With the rise in the gig economy, different employment models have risen in popularity. Unlike in earlier times, people are willing to explore other employment types than full-time employment. Organizations too are hiring flexibly, according to their varying needs. Contract to Hire is an employment model that can be categorized under part-time/seasonal employment. Reports show that the demand for Contract to Hire employees has gone up in the past few years.
So, what is Contract to Hiring and how does this work? If you are an employee or employer who is looking to know more about this employment type, this article is for you. We cover its importance, how it is different, and its advantages and disadvantages. Let’s get started.
What is Contract to Hire
Contract to hire is a short term employment format in which an employee is hired for a predefined time period. At the end of the contract, the employer may offer a full-time position based on work satisfaction. It is also called “temp to hire” and is typically used by companies when they want to try out an employee before onboarding them as a full-time resource.
The contract to hire model is commonly deployed in industries such as IT, project management, admin support, seasonal sales, and so on. Although the employee will be under contract to work for a company, they are employed by a staffing agency and will be on the staffing agency’s payroll during the contract period.
How Contract to Hire Works
In a contract-to-hire model, the initial recruiting tasks like finding suitable candidates, validating their profiles and shortlisting the appropriate ones are done by a staffing agency. After these steps, the agency hands over the profiles of shortlisted candidates to the hiring company for the final interview. The company interviews the candidates and selects the ones best fit for the job.
The selected candidate then starts the contract on the staffing agency’s payroll. After the contract period is over and if the company wishes to retain the employee, they are then shifted to the company’s payroll. The duration of the contract varies from company to company depending on their need. It could be short term contracts ranging from 1 to 6 months or long term contracts of 1 or 3 years.
Contract to Hire vs Direct Hire
There are two main differences between contract to hire and direct hire. While the contract-to-hire jobs are temporary in nature, direct hire jobs are permanent offers. The company directly hires the candidate shortlisted by the staffing agency on their behalf. Unlike contract to hire, direct hire places employees on the company’s payroll. Employees also receive benefits and remuneration from the company.
Benefits of Contract to Hire for Employers
Employers who use the contract-to-hire model for filling the job vacancies enjoy various benefits such as:
1. Speedy hiring
The hiring process often tends to be long and drawn out. An organization’s HR team might find it difficult to dedicate time specifically for hiring. Contract to hire is useful here as staffing agencies take over the time-consuming stages of hiring. As a result, companies can find the right talent quickly and fill the gap.
2. Assess employee fit
To find that a newly hired full-time employee is not the right fit is never good news for a company. Contract to hire helps employers to evaluate a candidate and see if they are the right fit before offering them a full-time position. In a way, the employers get a trial run to ensure that the employee fits in the company culture.
3. Budget flexibility
Contract to hire offers employers a monetary advantage as employees need not be paid benefits, insurance or other extras. By hiring temporary employees, businesses can cut down on these costs and use them to build the budget. Meanwhile, they can also maintain productivity by continuing the work with temporary employees.
4. On-demand skills
For certain projects, a company may require employees with unique skills until the project delivery. This is often seen in IT staffing. Hiring full-time employees in such situations is not feasible in the long run. With contract to hire, companies can meet the on-demand skill requirements with talented, temporary employees.
5.Scalability
To scale up a business, human resources are important. But to meet the required resources at short notice is not possible. However, that shouldn't stop a company from growing. Contract to hire helps companies hire resources fast and on a budget so that the company can scale up without any hurdles.
Benefits of Contract to Hire for Employees
Employees of all types – those looking for temporary jobs, full-time jobs or those exploring different career options can benefit from the contract to hire model. It helps employees:
1. Create impressive resume
For employees who are on a career break or looking to upskill themselves, contract to hire jobs can be useful in creating an impressive resume. It is possible to quickly learn and gain expertise in various areas with contract to hire jobs. So, employees can easily improve their skills if they are willing to learn.
2. Determine company fit
Company culture plays a major role in employee motivation and satisfaction. To know the work culture of a company in-depth, there is no better option than working there. By taking a temporary job in the contract to hire model, employees can determine if the company is a good fit for them and if they would like to get a full-time job there.
3. Showcase your talent
The best way to convince an organization that you are a great fit for the team is to showcase your talent to them. Contract to hire gives employees the chance to demonstrate their value and show how they can help the company grow. If the employers are convinced, they will offer a full-time job – a foolproof way to work in the company of your dreams.
4. Build a network
In a professional career, contacts are important. The right connections are no less than a lifetime saving. By creating a professional network of connected people employees build relationships that can come useful throughout their careers.
Drawbacks of Contract to Hire for Employers
Parallel to the various benefits that the contract-to-hire model provides for employers, it has certain drawbacks, such as:
1. Chances of Mis-hire
It is possible that the staffing agency that is hiring on behalf of the company is not completely aware of the company culture. As a result, there is an increased probability of mis-hires. In such cases, the contract will not be successful and employers will have to start over the hiring process again.
2. Less interest
Since there is a third party involved in the hiring process, some employees may feel hesitant to choose contract to hire jobs. They will show less interest in this model and prefer direct hire instead. Especially the highly skilled employees, they may find this model skeptical, which is a major drawback.
Drawbacks of Contract to Hire for Employees
Although the advantages are many, employees may feel hesitant about taking up contract to hire jobs because of the following reasons:
1. Lack of employment benefits
The benefits that full-time employees receive, like paid leaves, pension, insurance coverage etc. are not available for contract to hire employees. Even if an employee is permanently acquired by a company after the contract period, the time they served under the staffing agency’s payroll will not be counted towards the total accumulation of benefits.
2. No future guarantee
Even if the job is great and employees love it, they may not be hired permanently. If employers hired people to fill in temporary job vacancies, even if the employees showcase good performance, they will not be made permanent. This lack of guarantee is motivating for many employees.
Wrapping Up
Contract to hire is an excellent option for companies looking to hire employees temporarily and for employees who prefer flexible work. Like other recruitment models such as staff augmentation, outsourcing, etc. a good consultation service that understands a company’s needs is a must-have to successfully execute a contract to hire staffing. Aufait consulting services has more than a decade of experience working in the recruitment industry and has accomplished the staffing needs of several clients worldwide. If you have a consultation requirement and need any assistance, get in touch with us right away