Hiring Temporary vs. Permanent Employees: Pros and Cons

When building or expanding a workforce, one of the first questions businesses face is whether to hire temporary or permanent employees. Each option comes with distinct advantages and drawbacks, and the right choice depends largely on your organisation’s needs, growth stage, and long-term strategy.

In today’s employment market, flexibility is just as important as stability. Many businesses rely on a combination of both temporary and permanent hires to balance costs, maintain productivity, and remain competitive. So, when to consider temporary staffing? Understanding the pros and cons of each approach will help you make informed decisions that align with your business objectives.

What Is a Temporary Employee?

A temporary employee is hired on an hourly-rate basis, typically to cover last-minute or emergency gaps in the workforce. These arrangements are highly flexible and can sometimes continue on a week-by-week basis. Temps are paid more per hour to compensate for the absence of employee benefits such as pensions and paid leave. They can also earn overtime, making them well-suited to unpredictable or fluctuating workloads.

What Is a Contract Employee?

A contract employee is hired for a fixed term with a defined end date, usually to cover planned absences such as maternity leave or to deliver specific projects. Unlike temporary staff, contract employees are typically salaried rather than paid hourly, and they often receive some employee benefits. Contract roles provide more structure and commitment than temporary arrangements, with no overtime typically offered. They’re also commonly used as a “try before you buy” arrangement, allowing businesses to assess a candidate’s fit before offering permanent employment.

What Is a Permanent Employee?

A permanent employee is recruited on an ongoing basis with no defined end date to their contract. They receive a full benefits package and are integral to the long-term vision of a company.

Pros of Hiring Temporary Employees

Flexibility

Temporary staff give businesses maximum agility to scale their workforce at short notice. Whether it’s covering sudden absences or unexpected demand spikes, temps ensure continuity without committing to long-term costs. They can even bridge a gap when you are looking for the perfect permanent talent.

Cost Control

Although hourly rates for temporary workers are higher to compensate for the lack of benefits, the overall cost can still be lower when you factor in the absence of pensions, bonuses, training, and paid leave.

Speed of Hire

Temporary roles can often be filled within hours or days through specialist agencies, making them ideal for urgent, last-minute cover.

Overtime Availability

Temporary staff can work overtime when needed, providing additional flexibility during peak periods.

Cons of Hiring Temporary Employees

Lack of Continuity

Temporary staff may not stay long enough to build strong relationships with clients or colleagues, which can affect consistency and culture.

Limited Commitment

Because the arrangement is often week-by-week, temps may not be as invested in the long-term success of your company, leading to lower engagement levels.

Training Demands

Even short-term staff need onboarding and training, which can take time and resources away from permanent team members.

Knowledge Loss

Once their engagement ends, temps take their knowledge with them, which can create challenges in maintaining continuity.

Pros of Hiring Contract Employees

Planned Coverage

Contract roles are typically used for planned absences or projects, allowing businesses to prepare and ensure smooth handovers.

Trial Opportunity

Hiring someone on a fixed-term contract serves as an effective “try before you buy” approach. If they prove to be a strong fit, you may offer them a permanent contract later.

Specialist Expertise

A contractor can bring specialist skills that your existing payroll function may lack. Whether that be project management, implementation experience or software knowledge, you choose the skills most relevant for your team.

Benefits Inclusion

Many contract employees receive some benefits, which can improve retention and engagement during the contract period.

Stronger Commitment

With a defined fixed term and salaried status, contract employees often show greater commitment to their role than temporary staff.

Cons of Hiring Contract Employees

Higher Cost Than Temps

Salaried contracts with benefits typically cost more than hourly temporary arrangements, particularly for short-term needs.

Less Flexibility

Unlike temporary staff who can be engaged week-by-week, contract employees come with a fixed-term commitment that can’t easily be shortened if circumstances change.

No Overtime

Contract roles typically don’t include overtime, which may limit flexibility during periods of exceptionally high demand.

Still Time-Limited

Like temporary staff, contract employees will eventually leave, taking their knowledge and experience with them.

Pros of Hiring Permanent Employees

Stability and Commitment

Permanent employees are generally more committed to the long-term success of the company, creating a stronger sense of stability and reliability.

Skill Development

Because they remain with the company, permanent employees can be upskilled and developed over time, contributing to a more experienced workforce.

Cultural Integration

Permanents are more likely to adopt and reinforce company culture, helping build team cohesion and shared values.

Strategic Contribution

With deeper knowledge of the business, permanent employees often bring valuable insights into operations, processes, and long-term planning.

Cons of Hiring Permanent Employees

Higher Costs

Permanent employees come with ongoing expenses, including pensions, paid leave, training, and bonuses, which can be a significant financial commitment.

Reduced Flexibility

Unlike temporary or contract arrangements, permanent hires limit agility if demand fluctuates. Downsizing or restructuring permanent staff can also be costly and legally complex.

Longer Hiring Processes

Recruiting permanent employees usually involves more rigorous assessments, interviews, and notice periods, delaying the time to fill critical roles.

Risk of Mis-Hire

A poor permanent hire is more damaging than a poor temporary or contract hire due to the longer-term financial and cultural implications.

Which Option Is Best for Your Business?

The choice between temporary, contract and permanent employees often comes down to the following considerations:

Business Needs and Planning

If you need last-minute cover or have unpredictable, fluctuating demand, temporary hires provide maximum flexibility. For planned absences such as maternity leave or defined projects, contract employees offer structure and commitment. For stable, ongoing operations, permanent employees are the better choice.

Cost Management

For short-term, emergency gaps, temporary staff can reduce long-term financial commitments. Contract employees sit in the middle, offering planned coverage with some benefits. For stable operations, permanents may provide better value through loyalty and development.

Trial and Assessment

Contract roles are particularly effective for assessing candidates before committing to permanent employment, offering a structured way to evaluate cultural fit and performance.

Workforce Strategy

Many businesses find that a hybrid model delivers the best results: using temps for immediate, unpredictable needs; contract staff for planned projects and trial periods; and permanent employees for core functions and long-term stability.

How Portfolio Payroll Supports Employers

At Portfolio Payroll, we help businesses make confident hiring decisions by understanding both immediate and long-term workforce needs. With over 35 years of recruitment experience and recognition as the UK’s number one rated recruitment agency on Trustpilot, we are trusted partners in payroll and HR recruitment.

• Temporary staffing solutions – Whether you need last-minute cover for absence, unexpected demand, or emergency gaps, we provide fast access to skilled professionals on flexible, hourly terms.
• Contract recruitment – We connect businesses with salaried professionals for planned projects, maternity cover, and trial periods, offering the structure and commitment of fixed-term arrangements.
• Permanent recruitment – We connect businesses with candidates who bring stability, cultural fit, and long-term value.
• Expert insight – Our consultants provide market intelligence to help you balance costs, benefits, and workforce strategies across all employment types.
• Specialist support – From Payroll roles to dual-benefit or reward positions, we offer expertise in payroll staffing support tailored to your organisation.

The Bottom Line

Hiring decisions are rarely straightforward. Temporary employees offer flexibility and speed, while permanent employees bring commitment and long-term value. For most organisations, the ideal solution is a blend of both – ensuring stability while retaining the agility to respond to changing demands.

At Portfolio Payroll, we work with businesses across the UK to build the right workforce strategies, providing access to both temporary and permanent talent. By aligning recruitment with your operational and strategic needs, we help ensure every hire adds measurable value to your business.