Everything Employers Need To Know About Managing Temporary Contracts

Written by Julian Canlas

Temporary Contracts: An Employer's Guide

Temporary contracts are normally a form of employment contract. Each temporary employment contract has an end date to take note of for renewal or termination. They are often more flexible than permanent contracts, because temporary contracts include fixed end dates that can be renegotiated by both the employer and the contractor. But here also lies a caveat:

Temporary contracts can often be difficult to manage because they need to be constantly updated. As an organization scales and its temporary contracts become more complex, there needs to be an effective contact management system to prevent mistakes from happening (e.g. accidental renewals, late payments, etc.). In this article we’ll cover everything there is to know about temporary contracts, and consider why you should use software to manage them properly.

What Are Temporary Contracts?

Temporary contracts are legal agreements to work for employers for a specific, limited amount of time. This could include during the holidays, over the summer, or covering for an employee on maternity leave. They are especially common in sectors that find it difficult to manage the financial demands of permanent employees due to the fluctuating demands of work. 

Outsourced by the hiring company, staffing agencies mainly use and pay for temporary contracts. This is because staffing agencies are more efficient and deal directly with hiring, payroll and human resources issues. 

Temporary employees can serve various purposes depending on the company’s needs. Companies can employ temporary workers to fill a full-time employee’s spot when they are on vacation, or when funding to hire another full-time employee is not available. Additionally, organizations can hire specialists on a temporary basis to fill in a knowledge gap.

Advantages Of Temporary Employment Contracts

Access to a large pool of skilled workers.

When companies approach recruitment agencies for temporary employees, they gain access to an array of skilled workers who have already been pre-screened. This saves the company valuable time and money in the hiring process. 

Gives companies a trial period before committing to hiring the employee.

Temporary employees appeal to businesses because when arranged with the recruitment agency, the employer is entitled to a “trial period”. This allows the company to determine and evaluate the employee’s performance before deciding to promote them to a full-time position or let them go. Many companies often hire employees on a temporary contract for 3 months, before turning them permanent.

Reduces employment costs for companies

Temporary employees are cheaper labour for companies as they don’t receive the same employment benefits as full-time staff. This includes health benefits, paid time off and the relevant compensation packages. 

Disadvantages of temporary employment contracts

Temporary employees also require training.

Regardless of how skilled or experienced the temporary employee is, they will still require some time before getting up to speed with your way of doing business. For example, factory workers will need time to familiarize themselves with unique equipment, while office staff will require time to get used to various software. 

Lower levels of corporate loyalty compared to permanent employees. 

This is largely because temporary employees are not typically given the same fringe benefits as other permanent employees. Moreover, they face more instability when cuts occur as temporary employees will often be released. They are also not entitled to promotional opportunities regardless of work quality during their temporary employment period unless otherwise stated in their contract. 

Diminished morale amongst existing employees.

Hiring temporary employees may create friction amongst existing staff. Permanent workers may fear being replaced. Long established processes may cease to function efficiently because trust has not been established with the new employees. 

Types of temporary employment contracts

Internships

Companies often offer internships to graduates or students for them to gain hands-on work experience in their field of study for a temporary time before joining the workforce. These include both paid and unpaid internships. 

Advantages

  • Offers companies additional help at low costs. Interns usually work for little-to-no pay, giving employers extra help at low cost. Hiring interns can also be a form of recruitment to encourage interns to apply or convert into a full-time position with the company. 
  • Introduction of fresh perspectives. Drawing perspectives from people outside of your industry, team or operations could bring about surprising inspiration. Bringing in students who don’t see your company from the inside every day opens up opportunities for fresh perspectives on your business, strategies, and plans. 
  • Mentorship opportunities. Many employees look for opportunities to mentor younger people. An internship program provides the perfect opportunity for your employees to do so. Not only will it be helpful for your business culture, it also benefits the student’s wellbeing and continued learning. 

Disadvantages

  • Lack of experience. Interns are here to learn, meaning they may not have the necessary skills you require from seasoned employees. It will be time consuming to teach them, and this time spent teaching, could have been used on other tasks to improve productivity.
  • You may not have enough meaningful work for them. The work you assign to your interns may be repetitive and mundane, where they don’t get many learning opportunities. If your business is slow and there’s not much work to do, considering waiting to hire in another semester instead. 

Part-Time Employees

Part time employees are people under a contract of service to work less than 35 hours a week compared to full time employees who work at least 40 hours weekly. They are usually paid by the hour excluding break times, or a fixed monthly sum. 

Advantages

  • Flexibility for employers. Part-time employees allow companies to staff according to the company’s needs as it doesn’t make sense to keep a roster of full-time employees in volatile industries. Hiring part-time employees helps to carry the workload while providing your full-time employees with an extra level of support. 
  • Cost-effective solution for temporary needs. Employing part-timers helps keep overhead costs low and are less expensive because they don’t get the same benefits as full-time employees. They are also paid by the hour, and without the health care and paid leave benefits, it offers the company large cost-savings for extra labour. 
  • Larger talent pool. Part-time employees often include moms re-entering the workforce or retiring workers who are not quite ready to leave. These people bring with them expertise obtained from previous work experiences that might benefit your company.

Disadvantages

  • Low commitment or productivity issues may arise. This is a risk every company faces when hiring part-time workers. They may feel that they don’t owe your company because they don’t receive any benefits, nor are they as valued as full-time employees. Hence, they don’t have a deep connection with the company unlike full-time employees.
  • Potential for inconsistent work. Part-timers may not work the full workday, and they sometimes clock out before a project is completed. Either that, or they may need to try and catch up on the next workday. As they work less, they are not as familiar with the work, and hence, the quality of output suffers.

Freelancers/Contractors

Freelancers are essentially self-employed personnel and often take on contract work for companies and organizations. These “contractors” are mostly responsible for all sorts of things that traditional employees are not, such as setting their own work hours, keeping track of time spent on different projects, etc. 

Advantages

  • Independent work style. Freelancers are considered to be experts in their domains, hence enabling them to work independently without any support. 
  • Access to global talent. Companies can hire talented personnel across the globe due to the remote nature of this employment type. As it may be difficult to communicate across time zones, companies should keep in mind to be specific with the job requirements.

Disadvantages

  • Uncertainty in freelancer’s progress. In the case of fixed price projects, it is difficult to track the time invested by the freelancer. Moreover, freelancers may not be used to reporting time distribution and a timesheet may be restrictive for a freelancer. 
  • Difficult To Gauge Quality Of Freelancers. Freelancing Portals Do Not Screen The Freelancers Unlike Recruitment Agencies. Hence, They Can Only Be Evaluated Based On The Projects They Have Uploaded Or Past Portfolio. Although Some May Have The Required Qualifications, They May Not Necessarily Be Skilled Beyond Technical Aspects. 

What Should Be Included In Temporary Employment Contracts?

Temporary employment contracts should detail all the job specifics, outline expected deliverable and tasks, and employment particulars. Apart from those, here are some other points to include: 

  • Employee entitlement & benefits
  • Working hours
  • Employee details
  • Business details
  • Notice period details
  • Job payment terms
  • Grievance handling, disciplinary action, etc.

Some companies prefer taking in part-time employees and each contract has a different end date. How can your human resource team effectively manage them all without leaving out any important renewal or termination dates? 

Defining A Management Process For Temporary Contracts

Today, the norm for effectively managing temporary contracts at scale is investing in a contract management platform that can automate and standardize processes.

These are 3 reasons why you should invest in it:

  • Receive notifications and reminders on key dates. Never miss a renewal or payment deadline again. Automated reminders allow contract managers to update a contract on time without any issues.,
  • A centralized platform to save all your contracts. All employees can be given access and be kept up to date with the latest versions of amended contracts. Contracts can also be sorted into folders for easy browsing of contract details.
  • Know who has access to your contracts. Employees can easily find out who has access to each document and managers can chat with employees within the platform and approve contracts swiftly. 

With an all-in-one contract management platform such as Contract Hound, you can now scale your contract management processes and speed up contract approval processes within your company!

Published

February 25, 2021

Writer

Julian Canlas

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