The Pros and Cons of Staff Augmentation vs Contractors

October 17, 2022

By Emily Morgan

Technical Writer

Have you ever thought about which remote work model is best for you and your business? Is it staff augmentation or using contractors? If you are confused between the two, you are not alone in this. It is very hard for tech leaders when it comes to staff augmentation vs contractors.

Of course, things aren’t quite that easy. Leaders in the technology sector have various hiring choices and must select the best one to meet their objectives within the time frame and financial constraints.

We have compared staff augmentation vs contractors, their pros and cons, and choosing which is best for your firm. Let’s start with the basics and discuss staff augmentation and contractors.

Staff Augmentation

staff augmentation

Staff augmentation is a cost effective staffing strategy that adds a temporary, highly-skilled person or team to your existing workforce to improve project output.

The market intelligence firm SpendEdge recently released a report predicting that the worldwide staff augmentation marketplace will expand at a CAGR of 3.53% between 2021 and 2025, resulting in an additional spend of $81.87 billion.

Staff augmentation has become a more appealing choice for IT-related businesses or departments to fulfill the ever-changing requirements of their clients and users and the market dynamics, particularly in times of instability when adaptability and flexibility are crucial qualities.

Businesses may quickly adapt to their operations’ changing demands and needs with the help of an IT staffing agency or Consulting Firm offering these services.

You can read in more depth by following the link below:

Staff Augmentation Parent Guide

Contractors

contractor

Managed services, hiring independent contractors, is another popular type of business hiring model. Compared to staff augmentation, this methodology is unique in several important respects. This is known as outsourcing, when one company hires another to handle a job.

The number of contingent workers is on the rise. More and more people are developing their skills and education for this. As contractors are hired for a specific skill set, there is an increase in skill learning. There are 54 million people (one-third of the total workforce) working as independent contractors in the US.

In this model, businesses only need to specify what they need and wait for it to be completed. There is little else for them to manage. This model can save both time and material for the company. However, for some, this surrender of power might be unsettling.

The Pros of Staff Augmentation

When augmented with additional personnel, multiple alternatives are available for pre-existing teams. Benefits it provides include the following:

Increased Flexibility

Having a short-term worker to help with tasks can save you time, money, and materials. Utilizing a staff augmentation service can help you save money on payroll taxes and benefits by charging you for the hours employees put in.

This model gives you more flexibility as you are not confined to follow the employment rules. You can bend the ongoing job in the way you like. Selecting an augmented staff team makes it simple to arrange for large and small initiatives, even though few full-time employees would agree to work such long hours.

Reduced Costs

Permanent employment may not be worthwhile if you anticipate using a worker for only a few weeks or months. Even one full-time employee will result in significant financial outlay due to wages, benefits, and taxation.

You can bring on a specialist only when needed with augmented staffing rather than an expensive long term project. As a result of the  , it is now more costly and challenging to hire full-time employees.

However, an enhanced staffing service can assist you in avoiding the ACA’s stringent rules and exorbitant health insurance payments.

Improved Quality of Work

When a project calls for expertise that isn’t currently available in-house, bringing in additional help can be the best option. If the requirement for the requisite abilities is temporary, this strategy excels. You can hire experienced project managers to enhance the quality of the final output.

pros and cons of Staff Augmentation

The Cons of Staff Augmentation

Along with a lot of benefits of the staff augmentation hiring model, we also see some drawbacks, including:

Increased risk

It takes time for a team to adjust to adding new members. Your team’s productivity may decrease temporarily as new members learn the ropes of the business. As expected, adding new members to a team causes a temporary pause in progress.

It’s possible that your internal team won’t be as productive as usual as the new hires learn the ropes. However, getting your augmented personnel up to speed on the project may take more time and additional costs. All of these factors threaten the project’s success as a whole.

Lower Quality of Work

Sometimes, only current staff members have the breadth and depth of experience in the company’s history necessary to complete some initiatives successfully. Depending on the nature of the undertaking, a new hire may require training and ramp-up time. The resultant output may suffer as a result.

The Pros of Contractors

The modern economy is booming because of the rise of freelancers and contract workers who specialize in short-term projects. Working under a contract has various benefits:

Reduced Risk

Numerous laws exist for the safety of workers, and employers must follow them. The rights in question consist of the following:

  • An area free from danger where employees can do their jobs
  • There should be a bare-bones salary floor.
  • It ensures that employees are safe from discrimination in the workplace.
  • Safety from retaliation by the company

When an independent contractor is used, the company’s liability in the event of a claim is considerably reduced, and the company can dictate the company’s hiring terms. This overall reduces a lot of risks involved.

Increased Quality of Work

Contractors must be able to get along with others, but their expertise usually gets them employed in the first place. This means they are competent and require little training before contributing to the team.

A contractor’s resume will typically highlight a strong set of defined abilities you may look for when making recruiting decisions. Therefore, there are many opportunities to enhance the standard of work and the results obtained.

pros and cons of contractor

The Cons of Contactors

It’s likely that after reading this, you’ll swear off ever employing another employee again in favor of working exclusively with contractors. However, there are also substantial drawbacks to utilizing contractors, including the possibility that government agencies will challenge your classification decision.

You may not feel completely at ease turning over control of the project and all associated data and intellectual property to a new group. Here are some of the cons of contractors:

Higher Costs

Despite the prior discussion of the commercial benefits, paying foreign contractors in their native currency may be prohibitively expensive. This currency conversion issue is common among companies that employ freelancers or contract workers in several countries.

Full time employees are happy to go the additional mile if it means the job gets done. Furthermore, they wouldn’t ask for or expect to get any overtime compensation. On the other hand, contractors will not accept anything less than the full amount of their agreed-upon hourly rate for any time beyond that which they have worked.

Less Flexibility

A contractor you hire may have a work process different from the rest of your team, which may lead to misunderstandings and some adjustment time. You can’t change the contractor’s approach to bend it in your way. So there is very little flexibility while using contractors.

When to use Staff Augmentation

Consider your options’ potential pros and cons, and move forward only if you’re confident in your ability to control the potential dangers. Go for augmented staff in the following cases:

staff augmentation2

When you need Extra Help

Outsourcing is a good option if your project team is already performing well but could use some enhanced operational efficiency. It’s worth noting that it’s possible to acquire excellent performance and cost savings by employing software experts from Eastern Europe.

Whether long or short your contract is, a staff augmentation strategy can help you satisfy your obligations. Additionally, you can quickly and easily tap into a wide pool of software development teams located anywhere in the world.

When you need Specialized Skills

You’re looking to quickly grow your team by adding key individuals with specific skill sets. Staff augmentation is useful when only temporary access to specialist expertise is required, such as setting up new technology, developing a new brand, or constructing new facilities.

Recent research by McKinsey & Company found that nearly nine in ten businesses worldwide are experiencing a skills gap right now or anticipate one within the next few years. In a cutthroat industry like IT, quickly locating and incorporating employees with specific talents can make all the difference.

skilled employee

When to use Contractors

Whether an individual is hired as an employee or independent contractor is determined on a case-by-case basis. These instances of bringing in an outside contractor could be beneficial.

When you need a Short-Term Boost

The shortage of resources or expertise is a common problem for businesses, especially regarding one-off or temporary projects. Projects of this type can include but are not limited to introducing new information technology or systems.

It can also include meeting regulatory or policy mandates and analyzing current methods and their effectiveness. Hiring a contractor can give you more freedom to do these jobs and get a short term boost without the commitment of a full-time employee.

When you need to Fill a Specific Fill

In some cases, your company may need access to experts in a particular field of expertise. A wide range of specialized talent is available for contract or interim employment.

It includes those with experience in IT, labor relations, project management, systems integration, and technical competence in disciplines like engineering and geology.

Conclusion

There are pros and cons to utilizing staff augmentation facilities. Before deciding, it’s crucial to comprehend the staff augmentation model. When you need more hands-on board but don’t want to add permanent staff members, staff augmentation may be a smart option.

On the other hand, using contractors can also be successful if you give it enough thought and effort. Contractors have emerged as a viable option in today’s dynamic technological landscape.   It provides a means for businesses to tap into a wider talent pool, build stronger teams, reduce costs, and better manage employees for their most critical projects.

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