You just got the call: one of your employees is leaving. Unexpected departures happen at every company, but they’re still challenging to experience. Suddenly, you’re facing the urgent need to find a replacement hire. In the meantime, other employees will need to take on additional tasks and team morale may suffer. Rather than scrambling your team into a panic, a good option may be a contract to hire solution.

A contract to hire differs from a direct hire and provides unique benefits for the business -learn why it’s a smart move following an unexpected departure.

What is contract to hire?

A contract to hire employee — also known as work to hire or temp to hire — is a person who works with a company for a specific timeframe, often on one assignment or project. When that period ends, the employer may hire the employee full-time with benefits. The employer usually works with an organizational consulting firm or staffing agency to find the right contract to hire employee.

Contract to hire offers flexibility benefits for both the employer and employee. The contractor relieves the additional workload that employees have been forced to shoulder. They may also bring specialized skills that augment the team’s existing capabilities. Alternatively, a business may be planning for a busy season. They’ll extend a contract to hire offer to several professionals, bridging the immediate talent gap and retaining the option to keep one or more of these professionals on full-time.

Meanwhile, employees benefit from a more flexible job situation. This also gives them the ability to "test the waters" and see if the company is a good fit for them in the long term.

Direct hire vs. Contract to hire

The main difference between direct hire and contract to hire employees is the payroll structure. A direct hire joins the company as a full-time employee and starts receiving salary and benefits from the company. With a contract to hire position, the company pays the staffing agency, not the individual. Because contract to hire workers usually don’t receive the same benefits as direct hires, they sometimes may require higher pay.

Contract to hire employees are also different from independent contractors. The latter are self-employed workers. Meanwhile, the former is under a work to hire contract with the organization, though the recruiting agency is technically their employer.

The benefits of contract to hire

So, what does contract to hire mean and is it the right move for your staffing needs? Every hiring situation is different — the answer to whether contract to hire is a good idea isn’t a simple “yes” or “no.” It’s important to consider your company’s current talent needs and long-term goals.

Consider the below when deciding on contract to hire jobs.

Benefits for your company

  1. Streamline the hiring process: At some organizations, the interview process for a full-time employee can feel a bit like the television show Survivor— it requires a lot of work to reach the end. But contract to hire employees can start almost immediately because the staffing agency, not your HR department, handles the arduous hiring tasks. That saves your team time and energy in the interview and onboarding phases, with the contract to hire employee contributing immediately.
  2. Test out future employees: A contract to hire role is like a test run to see if the employee would be a good fit over a few months or a year. If so, you can hire them full-time and begin the more extensive onboarding process. If there’s no compatibility, you two can go your separate ways. That power of decision is a key benefit for your company.
  3. Minimize financial risk: With a contractor, you’re not paying full salaries and benefits; people in these positions are typically only paid for the time they work. If there aren’t enough projects to go around, they can take a reduced workload without negatively impacting your budget. These employees also ease the burden of scaling too quickly after a large influx of customers or clients. Rather than trying to hire 20 people at once, you can look to contract to hire employees to help bridge that growth.

Benefits for your future employees

  1. Access professional flexibility: Top professionals crave flexibility- 80% of employees are more loyal to an employer that offers flexible arrangements, per Flexjobs. Contract to hire employees are just that, flexible. With the ability to flex the hours necessary to get the job done, they have a laser focus on the job at hand.
  2. Test out future employers: Though employees may get a taste of your company’s culture during interviews, there’s nothing like experiencing it for themselves in the daily work environment. This can help reassure them that your company is the right fit. With a contractor role, the employee can learn what they like and dislike about the position before deciding whether to join full-time should an offer be extended. This helps minimize future turnover risks.
  3. Share specialized skill sets: Contract to hire positions also give employees a chance to show off their skill sets. Typically, people are brought into these roles because they have unique experience or talent that would benefit a shorter project. These workers can contribute immediately, because they have the foundational knowledge required to get the job done. They’ll also be able to share insights with team members, helping employees become more well-rounded while also gaining new experiences.

Contract to hire positions are not for everyone. Some job candidates may only be interested in full-time, permanent positions. Other candidates may prefer to remain in contractor positions, rather than joining a company full-time. The right hiring agency will pair you with qualified candidates who are excited about contract to hire opportunities and ready to make a positive impact at your company.

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Take the next steps towards creating contract positions

If your company is in a position to hire a few additional people, or you think you might have a need in the near future, contract positions could be a great option. Similarly, if you work in an industry with a busy season, you might consider using contract to hire employees to help with the increased workload, then reassess at the end of the season.

Make sure you define what a contract position is to any potential employees. You’ll have a clear path to success by establishing expectations for evaluating a contractor. Even better, working with an organizational consulting firm removes the stress of trying to navigate the contract to hire candidate pool. We’ll help find the right people, clearly identify roles and responsibilities, and ensure a smooth onboarding process.

Ready to see why so many companies are looking at contract to hire roles? Learn more about our Interim Executives & Professionals.

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