What’s Best for Your Business?” – The Pros and Cons

When building your team, deciding on the type of employment is crucial. Knowing what is best for you, your business and your employees can be tough to navigate and make sense of. In Australia, understanding the legal frameworks and industry-specific needs can guide this decision. We have taken a deep dive look without the jargon to help better understand the pros and cons of short term contracts vs. permanent hiring.

Short-Term Contracts

Pros:

Flexibility: Ideal for industries with fluctuating demands, such as construction and hospitality, allowing businesses to adjust staffing levels as needed.
Cost-Effective: Reduces long-term commitments, potentially lowering expenses related to benefits and entitlements. Engaging in short-term contracts can also save you on expensive labour hire fees.
Specialised Skills: Enables access to niche expertise for specific projects without permanent commitments. This is a great way to build a pool of reliable resources you can count on - in industries such as construction and hospitality, this style of hiring helps broaden your SME network of reliable people.

Cons:

Job Security Concerns: The Australian labour market has seen challenges with job security, particularly in sectors like higher education, where casual contracts are prevalent.
theguardian.com
Limited Loyalty: Short-term staff may not fully integrate into the company culture, affecting team cohesion. Unfortunately it goes without saying, someone on a short-term employment arrangement will never feel quite a ‘part of the team’ as permanent employees do.
Training Costs: Frequent onboarding can be resource-intensive.

Permanent Hiring

Pros:

Stability: Essential for roles requiring consistency, such as account management and leadership positions.
Employee Loyalty: Permanent staff are more likely to bind with company values and contribute to long-term goals. This also makes employees feel valued and will support the business and their goals long term.
Skill Development: Investing in permanent employees supports growth and enhances productivity.

Cons:

Higher Costs: Includes salaries, benefits, and other entitlements as mandated by Australian labour laws.
Reduced Flexibility: Adjusting workforce size in response to market changes can be challenging.
Risk of Poor Hires: Long-term commitments to unsuitable employees can impact business performance. This can be countered with effective performance management and training strategies, however it is one to be on top of for long term employee retention.

Legal Considerations in Australia

In Australia, employment classifications significantly impact entitlements and obligations:

Casual Employment: Casual employees receive a loading to compensate for the lack of benefits like paid leave. However, this classification has been subject to legal scrutiny, emphasizing the importance of correctly determining employment status.
en.wikipedia.org
Fixed-Term Contracts: These are contracts where an employee is hired to work for a set period of time, like six months or until a project is completed. However, employers can’t use these contracts to avoid giving employees the benefits and protections they would get if they were hired permanently (like paid leave or job security). If a fixed-term contract keeps getting renewed repeatedly, it could be seen as an attempt to avoid offering permanent employment rights. There were changes to how Fixed-Term Contract arrangements are made from 6 December 2023 by FairWork.
Permanent Employment: Offers job security and access to various entitlements, aligning with Australia's commitment to fair work practices.

Deciding between short-term contracts and permanent hires depends on what your business needs. If you work in industries like construction or hospitality where work comes and goes, short-term contracts can offer the flexibility you need.

If your business relies on building strong, ongoing relationships—like account management or skilled trades—permanent hires are often a better choice. It’s important to understand Australian employment laws and match your hiring approach to your business goals to build a reliable team.

Resources for business owners:

FairWork - Full-time employees

Fairwork - Part-time employees

Fairwork - Casual employees

FairWork - Fixed term contract employees

FairWork - Best practice guides

Business.gov.au - Industry information