Contract or permanent? A decision guide for technology hiring

The deciding question: does the work end?

Most contract-or-permanent decisions get easier once you describe the work rather than the job title. Write down what this person should have delivered after six months, and what they should be doing after two years. If the six-month answer is the whole job — the platform migrated, the certification passed, the product launched — the work has an end. If the two-year answer is “still running it, still improving it, still the person we go to”, you are describing ownership, and ownership is what a permanent salary buys.

Signs the work has an end

• A deliverable with a clear acceptance point: a migration cut over, a release shipped, an audit closed.
• A date the work is tied to, such as a launch, a customer commitment or a regulatory deadline.
• A skill you need applied rather than built up inside the team, like a specialist review or one hard integration problem.
• Cover for a known gap: parental leave, a notice period, or the months a permanent search will take.

Signs you need an owner

• The system or product will keep changing after the first version ships.
• People will bring this person decisions, not just tasks.
• What they learn is core to what you sell, and you want it to stay in the business.
• You expect them to mentor, hire or lead others later.

If you honestly can’t tell yet

That is common when funding, a customer pipeline or the product direction is still moving. A contract keeps the option open while the shape of the role settles. Put a review date on it, though. If the uncertainty is about budget rather than scope, and the work is in fact ongoing, a long run of contract extensions can cost more than the permanent hire you were avoiding, and the knowledge still leaves with the contractor.

When a contractor tends to be the right call

• The work has to start soon. Permanent candidates usually have a notice period to work before they can join, and for experienced engineers that can be a matter of months. An available contractor can start once the scope, the day rate and the IR35 status are agreed.
• It is a defined project: a migration, an integration, a launch, a piece of compliance work. You pay for the period of the work, not beyond it.
• You need specialist expertise for a specific problem, and nobody on the team needs to hold that skill permanently.
• You are covering a gap while you recruit permanently, so delivery does not stall during a long search.
• Demand spikes and then falls back, for example around a launch. Contract capacity can be added and released without a redundancy process.

If you are buying a result rather than time, a statement-of-work engagement can suit better than a day rate; Humand structures these where outcome-based delivery is what the client needs. How Humand runs contract hiring, including IR35, is set out on the contract recruitment service page.

One specialist contractor or a consultancy?

A single specialist contractor suits a well-defined problem where you can direct the work yourself and want one particular expert. A consultancy can be the better fit when you need a team, someone accountable for the outcome, or delivery capacity you do not have time to manage. Neither is automatically cheaper once management time, scope changes and knowledge transfer are counted.

When a permanent hire tends to be the right call

• You are building a capability you want to own for years: a platform, a product area, a core algorithm.
• Knowledge retention matters. If the work is your intellectual property, you want the person who understands it to stay.
• The role needs context that takes months to build, which is typical in regulated products and deep-tech engineering. Paying a day rate through that learning curve and then losing it rarely makes sense.
• You want continuity in the team: someone who mentors others, carries the history of decisions and shapes how the team works.
• You want predictable cost over a longer horizon, and the role is likely to grow into more responsibility.

A permanent search usually takes longer to complete than a contract placement, so start it early and write a brief that is specific about outcomes. On a Humand permanent search, an initial shortlist of three to five screened candidates usually comes within a week, and strong candidates are sent as soon as they are found rather than held back for a batch. That first shortlist is a starting point, not the whole search: the brief often sharpens once you have seen the market, and the search continues until the role is filled, paused or closed. The hiring brief review checks a draft against what candidates and recruiters need to see, and our permanent recruitment page describes how Humand runs these searches.

Contract, permanent or both: a decision table

Each row is what the situation usually points to, not a rule. Where the honest answer is “it depends”, the last column says on what.

What a fair cost comparison involves

Setting a day rate beside a salary misleads in both directions. A salary is not the whole cost of a permanent employee, and a day rate is not the whole story of a contract either.

Behind a salary

Employer costs sit on top of the salary: employer National Insurance, workplace pension contributions, holiday, benefits and equipment. Add the cost of recruiting, the management time, and the months before a new person is fully productive. In return you get continuity and knowledge that stays.

Behind a day rate

An outside-IR35 contractor’s rate covers the cost of running their own business; an inside-IR35 assignment is normally delivered through an umbrella company that employs the contractor, and the assignment rate and the contractor’s take-home are different figures. You pay for the days worked and there is no notice period or redundancy beyond the contract terms. The rate accumulates for as long as the engagement runs, and the context goes with the contractor at the end.

Compare the period you actually need

There is no reliable multiplier that turns a day rate into an “equivalent salary”; those rules of thumb ignore how long you need the person, how many days they will really work and what happens to the knowledge afterwards. Cost both routes over the period the work genuinely needs, and include the cost of the seat staying empty while you decide — the vacancy cost calculator puts a figure on that from your own inputs. Humand’s contract shortlist briefs include day-rate benchmarks, and contract commercials are open-book: you can see what the contractor is paid and what Humand’s margin is, with the structure shaped around your budget and the engagement rather than a fixed mark-up. For the permanent side, salary benchmarking gives decision support on pay for the specific role.

How quickly each route can start

A contractor can usually start in a fraction of the time a permanent hire takes, because a permanent move typically means a search, interviews, an offer and then a notice period. For a contractor who is available, the path is shorter: agree the scope, the rate and the IR35 status, complete onboarding checks, and begin. Humand can mobilise quickly for urgent specialist contractor requirements.

Speed is not the only thing to weigh. A contractor who starts next week but leaves before the work is finished has not saved you time, and a permanent hire made in a hurry costs more to undo than a considered one.

IR35: how status affects a contract hire

IR35, the off-payroll working rules, decides whether a contractor working through their own company should be taxed like an employee for a particular engagement. Status depends on the working practices of the engagement, not on the contract wording alone. GOV.UK’s guidance on off-payroll working explains who is responsible for the determination in each case. Where the client is medium or large, the determination is the client’s to make. What happens around that decision on a Humand contract engagement is set out below.

Using both: contract now, permanent later

Running the two routes together is often the most practical answer for a scarce role. A contractor holds the work while a permanent search runs properly, instead of being rushed to fill the gap. Three things make it go well:

• Be open with the contractor about the plan. Some are open to a permanent move and some prefer to keep contracting; ask early rather than assuming.
• Make documentation part of the contract scope, so the permanent hire inherits the work rather than rediscovering it.
• Check your terms of business before discussing a conversion, because agency agreements commonly address it.

Onboarding a contractor so the time counts

A contractor is paid from the first day, so the first week matters more than it does for a permanent hire. Before they start, have these ready:

• Access to the systems, repositories and environments they need on day one.
• A named owner in the team who can answer questions and make decisions.
• A written definition of done for the engagement, and how progress will be reviewed.
• The context behind the work: previous decisions, known problems, who depends on the result.
• An agreed approach to documentation and handover.