Contract vs. Permanent: Profit Discussion
Hello everyone,
My colleague and I are having a spirited debate and would love your input.
We’re comparing two consultants: one billing £400k annually as a freelancer and another billing £200k annually as a permanent employee.
The question is: who is generating more profit for the business?
Historically, our incentive targets were set at “x” for freelancers and 50% of “x” for permanent employees. Recently, they’ve been adjusted to be equal, which means that permanent consultants are now competing against freelancers who may be less experienced.
It’s important to note that freelancing and permanent roles are handled separately in our company, each with its own line management structure across regions.
Business owners, we’d appreciate your insights! What are your thoughts?
RCadmin
This debate boils down to understanding how profit is calculated for different types of consultants—freelance and permanent—and how their contributions and associated costs impact the bottom line.
Assuming the overhead is manageable, the net profit generated from the freelance consultant would generally still be significant due to the higher billing amount.
Permanent Consultant:
Analysis:
Conclusion: While the freelance consultant typically brings in more revenue, the profit contribution ultimately depends on the net profit after considering associated costs. It’s crucial to ensure that the incentive structure reflects these differences to maintain morale and fairness within the teams. Hence, an analysis of actual costs and profits might clarify who is really driving more profit for the business.