Table of Contents
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Table of Contents
What Are Employment Types?
In our increasingly complex and diverse workforce, more and more companies use different staffing strategies to meet their business needs. No longer do companies only hire full-time and part-time employees; there are many other types of employment that can benefit both employers and their employees. It is not unusual for a company to have five or more employment types.
Why It’s So Important to Understand Different Employment Types
The flexibility of using different staffing models gives employers strategic planning and productivity benefits. However, there are several factors that are important for employers to understand as they diversify their workforces.
- Legal and compliance. Correctly classifying employees and understanding the legal obligations of such classifications help employers stay in compliance with the law. For example, some employees must be paid overtime, some employees are entitled to health care benefits under federal law, and some employees are entitled to employment protections that can only be addressed by clearly classifying employees in the proper employment type.
- Clarity of relationship. Not only is it important for employers to understand the employment types, it is also important for employees to understand the benefits and obligations associated with their employment type. For instance, part-time employees may expect certain benefits that are only offered to full-time employees. By communicating the parameters of the employment relationship clearly, employers can set proper expectations with their employees.
- Recruiting advantage. Companies that have several employment options may appeal to candidates who are looking for less permanent and/or more flexible work arrangements.
Types of Employment
Following are some of the more common employment types and what you need to know about each. Before proceeding, however, let’s clarify the difference between employees and contingent workers. Employees are hired by companies on the company payroll and earn a salary or hourly wage. They have employment rights and protections, such as unemployment insurance and fair treatment under Title VII of the Civil Rights Acts of 1964.
Contingent workers are typically independent contractors, freelancers, and consultants who aren’t paid as employees of the company and are typically paid by the project instead of by the hour. They file their own taxes with the IRS as though they are business owners.
Classifying employees and contingent workers correctly is essential since there are penalties associated with misclassification. Some penalties can include payment of back wages for up to three years, fines, and even jail time.
Full-time employees usually work 30-40 hours per week and earn benefits. For example, under the Affordable Care Act, employers with 50 or more full-time employees must offer health care benefits to these employees or pay a penalty.
Part-time employees typically work fewer than 30 hours per week. While not mandated by law, health insurance and other benefits are sometimes offered to part-time employees to be competitive with other employers.
Interns work for companies while attending school in order to gain experience in their fields of interest. These positions can be either paid or unpaid, although employers should be careful to observe Department of Labor guidelines under the Fair Labor Standards Act to pay at least minimum wage and overtime pay when appropriate. Internships may last a few weeks or a few months, and interns may be offered a regular position with the company at the end of their internship.
Sometimes called an “earn and learn” training model, an apprenticeship is a program that helps employees gain the skills and experience they need for their current or future role. Traditionally used in blue-collar roles, apprenticeships allow the employer to closely supervise the employee as they learn how to perform various job functions.
At first glance, apprenticeships may seem similar to internships, but there are some key differences. Compared to internships, apprenticeships are longer (usually one to four years), and more structured. They also better prepare participants to move forward in their careers. Interns are usually given only entry-level duties, while apprentices gain more responsibility as they move through the program. Apprentices work full-time, with their wages increasing over time.
Seasonal employees are hired to help with staffing needs during peak times, such as the summer and winter holidays. They are paid as regular employees, but the employment is not expected to be long-term.
Leased employees are typically hired by a staffing agency and sent to work for different employers, sometimes for extended periods of time. They are paid by the staffing agency, which bills the employer for their time (plus costs). Some staffing agencies offer benefits to their leased employees. Leased employees may enjoy the variety of working for different companies as well as the flexibility to accept or reject assignments.
Temporary employees are similar to seasonal and leased employees because the employment is for a set time rather than an ongoing commitment between the employee and the company. Working either full-time or part-time, temporary employees may be sent through a staffing agency or may be hired directly by the company. Temporary employees most often work on a project basis, and their employment ends when the project is finished.
Contingent employees aren’t employees of organizations for which they provide services. Instead, as Upwork puts it, they are “they are hired on a non-permanent basis to perform certain specific tasks required by the company.” Some may have their own companies and consult with organizations who need their expertise. Sometimes these consultants hire others to work for them to complete assignments for other organizations. In a “gig” economy, where workers prefer to market themselves and perform services for multiple companies, this model provides flexibility in schedule and services performed.
When it comes to contingent workers, there are lots of terms thrown around. But what do they all mean? Since the differences in definitions are subtle, we’ll go through three different terms associated with contingent workers.
- Independent contractors. This is a broader category that includes both consultants and freelancers. An independent contractor is simply somebody who is self-employed and offers their services to other companies. As non-employees, they do not receive benefits.
- Freelancers. A freelancer is one type of independent contractor. They are hired to complete specific projects or work within certain timeframes, and they usually work for multiple organizations at once. Freelancers can be found for most fields; common types of freelancers include designers, writers, data analysts, recruiters, and web developers.
- Consultants. Consultants are freelancers who are experts in their fields. They’re brought in to advise businesses about how to improve in specific areas. Consultants may specialize in strategy, management, human resources, and much more. Unlike traditional freelancers, consultants don’t complete specific projects; instead, they give higher-level strategy advice and direction.
How to Determine What Employee Type You Need
You’ll consider several factors when deciding what type of employees are needed at your company.
Step 1: Nature of the Work
Decide the nature of the work you need workers to perform. Does it require employees who will need company-specific training? If so, the cost of training will likely be repaid faster with a full-time employee than with other employment types.
Step 2: Regular or Occasional?
Do you have regular, ongoing business needs where either part-time or full-time employees are needed to keep operations running? Hiring employees who have an expectation of regular employment will likely give you a more loyal and better-trained crew than hiring employees who aren’t looking for ongoing work.
Step 3: Temporary or Permanent?
Understand the scope of the work you need performed. Is it temporary in nature? Is it seasonal? If so, hiring someone on a temporary basis—either seasonal, temporary, or leased—may be a better option than bringing someone on board who has an expectation of ongoing employment.
Step 4: Core or Peripheral?
Determine if the work is central to your core business functions, or less essential. Is there expertise outside the company that can do the work on an as-needed, project basis less expensively than trying to find and hire this talent in-house? If so, a contingent worker arrangement may be best.
Ultimately, a combination of employment types can provide your company flexibility, critically needed skills, and cost savings if you are strategic in your planning and execution.
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Questions You’ve Asked Us About Employment Types
Carol Eliason Nibley, SPHR, GPHR and Principal Consultant at PeopleServe, has more than 25 years of experience in human resources, most recently serving as Vice President of Human Resources for a technology company in Utah County. Carol has taught HR certificate courses at Mountainland Technical College and in other settings for more than 12 years.