Technical Consulting Contracts: The Three Types

tech consulting contracts

If you’re considering becoming a technical consultant, you’ve probably already started poking around job sites to see what kinds of positions are available. While finding the job postings are easy, deciphering them tends to be more difficult. The language is far from straightforward, and the postings tend to be in shorthand without definition. As a result, we often have to explain to new consultants what contract to hire (C2H), short-term contract, and continuous contract mean. Today’s blog post will explain the difference between these three contract types so that you can decide which is the best fit for you.

Contract to Perm / Contract to Hire (C2H):

In this type of contract, a company brings a contractor/potential employee in for a relatively short window (1-3 months) as a contractor with the expressed intent of converting that person to a full-time employee. C2H is a way of mitigating risk for everyone; it’s a “try before you buy” for all parties. During this period of time, the employer can check to make sure that the resource is a match for their company, both in skills and knowledge, as well as culturally and personally. For the resource, this trial time allows them to check whether the work is engaging and meaningful, as well as that the workplace is enjoyable and healthy. Some view C2H as less stable for them vis-à-vis a straight hire, but in reality, C2H is most often done for internal reasons that have little to do with stability.


Short-Term Contract:

Short contracts (1 day – 3 months) are generally offered when there is a relatively small problem that cannot be solved by internal resources (e.g., a unique/difficult software problem) or when there is a short spike in the workload that doesn’t warrant a new employee (e.g., seasonal business demand). While there is obviously no long-term stability in these types of contracts, they generally fetch the long dollar. Consultants working these short gigs expect to be paid a premium and companies looking to fill a quick need are usually willing to pay it. As companies pay short-term contractors for so few hours, they tend to care a little less about rates.


Continuous Contract:

Some large corporations rely heavily on contractors to architect, implement, and even maintain custom applications. The reason for this is different from company to company (e.g.; tax purposes, market forces on technical talent, philosophy of FTEs v contractors), but in these situations the contracts can go on for years (e.g.; 3+ years). Large, enterprise applications take a long time to develop and need continuous attention and some companies use contractors the whole way. These situations can be just as stable as FTE employment but can be more lucrative for the contractor.
Despite the talk that technical consulting is a risky business, you can see that two of the three contract types are quite stable. While C2H and continuous contract can keep you with a company for a long period of time, short-term contracts likewise have their perks – monetary perks. Now that you understand the job posting shorthand and the difference between the three contracts, which will you pick?

What have your experiences been with each of these contracts? Which would you suggest to new consultants? Let us know in the comments section below, or join the conversation on Facebook, Twitter, and LinkedIn.

Thanks to Ole Husby for the use of their respective photographs.