Contract vs permanent staff: Is hiring contractors right for you?

When building a team, employers face a critical decision: whether to hire contractors or permanent staff. This choice goes beyond filling roles – it shapes how your organisation responds to change, manages costs, builds expertise, and sustains growth.

This guide outlines the key distinctions, explores the scenarios of both hiring types, and helps you decide which model best suits your needs.

Speak to a recruitment expert

What is the difference between contractors and permanent staff?

In Singapore, independent contractors are usually engaged for specific projects or defined timeframes. They operate independently or under fixed-term agreements and are not entitled to statutory benefits under the Employment Act. Employers also often engage contractors through a skill-first hiring approach – focusing on the specific expertise needed to deliver outcomes quickly and efficiently.

Permanent staff, on the other hand, are employed on a continuous basis and enjoy full employment benefits, including Central Provident Fund (CPF) contributions, paid leave, and other entitlements.

Here’s a breakdown of the key distinctions:

When does hiring contractors make strategic sense?

Hiring independent contractors can be a smart move when your business requires flexibility, speed, or access to specialised expertise without long-term commitments. This approach is particularly effective in the following scenarios:

1. Project-based initiatives

Contractors are ideal for short-term, outcome-driven projects that require specialised expertise. For instance, if you're developing a fintech app, you may need mobile developers, UI/UX designers, and QA testers for a six-month sprint. Rather than onboarding full-time employees – who may not be needed beyond the project’s lifecycle – contractors allow you to assemble a high-performing team quickly, execute efficiently, and scale down once the deliverables are met.

This model is particularly effective for startups and innovation teams that operate in fast-paced environments where speed to market is critical.

We often recommend contractors for project-based roles or when speed is critical.

– Jeffrey Ng, Regional Director, Michael Page Singapore

2. Seasonal campaigns

Retail and consumer brands often face seasonal spikes in workload, especially during festive periods like Deepavali, Christmas, or Lunar New Year. During these times, businesses may require graphic designers, copywriters, and social media managers to run targeted campaigns. Since the demand is temporary and time-bound, hiring contractors ensures you meet marketing goals without committing to long-term employment costs.

3. Operational surges and fluctuating demand

Industries such as logistics, e-commerce, and hospitality frequently experience operational surges – particularly during year-end holidays, major sales events, or peak travel seasons. For example, e-commerce platforms often require extra customer service agents and order fulfillment staff during flash sales or festive campaigns. Contractors help meet these short-term needs without inflating the company’s fixed payroll.

4. Access to niche or emerging skills

When businesses explore new technologies or enter unfamiliar markets, they often require specialised skills that are not readily available in-house. Contractors with expertise in areas like blockchain development, AI integration, or cybersecurity can be brought in to fill these gaps quickly. This allows companies to innovate and experiment without the long-term commitment of hiring full-time specialists.

When is it better to hire permanent staff?

Permanent staff are essential when your business requires continuity, strategic alignment, and long-term investment in talent. These employees contribute to the organisation’s stability, culture, and sustained growth. Here are key scenarios where permanent hires are the preferred choice:

1. Building core functions

Functions such as operations, finance, and human resources demand deep familiarity with internal processes and long-term commitment. In industries like manufacturing, permanent staff are better positioned to optimise workflows, uphold standards, and evolve with the company’s needs over time.

2. Driving strategic growth

Roles that shape long-term strategy – such as a regional sales director in a tech firm – require sustained engagement and alignment with organisational goals. Permanent employees in these positions are more likely to develop market insights, build lasting client relationships, and contribute to strategic planning.

3. Developing internal talent

Sectors like healthcare rely heavily on internal talent development. Permanent hires offer better returns on training and mentorship, allowing junior staff to grow into leadership roles. This long-term investment builds institutional knowledge and supports succession planning.

4. Ensuring compliance and accountability

Positions involving compliance and risk management – such as regulatory officers in financial institutions – require consistent oversight and accountability. Permanent employment provides the stability needed to uphold regulatory standards and manage risk effectively.

How to decide between contractors and permanent staff

Weighing the trade-offs

The smartest hiring decisions begin with clarity – what problem are you solving, and for how long?

– Jeffrey Ng, Regional Director, Michael Page Singapore

The decision to hire independent contractors or permanent staff hinges on your organisation’s priorities – whether that’s speed, cost control, specialised expertise, or long-term continuity. Each path offers distinct advantages depending on the nature of the role and the business context.

The table below outlines key considerations to help clarify which option may be more suitable:

Making the right hiring decision

Start with the role’s purpose. We advise clients to map roles by impact and duration. If it drives long-term strategy or culture, go permanent. If it’s about speed or specialisation, contract talent is your best bet.

– Jeffrey Ng, Regional Director, Michael Page Singapore

To determine the best fit, start by evaluating the role’s scope and duration:

• Is it tied to a defined project or short-term initiative?
• Does it support seasonal or campaign-based activity?
• Is specialised knowledge required that your team doesn’t currently possess?
• Are you testing a new market or technology with uncertain outcomes?

If so, contractors offer the flexibility and speed needed to execute without long-term obligations.

Conversely, consider whether the role demands deeper integration:

• Will it contribute to strategic planning or leadership?
• Is it central to team cohesion or culture-building?
• Does it involve regulatory oversight or risk management?

In these cases, permanent staff provide stability, accountability, and the opportunity to build internal capabilities.

Budget also plays a role. If resources are constrained, contractors can help manage short-term costs – provided expectations are clearly defined. But when long-term growth is the goal, investing in permanent talent often yields stronger returns through continuity, development, and institutional strength.

Choose the right talent model for your business with Michael Page

There’s no one-size-fits-all answer. The right choice depends on your business goals, the nature of the role, and your capacity to invest in talent. By weighing the trade-offs and aligning hiring decisions with your organisation’s priorities, you can build a workforce that’s both agile and resilient.

Whether you’re hiring contractors or building a permanent team, a recruitment agency can help you cut down time-to-hire and connect with the right talent faster.

With a comprehensive sourcing methodology, involving targeted candidate solutions, Michael Page helps businesses make confident, strategic hiring decisions.

Need help navigating this decision? Speak to the experts at Michael Page for tailored hiring strategies that fit your business needs in Singapore.