Contract Employee Vs. Direct Hire

by Cate Julia; Updated September 26, 2017

Contract employees work for businesses on a project basis and may control how, when and where they work. A direct hire employee performs services for a business and has no control over the details of how those services are performed.

Time Frame

Contract employees work with a business for a length of time determined by the terms of their contract. Direct hires work for a company indefinitely unless they quit, get laid off, or are fired.

Features

Contract employees are self-employed so they pay for their own taxes and benefits. A business takes care of taxes and may give benefits to direct hire employees.

Function

Direct hire employees help businesses provide efficient service for their customers. Contract employees work with businesses on overflow or outsourced work.

Benefits

Direct hires receive a regular paycheck and have set work schedules. Contract employees control their own time, can negotiate their rate of pay, and can write off some of their expenses on their taxes.

Considerations

Self-employed contractors pay taxes on a quarterly basis, so they should meet regularly with a tax professional to find out which records to keep and which taxes they need to pay.

About the Author

Cate Julia has been a freelance writer for over five years. She has a B.A. in English from the University of Maryland, a M.A. in liberal arts from Johns Hopkins University and a Master of Library and Information Science from Florida State University. Her work has appeared in the "Greenwood Encyclopedia of African American Literature" and the "Encyclopedia of American Race Riots."