Full-time versus contract employees – which way should you go?

Posted on September 26th, 2014
Business Skills & Planning

As a small business owner every new addition to your small team is crucial for your business, which makes the decision whether to hire full-time employees or make use of freelancers (contract) an extremely important one.

Many small business owners make the mistake of overlooking the key differences between full-time and part-time staff.

Here are the pros and cons of each employee category:

Full-time employees


  • One of the biggest advantages of hiring full-time employees is that you have a pool from which you can build a strong management team. This is not only beneficial in that your business will enjoy solid leadership, but will also help in the creation and maintenance of a strong company culture.
  • Full-time employees only need to be trained once (usually right at the beginning) on their duties. The benefit for a business owner is that your employees will, to a greater degree, be able to complete tasks without your supervision.
  • The life of an entrepreneur often means being up and about, attending meetings and business trips. With full-time employees you can be assured that someone will be able to run your business in your absence.


  • Full-time employment comes with benefits such as medical aid, a pension fund, and paid leave which can have quite substantial cost implications for any business. This is the reason why many SMEs don’t offer these benefit, however ultimately this may affect your hiring options as most employees could choose to work for companies which do offer benefits.
  • Monthly salaries are one of the biggest overhead costs for many SMEs. Salaries need to be paid regardless of whether or not the company is performing, or if there is money is coming in.
  • Full-time employees place a greater administrative burden on the business. All businesses need to meet their tax obligations including Pay-As-You-Earn (PAYE), Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF) for their full-time staff.

Freelancers (Contract Employees)


  • Freelancers are not entitled to benefits such as medical aid, a pension fund or paid leave.
  • Freelancers offer more hiring flexibility, it is generally much easier to terminate a freelancer than it is a full-time employees. South Africa’s labour laws are very strict about the terms of termination for full-time employees.
  • In keeping with current trends you are able to outsource specialist firms to handle all your requirement such as, IT or account management, instead of bringing in someone inhouse. The biggest advantage this offers is that you pay per hour or project, and there are no monthly salary obligations.


  • As a business owner, working with freelance employees may mean having to dedicate more time to supervision to make sure tasks are completed to your standards. This could slow down productivity, with continuity being compromised.
  • Independent contractors work for themselves which means they do not owe you any loyalty, and could potentially work for your competition offering similar services.
  • There may be busy periods in your business where you will require all hands on deck. While full-time employees can dedicate 100% of their time to urgent matters, and even work after hours, freelancers may not be available when you need them. In addition, if they are available hourly rates for their services may apply.