What is Contract to Hire? Definition, Process & Benefits

While an employee just loves every perk they get at work, not every employer has a great time granting them those perks. There’s a lot going on in the employer’s mind, the year’s ROI, the planned purchases for the upcoming year, negotiations with vendors and so on.

At such a time, an employer might opt to get someone for a contract to hire position rather than a permanent job on the company payroll. And to get this moving, they may contact a staffing agency with their requirements and what candidate profile they have in mind.

What is Contract to Hire Meaning?

In contract to hire, a hiring is made by a hiring service provider and the hire will be on their payroll instead of that of the organization that is outsourcing the hiring process. The hire will work as per the terms of the contract executed between the organization and the hiring service provider. After the completion of the contract, if the person is suitable enough to join the main organization, then he/she will be inducted in as a permanent full-time employee. For the duration of the contract, the employer refers to the hire as a ‘contractor’.

What is Contract to Hire Position?

In a contract to hire model, the position of the hire is temporary or part-time and made to fulfil the needs of the main organization. The roles and responsibilities of the hire are decided by the contract that is executed between the employer and the hiring party. Some of the industries or service areas that use contract to hire positions are:

• Accounting
• Administrative support
• Graphic design
• Information technology
• Marketing
• Project management
• Sales
• Seasonal retail

How to Hire a Contract Employee?

To hire a contract employee, the employer should preferably avail the services of an HR consulting company. The HR consulting company will determine if it is possible to hire using the contract to hire model for the role. Once it confirms that this is the case, the agency will then start approaching the best candidates for the role in their network.

The agency will then shortlist candidates and screen them further for the role. This is followed by an interview where candidates will be selected if the meet all the requirements. Post this, there is a background check and onboarding. At each stage, the hiring party keeps the employer informed of what’s happening.

How to Convince a Candidate for a Contract to Hire Role?

To convince a candidate working in a direct role for contract to hire, you can highlight a few reasons that work in the favour of a contract to hire.

New technology or learning: They can work a project that involves a technology or new learning that they have never had. You could also inform them what impact this will have on their career and how it will better the roles they will be offered in the future.

A better company: It may not be possible to join one of the Big 5 directly, but on a contract basis, where they do not have to pay the candidate as much. Work experience with a company such as Deloitte, for instance, will look great on anyone’s resume.

A better position: A better position may be open to a candidate in a contract to hire role, something they would prefer and would probably be difficult to get in a direct role.

A location of preference: They may get to work in the location of their choice in a contract to hire role, or possibly even a work from home, which let’s be fair, everybody loves!

An honest reason: Does the company have a reason why they want to hire for a contractual role rather than a direct one? Is there a possibility that the role will become a full-time direct role after a while, and would that demand any change?

What are the Benefits of a Contract to Hire from a Staffing Agency?

Beginning with a much-reduced time to hire, a third opinion when assessing the candidate to budget flexibility, there are several benefits to a staffing agency providing a contract to hire. A staffing agency providing a contract to hire presents the following list of benefits.

1. Faster process to interview.
2. Opportunity to assess the candidate.
3. Budget flexibility.
4. Staffing flexibility.
5. Gives room for business growth.

Contract to Hire Process

1. Determination of skills

The first stage of the contract to hire process involves the employer outlining the future responsibilities of the contractors, the skills that they must have, cultural fit, the experience, and the exact duration that they will be required to provide their services.

2. Selection of Staffing Agency:

In this step, you select the staffing agency who will handle the contract to hire responsibility. To select a good staffing agency, answer questions like:

• How long have they been hiring in your industry?
• What processes do they follow?
• Are they strong and clear in communication?
• What are their fees?
• Do they offer any additional services?
• Do you enjoy working with them?

3. Sharing of information

Now share this information with the staffing agency that you will entrust with the job of filling this contract to hire role as a clearly outlined brief. Make sure you have all the details down and clarify the same with the staffing agency. If they require any additional details be sure to furnish the same with them.

4. Specification of deliverables

Talk to your staffing partner and determine their responsibilities. In this step, the project start and end dates, the number of deliverables, the point of contact for both the staffing company as well as the employer, and the custodians of each deliverable are discussed.

You can even discuss finer details such as when the first set of candidates will be made available, the number of screening rounds that will be there and the expected interview to offer acceptance rates.

5. Execution of work

The staffing agency then executes the instructions as per the requirements of the contract and goes about finding the ideal candidates. This step takes the most time in a contract to hire process, so it is better to agree on a duration for this step.

6. Signing the contract and onboarding

Once the hiring party has selected a few candidates for contract to hire roles, they will share the list with your hiring manager, who will then give the approval and the go ahead to proceed. The staffing agency then onboards the hires on its payroll and conducts further training and prepares them for the role.

Closing words

A contract to hire role is not a makeshift adjustment to keep the ball rolling. Instead, it is a well thought out decision from HR and the higher management in a company to manage requirements more effectively.

It saves time, increases flexibility, and reduces costs for the company, as long as the staffing partner you pick is a great one. How can you be sure you have picked the best staffing partner?

Opt for Alp Consulting, an HR consultancy with more than 25 years of experience connecting quality professionals with quality employers. It is easier said than done to convince a candidate to move from a direct role to one with a contractual obligation. Let us work the magic for you. Talk to Alp Consulting today!

FAQ Section

1. What is the difference between contract and contract to hire?

A contract is the documentation for the contract to hire position that the hiring party and the employer have agreed to, the role on offer is contract to hire, and the person who undertakes the job is referred to as a contractor.

2. What is contract to hire job?

A contract to hire job is a temporary one that addresses an employer’s immediate needs without giving the candidate an option for direct employment immediately. The contract to hire role can become a full-time direct role after a while.

3. What is contract to hire staffing?

Contract to hire staffing is the process of selecting suitable candidates as contractors who will work on the staffing company’s payroll but do work on behalf of the employer.

4. What is contract to hire clause?

A contract to hire clause is that part of the contract that specifies how the contractor must work with the staffing agency and the employer to get the work done.