Contract to Hire: What it Means for Job Seekers and Employers

What is Contract to Hire

It’s not uncommon for candidates to be skeptical of the contract to hire situation, many candidates may even be wondering what exactly a contract to hire position even is. In short, a “contract to hire” or “temp to hire” position is one in which a candidate is initially hired temporarily, but with the intention of becoming permanent if they perform well during their temp status. It is important to not confuse C2H positions with direct hire positions – direct hire opportunities bring candidates on permanently and skip the temporary employee phase altogether. Contract to hire roles are a great option for many,  there are benefits to this employment arrangement for both candidates and managers alike. So what are both parties involved really getting out of this relationship? How does the employer benefit? How does the employee benefit?

Benefits of Contract to Hire

Benefits for Employers

1. You can have a trial period before committing to a candidate. You want to make sure that a candidate has the necessary skills and is a good culture fit before employing them directly. Employee turnover is expensive – and if a contractor is terminated, the staffing agency is responsible for the unemployment costs.

2. Budget friendly. The additional position fits into the short term budget; but funding may not be allocated for next year’s budget if business conditions change.

3. Satisfies the labor needs of a changing workload. With newer positions, a company may not be sure if a resource is truly needed, or if the rest of the team can pick up the slack. Or, if a position depends on winning a key account, a company may want to use a contract to hire agreement in case the business is not won.

4. Fresh perspectives. Hiring contract employees can bring new ideas to the table. Is your current team stuck on a particular task and can’t seem to move forward? A contract employee can offer a new set of eyes on the task and possibly see the underlying cause of the standstill – this could lead you to the solution you have been seeking! If the contractor does not bring in new processes like you hoped,  you are fortunately still in the trial period and are not obligated to continue any further after their temp status expires.

Benefits for Employees

1. You are able to prove your value. Make sure you are putting all of your best skills and traits on display everyday while in the temporary phase. It is important to show your employer why you would be a great long-term fit.

2. Contract to hire work is a great look on your resume. Don’t shy away from C2H positions! Temporary positions are becoming an increasingly attractive option for many. It is generally better to stay working – even in a contract to hire scenario, rather than a direct hire position – than to not work at all. It is good to be selective; but not to the point that you stay unemployed.

3. Finding out if a company is a good fit for the future. Just like an employer has a trial run with the employee, the employee can also see if the employer is the right fit for them. Contract to hire positions can also help narrow down career path options if you are unsure of what line of work you should continue in. Entering in different roles as a contractor is less of a commitment if you are trying out that specific line of work for the first time.

4. Contract to hire positions can pay more. Since you are taking a calculated risk pursuing a contract to hire position and benefits are normally more costly while on contract, you may be able to ask for a higher hourly rate.

Things to Keep in Mind if you are in a Contract to Hire Scenario

1. What is the intended time frame before the company will hire a candidate direct? Recruiters have two types of positions that are advertised as contract to hire: those with a defined contract period, and those that are long term contract with the potential to be hired in. Ask at the beginning of the process, as well as in your interview, what the expected length of the contract will be.

If a company states 90 days or 6 months, they likely already have the approval to hire a candidate direct at that time if all goes well. If they can’t commit to a date, make sure you would be comfortable remaining on contract for an extended period of time before accepting an offer.

2. What needs to happen in order to be hired in direct? Make sure you know what is most important to the hiring manager. If you can deliver on the points that matter most to him, you are likely to be seen as a valuable contributor to the team – and companies do not want to lose key people.

4. Know which industries are C2H friendly. Industrial work and roles in information technology produce the best results for the contract to hire arrangement. Office and administration roles are also ideal!

3. Sometimes, it is out of your hands. If it is not in the budget to convert a contractor to direct hire or management cannot get the necessary approvals, it may not be possible to be hired in. Know how long you are willing to stay if this becomes the case. Also, keep in mind that as business conditions change, hiring practices can also change – so even if a company has contract to hire approval at the beginning of the process, that can always change down the road. Similarly, if things are going well, they may be able to hire you in earlier than planned.