While permanent jobs used to provide long-term stability, a changing global economy has created downsides to permanent employment as more employers find value in using temporary and contract employees.

Lack of Job Security

Permanent employees don’t always have the job security they imagine. Buy-outs, mergers and downsizing all have the potential to negatively affect permanent staffers. You may find your hours are reduced, benefits eliminated or jobs out-sourced, sometimes to higher-paid consultants. Employers don’t generally pay unemployment insurance, taxes, vacation or benefits to freelancers or consultants, which makes them attractive candidates.

Reduced Ability to Evolve

While permanent employees may become experts in a particular area of business, consultants and contract employees continually challenge themselves in an effort to remain relevant and valuable in an ever-changing professional marketplace. As a result, nonpermanent workers often have more relevant and in-demand skills than their permanent counterparts, making them valuable assets to employers, particularly in niche industries or in a volatile economy.

Limited Earning Potential

Working for a single employer as a permanent employee can limit your earning potential, particularly if you reach the top of your pay scale. If you’ve signed a noncompete agreement or are banned from performing consulting work or taking on another concurrent job, you’re putting all your financial eggs into a single employer’s basket. If the bottom falls out of the company, you have no other financial avenues in place to weather the brunt of an unexpected termination or layoff.

Static Professional Opportunities

Temporary workers, consultants and freelancers typically work on a limited-time contractual basis, providing an opportunity to continually explore new lines of work, meet new people and learn new skills. Consultants network within their industries and have the opportunity to choose the projects they pursue, while permanent employees are relegated to the specific duties of their positions. There’s less opportunity for permanent workers to branch out and have an active say in the type of work they do.

Lack of Flexibility

Permanent employees may have difficulty achieving and maintaining a work-life balance, whereas temp and contract workers often have flexibility in when, where and how they work. For example, permanent employees may be expected to be in an office during set business hours, where a contractor may work from home or another remote location, completing specific tasks rather than punching a time clock. This creates a greater degree of personal freedom.