriate skills set is used.
Trial period: Staff can be hired on short-term contracts before being offered a permanent role. This allows managers to evaluate their performance and assess how they would fit into the organisational culture.
Drawbacks of Temporary Contracts
Training costs: A high turnover of temporary workers creates a need for regular training to upskill new hires. This results in significant training expenses without long-term benefits, as those skills leave the organisation when the employee leaves.
Limited loyalty: Due to the short–term nature and reduced benefits of temporary contracts, workers tend to feel less committed to the organisation. This may reduce their integration into the teams and culture, encourage the feeling that their roles are less important than permanent staff and lower their productivity.
Disrupted team dynamics: When staff leave and are replaced on a regular basis, it can be difficult for people to form and maintain stable relationships in teams. This can limit cohesion and make it difficult to clarify the roles of individual team members.
Lack of skill development: Temporary contracts prioritize immediate tasks over long-term skill development, often assigning simpler duties to workers. This limits their exposure to complex skills, resulting in lower productivity for the business and fewer career advancement opportunities for employees.
