FTCs: The Problem

Jack Birch, Head of Interim Management, explores the topic of FTCs within the interim marketplace.

Operating as specialists within the Interim Management space, the Procurement Heads team and I frequently have conversations with clients and candidates regarding engagement and remuneration methods for interim hires.

With day rate contracting, IR35 – inside or outside, rightly or wrongly, pros and cons, risks, blanket bans etc. etc. – is always a hot topic, but another huge one is the Fixed Term Contract. In recent months we’ve seen something of an uplift in organisations looking to engage interim resource in a very similar manner to permanent staff, by virtue of salaried FTCs …

The Pitfalls of Salaried FTCs:

While FTCs may seem like a sensible solution, they come with inherent challenges that can hinder both businesses and interim managers.

1. Rigidity & Limited Flexibility

FTCs lock both parties—the business and the interim manager—into a fixed-term commitment which can become problematic when circumstances change. Business needs evolve, and unexpected shifts in project scope or market conditions can render a FTC ill-suited.

FTCs also lack the agility that day rate contracts provide. Interim managers are bound by the terms of their contract, which usually restricts their ability to take on additional projects or adapt to changing priorities.

Businesses, too, face limitations when trying to adjust staffing levels or respond swiftly to market demands. The rigid structure of FTCs can stifle innovation and prevent nimble decision-making.

2. Cost Inefficiencies

Salaried FTCs add to employed headcount numbers and costs and come with fixed compensation packages, regardless of the actual workload. This can lead to inefficiencies—for instance, paying an interim manager for downtime during quiet periods or overburdening them during peak times. Day rate contracts, on the other hand, allow businesses to pay only for the work performed, optimising costs and ensuring a fair exchange of value.

A common reason cited for trying to hire on a FTC rather than a day rate is that it’s often considered less expensive by comparison to paying a daily rate. Whilst this can be true, here are two key considerations to bear in mind:

  • The true cost of an employee (perm or FTC) is much higher than just the basic salary – it will include pension contribution, paid holiday and statutory sick pay whilst not working, bonuses, healthcare, insurances, IT and equipment, training, and is often also accompanied by a chunky recruitment fee paid upfront upon hiring. All in, the real cost is often an additional 75-100% on top of the basic salary being paid.
  • Are you looking just at the cost, or are you considering the overall value? The best interim operators will often deliver over and above the remit they were brought in for and make a significant contribution to project aims or achieving savings goals (especially pertinent in the Procurement space!). A “more expensive” interim will often provide a significantly better ROI on balance as an overall proposition.

3. Missing out on Top Talent

True interim managers — the professionals who operate in this market as a career choice by design and enjoy solving problems, delivering change and then moving on to their next assignment — typically shy away from FTCs. These experts value autonomy, variety, and the ability to choose projects that align with their skills and interests. There is inherently much more risk and much less security when operating as a self-employed contractor, and their budgeting and accounting set ups are aligned to day rate remuneration, so for most there is no motivation to become a salaried employee again but just for fixed period of time. In fact, I’ve heard many contractors refer to FTCs as “the worst of both worlds”.

When businesses rely solely on FTCs, they risk losing access to this pool of specialised talent.

For us, this is the single most compelling reason for businesses and employers to reconsider their interim hiring approach if it’s heavily weighted towards FTCs, especially for mid/senior level roles, change projects or particularly niche remits.

Don’t just take our word for it!

The team and I regularly seek feedback from our candidate and client base, and wider networks across the likes of LinkedIn. A recent poll, answered by 245 interim managers in our network, showed:

Here is a selection of comments received on the topic –

“Certainly on the surface FTC is worst of both worlds. True interims and consultants are focused on “sprint” deliverables, skill transfer and exiting the client (from day 1) leaving it in a better state than at the start. All this is enabled by deep & broad functional expertise from different situations. The other advantage of scope deliverables is that it brings the benefit of change/exit if it’s not working. FTC – the clue is in the name – focusses on a duration, but may be more suited to longer engagements and these interims who desire greater surety (likely in exchange for lower day rates) and feeling more like a FTE.”

“It’s high risk for both the candidate, but also high risk for the client as the appointed candidate will have one eye on the market for a role with more security/stability/financial gain. Sometimes candidates who take FTCs are really perm candidates who just didn’t find a perm role at the time, or interims who would prefer a day rate operation, and therefore the risk of them leaving early for pastures new can be higher than usual …”

“FTC, as a value proposition, is as close to NIL as it gets”

“FTC is the worst of both worlds. Professional interims don’t consider FTC to be interim work. You need to go back to your ‘why’ if you want to be an interim, which means its ok to flex between inside and outside roles. I don’t advise anyone to get too hung up on being outside if they want to keep working.”

Is there a place for FTC hires at all?

In our opinion, yes. There will always be certain circumstances where a FTC hire makes sense and might even be the better approach for a particular role. Typically, these are more viable for junior/mid-level positions, where interim hires are needed to cover BAU roles and the organisation is looking to bring someone in as a like-for-like employee, under their supervision and direction, and for a longer time period – ideally 9 months+ (“selling” a 3-6 month FTC is always an especially tough ask!).

Personally, I’ve placed some very capable candidates into FTC roles, and also seen a scenario recently where a high-calibre senior candidate was looking to move back into the interim market whilst also purchasing a house. For mortgage purposes, operating under a daily rate would’ve caused a challenge, and so taking a 12-month FTC ended up being their best option in these particular circumstances.

If FTC is the way you need to hire then I’d always advise paying an uplift on the equivalent permanent salary to help account for the fact someone is taking on a role without the security of a permanent position and to help give the best chance of engaging someone suitable. But bear in mind that you will likely be broadly fishing in a different pool vs your true interim management experts!

“The net position is what is important and don’t forget travel costs, as away jobs rarely work on FTC as expenses are not tax deductible. If the compensation is right I am relaxed about the remuneration method. However, one reason FTCs are criticised is that companies often try to hire at the same or sometimes even less than permanent role salary levels. An interim or contractor is not a permanent hire and needs to be compensated for the short duration that provides flexibility for the company and offers less income security to the individual with gaps between assignments.”

“I often prefer a FTC. Rates aren’t high enough in some areas to make interim work attractive, e.g. I’d do more NHS work if I could have a FTC as day rates are low, but pension, holidays and sick leave are great. I was on a FTC at another place a while back and it meant I got paid sick leave when I had Covid and then the flu too. I also accrued a decent amount of pension when I left.

While salaried FTCs can have a place, for specialist interim expertise we would strongly recommend businesses consider the benefits of day rate remuneration for hiring interim staff. By embracing flexibility and attracting top interim talent, organisations will likely find the recruitment process much more straightforward and best maximise their ROI on balance.

For a discussion on day rates vs FTC hires, the current Procurement & Supply Chain market or all things interim management please get in touch with the team and I for advice without obligation.

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