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5 reasons why companies may prefer consultants to full-time employees

20 May 2017

Sub-contracting and hiring consultants instead of full-time employees is a growing trend in the technology sector. I’ve heard many CEOs mentioning their preference for consultants, especially at the company’s early stages. There are many good reasons for such preference – we examine 5 of them in this article.

Having worked as both a consultant and a full time employee in multiple companies, I’ve seen the benefits of hiring consultants as well as both benefits and drawbacks of being one.

1.Flexibility in spending and schedule arrangements

There are multiple billing options available for consulting services. Amount of time per week dedicated to a certain project may be specified. If workload varies, time per week may be capped, but not fixed. This allows companies to make sure their monthly expenses don’t go over-budget. Similarly, project duration may be either fixed or without an end date. If consultants are required to work on client’s premises, their working time may be scheduled around company’s needs. For example, in a manufacturing plant it is best to perform activities requiring access to manufacturing equipment when there is no production running. Of course, similar arrangements can be made with full-time employees, but consultants are generally more flexible.

2.Higher productivity

Since consultants bill by the hour or by deliverable, their mind set is to maximize their productivity. Each bill typically contains a detailed description of work performed. If billing by the hour, time spent on each task needs to be accounted for. If billing by a project deliverable, a consultant benefits by completing his/her task in the shortest time possible. This, in turn, positively affects client’s project timeline ensuring faster time to market. Also, a consultant’s engagement in a project typically lasts less than a full-time employee’s employment term. Therefore maintaining good reputation is key.

3.Low overhead costs

There are many costs of hiring full-time employees that don’t easily come to mind. Consider that in addition to base salary, an employee frequently gets benefits, paid training, RRSP top-ups, bonuses, stock options, and other perks. In Canada, an employer must contribute to each employee’s CPP. On top of that, employees are paid for time they don’t actually work. This includes statuary holidays, vacations, sick days, and time when business is slow. This list continues: how about HR and manager’s time for hiring process, performance reviews, and company-wide meetings? How about office space, workstation, specialized software, IT services? In contrast, most of these costs are not there when working with consultants. You pay hourly rate (or quoted project price) plus 5% GST (in BC, Canada). That’s all.

4.Lower investment in tools and equipment

Many consultants possess tools needed to do their job. This may include specialized equipment and software. It may include priority access to 3rd party facilities. This reduces company’s requirements for capital expenses as well as expenses associated with tools and equipment purchases. Unlike employees that don’t own company’s equipment, consultants treat their tools and instruments with care ensuring they perform top-notch all the time.

5.Expanded business network

We’ve already talked about consultants moving around from project to project more frequently than full-time employees. This also allows (and even forces) consultants to build an extensive network of business contacts. A client, in turn, benefits from consultant’s professional network. Need a set of complementary skills for a given project? Need your team’s design manufactured? Have more work than one consultant can handle? Your consultant may provide you with valuable referrals to take care of these situations.

Here we see that after careful examination it often makes sense for a start-up company to hire a consultant as opposed to a full-time employee. That’s why I’ve started Vital Engineering – to provide engineering services in a way that better answers start-up needs.

Whether you’re a technical manager or an aspiring engineering consultant, I hope that this article was helpful to you.

By: Vitali Tikhomolov, M. Eng., P. Eng., Senior Design Engineer, Vital Engineering Inc.

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