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As a UK based tech start up working on a social app, what are the pros and cons of hiring contractors on a full time basis to build the app, against hiring the same people as employees?

Edit:

Let me expand on the question to try and get some better quality answers. I don't just want to know about the financial difference (I think it's obvious hiring staff would be cheaper than contractors, as contractors are going to want somewhere near their day rate even on a longer term cotract, maybe upwards of £500 a day (£130,000/year). You'd be able to hire a comparable member of staff for around £50,000.

I'm more interested in things like atmosphere, buzz, workers rights, happiness etc. which I see as essential in creating a good product, and management, paperwork, hoops to jump through, creating a sustainable product etc.

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4 Answers

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Personally I think contractor only make senses when:

  • There is a direct short term targeted need and you don't have internal staff to handle it.
  • There is a specific requirement for a skillset you don't normally need. eg. database performance OR security implementation on .NET with X technology.

The reasons I say this: Once a contract has finsihed they are out of there, this means

  • They aren't focused on your long term goals. They are constantly reviewing and planning the next job. (they have to in order to survive)
  • Technical debt isn't their consideration. Their focus is more likely to be to implement todays solution without the long term "how am I going to maintain it" ... we have had this problem in the past.
  • It met the letter of the spec, not the intent of the system. Their focus is daily tactical not "bigger picture of the company" because they aren't around long term to get what the bigger picture is.

Disclaimer: Good contractors have a professional ethic that stops a lot of the negative points simply because they have pride in their work and aim to do the best thing by the employer ... Those who have been doing it a long term with good recommendations are probably worth getting in to help troubleshoot or setup

Which leads me to the good points of contractors:

  • Only the good ones last a long time in the contracting business.
  • They often have a broarder range of experience having changed roles, companies, industies frequently.
  • There is a good chance they have seen the good and bad practices and you can learn from them.
  • Specilist skill sets can be important to get you over issues like archetecture, scaling

So what does this mean?

I think it means be careful who you employ either way, think hard about the role you are employing them for, long term do you need them?

Example:

  • We don't contract senior / team lead developers.
  • We don't contract junior developers (because we are investing in them for the long term)
  • We do contract testers because it is required by not part of our core competency ... we don't need them full time and its better to get in the really good ones for a week at a time.
  • WE do contract in network admin because we only need it a few days a month and the devs can do it but its a different personality.

Does this help?

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Great answer, thanks!! – user10693 May 26 '11 at 9:51
up vote 4 down vote

I don't know UK taxation laws, so I'll leave those items out to someone more familiar with that aspect of the issue.

If you hire contractors through a group (for example, you contact a development firm and contract 2000 hours of work from them, but don't specify which person will do the work) you can gain a wider variety of skill sets for the same price. With an employee, it might be a little more difficult to get all the skills you need, and so you may need to cut corners somewhere.

On the other hand, the amount you pay for the contractors may easily outstrip the cost of hiring an employee, since 2000 hours (roughly equal to 1 year full time work) paid by the hour is usually more expensive than the salary + benefits for internal staff. While you limit the number of skills you can get for that price, you can save a bundle.

The question you should look at is how many different people would need to be involved in the development and maintenance of the application, and how many of those people would have full time work. Compare that to the cost of hiring an outside firm for a year (where they have to supply all the individual people as needed) and then hiring just the people for maintenance and growth as needed.

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If you are seriously looking at bringing in contractors I would suggest looking for an individual contractor, consultancies are very expensive and will probably charge out thier "consultants" at double the rate you could hire a contractor for yourself, – Ardesco May 23 '11 at 10:05
True, but then you have to find the mix of consultants you'll need yourself, and have to coordinate their availability. The benefit of working with a firm is that they'll take care of that for you, and ensure that the right people are available when you need them. – Elie May 23 '11 at 17:59
Or (me being in cynical mode) they will overcharge you and throw anybody they have spare at the job and give you something working but hardly perfect and they will also charge an absolute fortune for "changes" to the spec. – Ardesco May 24 '11 at 8:04
No doubt that can happen too. I would be careful when selecting a company, perhaps more so than when selecting an individual, to make sure that you're getting what you actually need. One question to ask former clients is how well the company sticks to the project budget, and how well the project met expectations. Research of the company is incredibly important. – Elie May 26 '11 at 13:02
That happens. Whole companies are built around that crap and they have hundreds of thousands of emplyoees sometimes. It SUCKS. – NetTecture Mar 25 '12 at 21:14
up vote 1 down vote

The main pro for hiring a contractor is that you don't have to employ them (employing somebody is an expensive business) and you can kick them out of the door at very short notice if you start having cashflow problems.

The main con is finding a contractor who is competant. There are a lot of people jumping on the contractor bandwagon because they think it will make them rich, (which it won't, being highly skilled at your job will make you rich) but don't have the required skills.

On the plus side because it is easy to get rid of contractors if you do get a bad one you can kick them out the door very quickly and try again :)

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up vote 0 down vote

I worked for a company that liked to keep some contractors so that if times got tough, they wouldn't have to fire full-time employees. Instead, they could just let contracts expire. The downside to this is that the uncertainty of not knowing if one's contract will be extended can cause the employees to be always on the lookout for other opportunities.

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1  
Most career contractors will be used to 3/6 month rolling contracts and if the work is interesting and the rate is right are unlikly to suddenly dissapear. If all your contractors suddenly desert you for no obvious reason, I would suggest that you have other problems that you need to identify and fix ASAP. – Ardesco May 23 '11 at 10:03
Are you using "real" contractors, or just using temp employees? E.g. do the employees cost 2x what your employees cost? – Ian Ringrose May 26 '11 at 15:54
@Ian: This was ten years ago, and I was only working for them. Someone mentioned this, and I remembered it. – Neil G May 26 '11 at 17:15

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