Cost-benefit analysis of temporary work vs. permanent employment:

In times of economic uncertainty and skills shortages, companies need to make their personnel planning both flexible and cost-effective. But which form of employment makes sense under which conditions – temporary work or permanent employment?

A clear answer depends on many factors: from the market situation and personnel requirements to the strategic goals of the company. The following overview shows when which model pays off – and what smart alternatives are available.

Overview of costs

Both temporary work and permanent employment involve different cost structures.

The following items are usually incurred for permanent employees:

• Wages and salaries including social security contributions, holiday pay and sick pay

• Recruitment costs, e.g. for job advertisements, application processes and onboarding

• Training and further education expenses

• Planning and administration costs for personnel controlling and scheduling

With temporary work, a large part of these fixed costs are eliminated because the employment relationship is handled by a personnel service provider. The company only pays the agreed hourly rate, which already includes all employer obligations. The service provider covers the costs of recruiting, payroll accounting and absence management.

Scenarios: When is which model worthwhile?

Short-term demand or project peaks

When order peaks or short-term projects create additional staffing requirements, temporary work is usually the more economical choice. Companies gain flexibility without entering into long-term commitments.

In addition, qualified specialists are often available within a few days via personnel pools – ideal when speed is of the essence.

Long-term personnel expansion and know-how transfer

For key positions that require in-depth specialist knowledge or high strategic relevance, permanent employment remains the more sustainable solution. It creates loyalty, continuity of know-how and enables long-term competence development.

Those who want to invest specifically in this area can make use of complementary services such as recruitment to find suitable candidates.

Uncertain market conditions or economic fluctuations

In uncertain times – such as when demand is volatile or geopolitical changes occur – temporary work helps to minimise cost risks. Staff can be deployed as needed and reduced when necessary without time-consuming termination processes.

Companies that want to further optimise their processes can also rely on business process outsourcing – for example, in payroll accounting or customer service.

Economic advantages of temporary work at a glance

• Cost control: Fixed costs are converted into variable costs.

• Planning security: Staffing requirements can be flexibly adapted to the order situation and projects.

• Time savings: Recruiting, contract management and administration are handled by the service provider.

• Risk minimisation: Employer obligations such as social security contributions or sick days are eliminated.

• Rapid scalability: Access to qualified specialists via established talent pools.

Especially in industries with a high volume of projects or seasonal fluctuations – such as manufacturing, logistics or customer service – temporary work can therefore be a strategic addition to the permanent workforce.

When permanent employment pays off in the long term

• High degree of specialisation: When knowledge is closely linked to the company.

• Stable order backlog: When staffing requirements remain predictable and constant.

• Corporate culture and loyalty: Long-term retention can increase motivation and productivity.

In such cases, it is worth making targeted investments in recruiting and employee development, for example through tailor-made recruiting process outsourcing solutions or targeted training programmes.

Combination as a model for success: flexibility meets stability

In practice, many companies rely on hybrid models that combine temporary work and permanent employment. This allows the core workforce to secure knowledge and stability in the long term, while external staff are deployed on a project-by-project basis.

This combination enables a high degree of adaptability with predictable fixed costs – especially when integrated into comprehensive HR services.

Conclusion: the right balance is key

Whether temporary work or permanent employment is the better choice always depends on the individual situation – the project duration, qualification requirements, market situation and corporate strategy. While temporary work offers flexibility, cost control and rapid availability, permanent employment ensures knowledge, stability and long-term employee retention.

Those who strategically combine both models and call on specialised partners when necessary benefit from a balanced combination of cost-effectiveness, security and adaptability.

Would you like to know which model is most economical for your situation? Then let us advise you without obligation – together we will find the right solution.

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