3 Types of Labor Models: Which is Best for You?

11/01/2024 03:00 AM

1. Full-time Employees

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According to the IRS (Internal Revenue Service), a full-time employee is someone who works an average of at least 30 hours per week. Full-time employees are best suited for long-term projects that directly impact a company's mission, require close supervision from management, or necessitate relationship building between individuals.

Advantages

  • More control over the work process

The company fully determines employee training styles, specific work hours, tools and processes used, and priorities for staff. Management can also closely monitor or regularly check in on work.

  • Stronger relationships can be built

Full-time employees can develop meaningful relationships with other staff and clients. This is particularly helpful when employees have specialized market or customer group knowledge.

  • Increased employee retention and loyalty

This model provides employees with job security and confidence, encouraging them to bring in more followers, customers, or potential candidates. Salaries and benefits for full-time employees can significantly reduce a company's hiring costs.

Disadvantages

  • Managing payroll and benefits administration

Employers must regularly pay salaries and manage benefits (including paid leave) for full-time staff through payroll solutions. They also must handle various tax requirements for employees.

  • High workforce development and turnover costs

To keep employee skills and knowledge current, companies must invest in training, mentoring, equipment, and relocation for staff.

  • Low work flexibility

Full-time employees often trade flexibility for job security. Companies must maintain a positive culture to engage and motivate employees.

Fact: Replacing an employee costs an estimated twice as much as their annual salary.

2. Project Teams

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These independent workers are well-suited for short-term tasks or external projects requiring specialized skills but less oversight.

Advantages

  • Expertise and experience available at negotiable rates

Companies can pre-negotiate with groups for top services on small, time-bound, or highly specialized communication projects.

  • Quick task preparation

Groups often have their own equipment, resources, or teams ready to immediately start projects with fast turnaround.

  • Diverse perspectives and learning

Groups are exposed to various clients, optimized methods, and opportunities to learn from industry peers. Companies can tap into these to explore new markets or work trends.

Disadvantages

  • Low work focus

Groups often work varying non-overlapping hours from the company and juggle multiple simultaneous projects.

  • Limited company control

Most groups use their own tools/teams, and some processes may affect company protocols. Clear project agreements are needed.

  • Not a long-term hiring solution

Issues like seasonality, economic shifts, or competitor activity could make top performers unavailable when needed.

3. Contract Employees

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Contract staff begin as temporary then have opportunities to become permanent by consistently meeting business needs. For small companies, employers can hire contractors initially to meet goals, then retain the most capable full-time staff.

Advantages

  • "Try before you buy"

Contracts include trial periods for employees to experience the company culture/style before committing fully. Underperformers need not be extended.

  • Hiring advantages over competitors

Known contract staff needing full-time roles saves interview/onboarding time and prevents competitors from poaching candidates.

  • Overall lower costs

Contractors often self-supply equipment, allowing budgets for full-time staff and higher priorities. Retaining strong performers with more work until full-time roles open.

Disadvantages

  • Inconsistent hiring expectations

Clarify with contractors if full-time positions are possible outcomes or just temporary engagements.

  • May not suit full-time employee work style

Some just want to keep their own hours, projects, studios or brands, conflicting with full company commitment.

  • Time-consuming hiring cycles

Frequent hiring/onboarding/offboarding of mismatched candidates wastes resources. Define clear role requirements and candidate demonstrations.

Seeking Skilled Employees for Short and Long-Term Company Goals

If your company needs to complete specialized tasks quickly, using independent contractors may be an optimal choice. However, if you're willing to invest in a full-time employee, the returns they bring could be substantial. And if you have the time to "try before you buy," contract employees can provide long-term hires from temporary job projects.

(According to LinkedIn)

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