When to Hire Full-time Developers vs. Contract Developers: A Founder’s Take

Greg Vilines is the SVP of Product for Terminal. A product leader for nearly two decades, Greg founded and exited his startup Fittery and has held leadership positions at multiple growth startups (Cypress.io) and large enterprises (Autotrader, The Home Depot).

Deciding to bring on new engineers is a decision startup founders and engineering leaders make over and over again. In today’s market, founders are grappling with shorter runways, tighter budgets, and more pressure to deliver than ever before. Not that startups need more pressure =).

In my journey as a founder and tech leader, I’ve had to choose full-time engineers and contractors again and again. I thought it’d be helpful to draw from my experience on when it makes sense to hire contract developers vs. hire full-time developers.

Defining Full-time vs. Contract Developers

First, let’s start with some definitions:

Full-time developers are employees of a company who work on a permanent basis. They are fully integrated into the company’s culture and are committed to the company’s vision and goals. They work regular hours and are typically compensated with salary and benefits. Most startups also give full-time developers equity grants and/or bonuses. 

Contract developers are freelancers who are hired to work on projects. They are not employees of the company and are typically paid on a per-hour or per-project basis. They don’t typically receive equity or benefits. There are also legal stipulations around the definition of what a contractor does for a company vs. a full-time hire, covering topics such as employment classification, taxes and insurance, and compliance with anti-discrimination laws.

Company Stage Has a Big Influence on Hiring Decisions

The stage your company is in has a huge influence on what types of team members you can bring on. Some key factors include:

• How much funding and runway do you have?
• Are you still validating your product direction, or is it solidified?
• Is your product live in market?
• Do you have product-market fit?
• What kind of technical complexity do your products have?

Keep these questions in mind as you’re making decisions on what type of developers to hire.  Each company’s situation is different, so there’s not one template to follow here.

Practically, if you’re looking to hire full-time developers, you should have enough runway for 18+ months of salary, benefits for the team you’re hiring, and so on. Contractors, of course, offer more flexibility in terms of payment and terms.

After you have a good understanding of the above, now it’s time to choose: full-time or contractor?

When to Hire Full-time Developers

Full-time developers are a great fit for product companies for one simple reason: Your platform will evolve and change as you iterate your products. A full-time team will be critical for shaping your product’s strategy, adapting to changes in the market and from customers, and establishing a scalable, long-term vision for your products.  

Full-time employees are best suited to have that long-term view. Given that engineers are the lifeblood of any product- or technology-driven company, the technology decisions they make will have dramatic impacts on your downstream success. Having committed, long-term team members is the ONLY way to ensure you win.

It’s also the only way to build a strong company and engineering culture. Full-time developers impact culture through:

• Commitment: When you hire a full-time developer, they become fully invested in the success of your organization. 
• Collaboration: Building strong internal relationships creates a collaborative environment where everyone is working toward the same goals and is invested in each other’s success.
• Knowledge sharing: Full-time devs have the opportunity to learn from and share knowledge with their colleagues. This reinforces the spirit of collaboration and also increases your organization’s resilience to technical and personnel change over time.
• Recruiting ambassadors: Full-time developers act as ambassadors for your organization to help recruit the NEXT wave of top talent to your company.

Finally, some technically complex products require the view of a full-time employee. If you’re building deep tech in fields like AI, cleantech, or fintech, it’s unlikely that the type of long-term R&D and investment required can be found through contractors.

When to Hire Contract Developers

Contract developers are an important piece of the team-building pie. A few use cases where contract work is a great fit are:

Building an MVP or a prototype

Looking to validate a product hypothesis and need to build an MVP or initial prototype? Contractors are a great choice.

When I launched Fittery, we used a fantastic contract team to validate our MVP and get our fit-focused shopping experience off the ground.  Once we had initial validation, we were able to raise funding and bring on full-time teammates.

Products where your team doesn’t have expertise

Your team won’t always have the expertise in-house to solve all your problems.  Contractors can be a great way to quickly onboard expertise without long-term commitments.

Similarly, when we were building out our predictive analytics tools for Fittery, our core team didn’t have the data science background to build our vision. We contracted with outside experts to help accelerate our initial prototypes, then transitioned that knowledge to our team.

High-priority projects that don’t have an owner

In a startup, you’ll have no shortage of priorities that need to be tackled. You’ll also never have enough capacity to take them all on. Contract developers can be a huge help here, allowing you to plug in help quickly.

When I led Product and Marketing at Experience, a Cox Enterprises company, we needed help building out some updates to our advertising products but didn’t have capacity.  So, we partnered with an outside contract team to make that happen.

Pick the Right Hire for the Job

Hiring a full-time developer or a contract developer is ultimately dependent on lots of factors.  There are paths that make it easier for you, though.

At Terminal, we believe startups need a spectrum of hiring options. That’s why we offer both full-time and contract developers who cost up to 40% less than hiring domestically. All of our developers are fully vetted and ready to start immediately.

Interested in learning more?  Talk to us today or start browsing our talent immediately!

FAQ

What’s the difference between a full-time and a contract developer?

A full-time developer is an employee of a company who works there on a permanent basis. Meanwhile, contract developers are freelancers who are hired to work on projects and are not employees of the company.

What factors should I consider when deciding between a full-time vs. a contract developer?

When you’re deciding between a full-time vs. a contract developer, consider factors such as team size, company maturity, in-house skills, and project duration and complexity.

When should I hire a full-time software developer?

Hire a full-time software developer when you have long-term projects and development needs, need contributors to strategy and direction, and have complex tasks requiring extensive expertise and oversight.

When should I hire a contract developer?

Hire a contract developer when you need extra hands on deck, are building an MVP, or lack specific niche skills or expertise.