Contract to Hire: The Real Story

It’s not uncommon for candidates to be skeptical of the contract to hire situation. There are pros and cons to this employment arrangement for both candidates and managers alike. So what’s the real story on contract to hire? Why do companies use it and how do you maximize your odds of getting hired in?

Reasons Companies use Contract to Hire:

1. They want a trial period before committing to a candidate. They 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. They are unsure of their hiring budgets. 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. Workload is variable. 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 contract to hire in case the business is not won.

4. They are lying. In rare cases, companies will use “contract to hire” as bait to attract candidates, with no intention of ever hiring them in after the contract period is slated to end. These companies “dangle the carrot” of being hired in to keep employees working hard. Do your homework and trust your intuition, and you will be able to tell the difference between these companies and true contract to hire situations.

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.

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.

4. Contract to hire work will look good on your resume. 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.

5. 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.

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