What is the Employed Contractor Model?


The Employed Contractor Model is a recruitment service offered by SThree to clients who are seeking skills on a short-term basis.

The Employed Contractor Model (or ECM for short) is a specific term and service created by the global STEM specialist talent provider SThree. Through this model contractors are directly employed by SThree and are contracted out to work on secondment to an employer. This service removes complexity and compliance concerns for clients. 


Until the 1980s it was customary for companies to employ their entire workforce on a permanent basis. During the following decade, however, a new philosophy emerged whereby companies would retain a core of salaried employees and outsource non-core roles. As a result, companies today frequently hire STEM skills as and when they need them. 

Although the rise of contract working helped companies to prosper and provided many workers with a great deal of freedom and flexibility, over time it came under scrutiny from regulators concerned about both the tax status of contractors and their lack of workplace benefits. This led to the natural growth of the Employed Contractor Model. There has been significant uptake of the model in the US, where it is known as W2, and it is spreading rapidly in Europe. In Germany it is called Arbeitnehmerüberlassung (AÜG), and PD Phase A and B in the Netherlands. In Japan, the model is known as Hakan.

Recent trends 

STEM contractors are increasingly useful to employers who want to flex their workforce based on business, project, or product lifecycles. They frequently see flexibility as an important quality of an effective workforce. The employment model chosen by individual STEM specialists depends largely on legislation in the country where they operate. New legislation in many countries has led to the growing popularity of the ECM model.  

IR35 in the UK is a good example of this because contractors are required to provide proof they operate as a true limited liability company and have more than one source of income. As a result, many contractors find that being a limited company is not worth the trouble and so they choose the ECM route.  

Another example of this kind of legislation can be found in the US where misclassification of contractors is a high priority for the regulator. As a result, many choose to work as W2 contractors, accepting a comparable set up to a permanent employee but on a temporary basis.  

The ECM model is used widely by companies with short-term project needs. Companies may also use it to hire experts in specific technologies, such as Java developers, who may no longer be needed if the organisation moves away from Java in two or three years. 

Advantages of the Employed Contractor Model (ECM) 

An Employed Contractor Model  allows contractors to continue to work on a wide range of interesting projects for a variety of companies while at the same time enjoying similar benefits to permanent employees. The model removes complexity and compliance concerns from contractors and provides a source of critical talent for companies without the responsibilities of employing full-time staff. Advantages and benefits for professionals include: 

Benefits of ECM to Contractors 

Benefits of ECM to Employers 

  • Access to wide range of projects and employers 
  • Enjoy similar benefits to permanent peers e.g., 
  • Paid holiday (not normally enjoyed by contractors or freelancers) 
  • Bonus scheme eligibility, security 
  • Added security of long-term contracts 
  • Freelance status remains intact (legally)  
  • Greater flexibility compared to permanent employment 
  • Takes complexity and compliance concerns off the shoulders of the contractor 
  • Access to highly sought-after specialists in STEM 
  • Less risk financial risk and admin e.g., do not need to finance training or equipment for individuals 
  • Ability to flex workforce to company, project or product lifecycles 
  • Compliant method to source external staff 

Disadvantages of the Employed Contractor Model (ECM) 

STEM experts who want the freedom of a pure contracting role may find the employed status under the ECM model difficult. However, it does provide access to a range of interesting clients on cutting-edge projects that may enhance their skills for the future.