Contract Employee Meaning
Contract employees are temporary employees hired by a company on a contractual basis for specified projects and duration notified prior to hiring.
Unlike permanent employees, contract employees are not on the payroll of the company and enjoy the other benefits offered, in short, they are hired with terms and conditions. (in this article we are explaining about contract employee which is different from contract workers)
Contract employees are often termed as gig workers or freelancers.
Here, we will discover:
Since the last decade, everything from hiring processes to retention strategies is changing in the workplace landscape. There were times when employees were hired on a permanent basis, their specific roles and responsibilities changed at a slow pace and their day-to-day responsibilities almost involved similar workflows and processes.
Presently, technology advances every day, every company be it service, or product based must keep on upgrading on monthly basis and for evolution they require workforce.
Workforce that includes employees with specialized skillsets, who can understand the need of the hour and who can practically approach the problems and suggest solutions.
This VUCA and BANI landscape created the space for contract employees, who are hired for their expertise, paid on contractual basis and hired till the time their experience is required for development and growth of companies.
Benefits of Hiring Contract Employees
Now when we are talking about changing landscape, we should understand why the need to hire contract employees has increased.
Let’s discuss the benefits of hiring contract employees.
1. Flexibility and Scalability
Contract employees are hired to adapt to the current needs on an urgent basis and scale the workforce based on the demands of the project.
And unlike permanent employees, employees need not make long-term commitments. Once the project is completed, their contract can be completed.
2. Expertise and Specialisation
Many a times companies either take up the project or update their product that requires specialized skillsets, but their budgetary constraints don’t allow them to hire permanent employees.
Then, they hire contract employees who can bring professional knowledge of niche skills, ensure optimisation and desired output.
3. Budget Efficient
Deploying permanent employees comes at a cost. There is an onus on employers to provide health benefits, retirement plans and other perks either to maintain statutory compliances or to ensure employee branding.
However, with contract employees, except for their fixed amount pre-decided, employers are not bound to offer any other benefits to them. Hence contract employees are cost effective.
4. Administrative Burden
HR processes like onboarding, performance review, payroll management, employee engagement and more create the added responsibility to department with each permanent employee hired.
But with temporary or contract employees, these processes or responsibilities are managed by contractual agencies or by freelancers themselves.
How to Hire a Contract Employee?
To hire contract employees, employers can follow the steps below:
- Identify requirements of the specific task or project along with skill set required
- Write a job description to hire contract employee explaining roles, responsibilities and duration of the contract
- Evaluate candidate’s profiles and conduct interviews to assess skills and experience of contract employees to be hires
- Once screening is done and candidates are shortlisted, craft contract agreement and share with shortlisted candidates and get started
What are the Rules for Contract Employees?
To safeguard contract employees and protect their rights, there are some rules and regulations that employers must comply with.
Let’s understand them in detail. Contract employees-
- Pay their own taxes, social security cost and other payroll related amount as there is no payroll deductions
- No entitlement of worker’s compensation, retirement and health insurance benefits
- Either contracting agency or directly the hired contract employee deal with employers based on their employment contract signed before starting contract
Supreme Court Judgement on Contract Employee
State on the rights of contract employee-
2020: Indian parliament passed laws guaranteeing social security and occupational health and safety of gig workers, though law is yet to be implemented.
2021: Indian Federation of App based Transport Workers approached Supreme Court of India to direct the government and companies to recognize gig or platform workers as ‘employees’ and offer social security benefits guaranteed under new laws.
2023: The government of Rajasthan announced its own law and allocated 2 billion rupees ($2.4 million) for the welfare of gig workers in the state
Till now, no concrete judgement has been passed by the Supreme Court on gig workers. However, they must address their issues and ensure safety in order to protect the future workforce of India.