It is really based on the arrangement of the company. The conditions for direct contract from the company and the external agency (usually they call it agency contract) usually differs based on companies.

1. Direct contract means that anything related to your reference check is direct with the company HR. Whereas, for external agency, your reference check is with the agency, not with the company you are sent to. So for instance, you are physically working at XXX company, but technically you are under YYY company. Therefore, in your resume, you are not supposed to put you are working for XXX, you should indicate you are working with YYY.

2. Leaves - External agency usually only offer you Annual Leave + Medical Leave only. Direct contract offer you the perks of a permanent employee not only including AL and ML, but also other things like Family Leave.

3. Training - Direct contract sometimes require you to fullfill additional training hours - thereby "more work" or "more leave" for you to go out and learn new stuff.

4. OT Allowance / Pay - As again, this is dependable on the arrangement between the company and HR agency. Some gives you pay, but those stinky management usually will NOT give OT Allowance/Pay for external agency.

5. Other Perks - Sometimes, certain celebration events only invite the perm employees but not the agency contract employees, in this case, yes, you are being "left" out. Then there are other 'allowance or flexi' that are given to you to claim and spend.


The above are some of the differences. It is obvious which is better, but is contract always bad?
Not necessary. It can be stepping stone to your career, and if you are a good negotiatior you can ask for additional $$ based on those "lost" benefits. But your direct employer will not be dumb, they know how much they are paying you and most likely will milk you for the money you are paid.