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Term contract or permanent employment – which is riskier?

Question: Which is riskier, working in a fixed term contract, or working in a permanent contract?

To many people, working in a fixed term contract is riskier because there is no job security. Every time the contract runs down towards the end, we either negotiate for the role to be converted into a full time one, or we begin to look for another job; and that would be a long, arduous task, sometimes with no income for months in between. Indeed, this seems to bear out in the market.

In a recent Straits Times poll, it was found that 1 in 4 professionals, managers and executives are working out of a fixed term contract as opposed to a permanent contract ( and employment experts believe that this is a worrying sign.

Yet, what if I were to tell you that a permanent contract is riskier? What if I said that you would be better off with the fixed term contracts and that you can earn much more with that than you would with a permanent contract? Would you think that I am stupid or worse, deranged? Well, at the risk of being called both (and lose my credibility), let me try to make the case for how it can be less risky than a permanent contract.

Too reliant on steady income Singaporeans like to live a comfortable life. (actually, who wouldn’t?) They like to earn a high income and afford lots of luxuries. They don’t want to have to hunt for their next meal, preferring to have the meal prepared and served to them on a silver platter. And, again, who does not want that? And having a good, steady income that we can depend on will allow us to enjoy all the trappings of life. But here’s the danger. We tend to get very used to the lifestyle. We trade hunger in the workplace for complacency at home. We work hard and comply with the bosses so that every month, we go to the bank, draw out the thousands of dollars, and live the luxurious life we are so accustomed to. So long as we are turning in our best, month in and month out, the boss will be happy, and we will get our paycheck.

Until the boss moves on. Or the business faces financial headwinds. And the company has to cut its payroll to stay afloat. Then they look around and see who the greatest cost to the company is, and let them go. If you think that you cannot be let go because you are in a permanent contract, think again. There can be several ways to engineer you out: (1) redundancy; the company can say that the business has restructured itself and there is no need for your role. And if retrenchment benefits are not provided for in your contract, then technically, you can leave with NO payment. (2) poor performance; if you suddenly see complaints about your quality of work, whereas in the past there was no issue, be careful. They are setting you up to be released with no compensation. (3) outright fire with notice payment; lastly, look at your contract; there is always a clause that says either of you can give notice to the other to leave without ascribing reason. All they need to do is pay you in lieu of notice (normally one to two months) and you are out!

Suddenly, you find that your whole world is rocked; and you are ill-prepared for it. Why, because you have been so used to your steady income; your happy lifestyle and you never expected that it would happen to you. You might even think that the company has your best interests all these years, and they will never do this to you; until they do. Every single person who is drawing a monthly income on a permanent contract carries this risk. Of course, it does not happen to everyone, hopefully not the 3 in 4 PMEs that the Straits Times asserts, but one can never say it will NOT happen to you.

So how is this riskier than the fixed contract employee? Well, for one, you are not ready for it. So, when it does come, the hit is pretty huge. You would not have put mitigating plans in place; for example, having a pretty huge war chest to tie you between gigs, or to have your own medical insurance, so that you won’t get caught out when you are suddenly out of this benefit when you lose your employment. And lastly, and worst of all, you would be unaware of what the market is trading, where it is moving, and how to tap in on it. In your blissful existence under a steady income from a permanent contract, you don’t need to be hungry, you don’t need stay ahead of the market, you don’t need to upgrade yourself.

Compare that with the term contract staff. He knows when the end is. He knows what he needs to produce to get the contract renewed, to be converted to full time, or to look for a new contract elsewhere. The prospect of being converted to full time or to have a contract renewal keeps him on his toes in the company; yet the prospect of being out of employment keeps one eye and ear focused on the market. He has to fill his down time with upgrading work based on where the market is trading; he will keep his contacts warm for possible new contracts, and where a new contract is developing, to be in on it as early as possible. The irony in doing all this is that, we can find better contract work than the one we are currently working in. So, while we may be enticed with the prospect of permanent work, the prospect of a more fulfilling, engaging new work sometimes causes one NOT to take up a permanent job offer, even after working so hard for it!

Time to change your mindset So, do you now agree with me that the term contract job is less risky? If it is, then why are so many “experts” decrying it? Well, our HR experts are still stuck in the stone age. Economists are also stuck in the stone age. And as a result, our government is also stuck in that same mindset. The need to drive full-time employment makes them want people in a permanent role. Having people in between jobs (as a term contract staff might find himself in) will knock this economic statistic, and therefore, the ability of the government to provide for its citizens. Hence, they will always prefer people to be in permanent contracts to make life easier for themselves. Yet if it is so risky, why should we subject ourselves to it? This is where the “Tyranny of the Enterprise” as I call it, comes in. These enterprises and the government work together to paint the picture that the best worker has to be compliant, hardworking, and sometimes, mindless. Just do as you are told, be loyal, and you will get a nice fat paycheck. The enterprises will then lock you into servitude using the regular paycheck as a means. Can you see how it works for both the enterprise and the government? But what about for you? Yes, you get to be stable, live a nice middle-income lifestyle, grow fat on the food and wine, until the company decides that you have out-stayed your welcome, and pulls the rug from under you!

It is time to change the rules of the game. Mindsets need to shift away from the Tyranny of the Enterprise to the Empowerment of the Individual. It is time that we acknowledge the new normal; that the economy will be in a greater state of flux, a buzz, if you will, when everyone is working the next gig, is building the next software solution, the next robotic policeman, the next outdoor catering business. Keeping everyone on their toes is the best way to keep the economy going; and we can get that better with term contract than with permanent contract.

But I fear I am just a lone voice in the wilderness touting the virtues of the term contract. This is because many people have bought into the tyranny. They fear the unknown. They prefer the fixed mindset to the growth. After all, better the devil that you know than one that you don’t, right?

And so the tyranny goes on…..

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