What are the cost advantages of a contingent workforce vs. permanent hires?

Talent Acquisition Workforce Management

By Diyaa Mani
August 6, 2025

Updated
September 30, 2025

0 min read

Managing workforce costs isn’t easy and many leaders get stuck trying to figure out what’s more cost-effective: bringing on full-time employees or using contracted talent.

It’s not always a clear choice. Full-time staff come with long-term costs you might not think about right away, and contingent workers can seem more expensive than they are.

This article will break down the real cost differences between contingent workers and permanent hires.

What’s the difference between contingent and permanent workers?

Before we talk about costs, it helps to clarify what we’re comparing. “Contingent workforce” means people you bring in flexibly; freelancers, contractors, or temporary staff. Permanent hires, on the other hand, are your full-time employees.

Here’s how they differ at a glance:

Aspect	Contingent Workers	Permanent Hires
Employment type	Freelancers, independent contractors, agency temps, etc	Full-time employees on your company payroll
Commitment length	Usually short to medium term, depending on your project	Long-term, often with no set end date
Benefits	Don't usually receive benefits such as health insurance or paid time off	Typically receives a full benefits package
Onboarding time	Fast - often ready to jump in quickly with minimal setup	Slower- may need formal onboarding, training and equipment setup
Best use case	When you need extra hands for a specific project, seasonal work or sudden demands	For roles that are central to your business and need long-term stability

Cost breakdown - Where do the savings come from?

At first glance, hiring a full-time employee might seem cheaper than bringing in a contractor. But when you account for the full cost of employment, including taxes, benefits, and downtime, contract staffing can offer major savings, especially for project-based or short-term needs.

Salary vs. bill rate

Contingent workers often charge more per hour or day, but you only pay them for their work. No paid breaks. No paying them during quiet periods.
A full-time software engineer in the US might earn $100,000/year, which is around $48/hour (based on 2,080 working hours per year).
A contractor with similar skills might charge $75 to $150/hour, depending on their experience and the complexity of the role.

At first glance, the contractor seems more expensive. But unlike salaried employees, you’re not paying contractors for:

Holidays or sick days
Company meetings or training
Periods of low workload or downtime

With full-time employees, you're paying that salary regardless of how much work there is. Contractors, on the other hand, are paid only for the hours or days they work.

Benefits and hidden costs

The true cost of a full-time hire is often 20% to 40% higher than their base salary. Here’s why:

Payroll taxes: In the US, employers pay roughly 7.65% in Social Security and Medicare taxes.
Health insurance: Average employer contribution is $7,000 to $10,000/year per employee.
Paid leave: Includes vacation, sick leave, and holidays (often totalling 15 to 25 days).
Retirement or pension contributions: Many companies offer a 3 to 6% 401 (k) match in the US.
Other benefits include dental, vision, life insurance, training, and bonuses.

Once you factor everything in, that $100,000 employee could actually cost you $120,000 to $140,000 per year.

In contrast, independent contractors are responsible for their benefits, insurance, and taxes. You agree on a flat hourly or daily rate - the extent of your obligation.

Onboarding and training

Contingent workers are often ready to start right away. They’re used to jumping into new projects and getting things done fast. Typical onboarding time for contractors is two to four days.
Permanent employees usually take two to four weeks to get set up when joining a new company. You need to invest time in training, onboarding sessions, and mentorship, all of which can take resources away from other tasks. According to Bamboo HR, you can expect to spend between $7,500 and $28,000 in hard costs to find and onboard a new employee.

Equipment and workspace

Contractors often use their own laptops, software, and tools. Many work remotely, so there’s no need for a desk or office space.
Permanent employees, by contrast, usually require:
- A company-issued laptop or desktop ($1,200 to $2,000 per employee)
- Monitors, keyboards, headsets, and accessories ($300 to $500)
- Software licences and security tools ($300 to $1,000/year)
- Office furniture or desk space (if in-office or hybrid)

These costs can add up quickly, especially for larger teams or when scaling fast.

When is a contingent workforce more cost-effective?

Contractors may cost more per hour—but not when you factor in downtime, benefits, and overhead

Here are some common examples where hiring on a flexible basis makes more sense than committing to full-time staff:

During busy periods or project spikes

Imagine you’re a tech company rolling out a significant product update. You need more developers, testers, and designers for only three months.

Bringing in short-term contractors lets you handle the workload without hiring full-time staff you won’t need later. You scale up for the busy season and then down just as easily.

When expanding into a new market

Let’s say your company is testing the waters in a new country or region. You’re unsure how big the opportunity is or how long you'll stay.

Hiring local freelancers or contractors can help you build a small presence without locking into long-term employment costs, office space, or admin work. If things go well, you can always hire full-time later.

When you need specialised skills for a short time

Maybe you’re upgrading your cybersecurity systems and need an expert to guide the setup. But once the project’s done, you won’t need them full-time.

Hiring a specialist contractor gives you the exact skills you need without paying a permanent salary for work required only once.

When you need to move fast

Your company just landed a big client, and you must build a team quickly to deliver. Recruiting and onboarding full-timers could take months.

Contract talent lets you move fast. They’re often ready to start immediately, helping you hit deadlines and keep clients happy without the slowdowns of full-time hiring.

Which is more cost-effective for you?

There’s value in both models. It’s not about which is better, but about which is better for you.

Understanding when to use each type of hire can save you time, money, and stress. Here’s a quick cheat sheet to help you decide:

Situation	Best Option
Working with tight or unpredictable budgets	Contingent – You only pay for the work you need, when you need it.
Hiring for long-term roles tied to business growth	Permanent – Full-time staff help build company knowledge and grow with you.
Need to move fast or bring in specialised skills	Contingent – Ideal for project work, urgent needs, or one-off expertise.
Developing core systems, products, or internal knowledge	Permanent – Better for roles where continuity and ownership really matter.

Bottom line:
Contingent talent can be more cost-effective if you need flexibility and speed. But permanent hires might be worth the investment if you're building long-term. The right mix often comes down to your goals, budget, and how fast you need to move.

Struggling to find the right balance between contract and full-time talent?

That’s where the right partner makes all the difference. At Airswift, we help companies worldwide build agile, cost-effective workforces, whether that means finding specialised contractors fast or hiring permanent employees in new markets.

Our global reach and local expertise mean you get the right people without the headaches of compliance. Let’s talk about how we can support your workforce strategy.