The Pros and Cons of Contract-to-Hire

By IBS Recruiter DK Kapani

When investing in something new, you would prefer to “try before you buy,” right? It’d be great to test a new product or a new living situation before we actually have to commit to it. The same is true when you’re checking out a potential workplace. One might argue it’s even more important.

In the workforce, this is what is called a Contract-To-Hire position, and it can be a positive or negative depending on how you look at it. There’s the “not knowing” if you will have a job or not when your contract is up, but also there’s the excitement of working with various people and industries.

There are multiple advantages of having a contract-to-hire (C2H) arrangement:

Demonstrate your value

Working in a C2H role will give you leverage to negotiate salary and benefits because you have demonstrated your skills and value to the position during the agreement period. The employer now knows you and knows you would be a valued employee.

“Try it before you buy it”

You get a chance to experience the culture, work environment, and expected job responsibilities at a company. It may work out, it may not. Either way, you get to sample before committing long-term. Multiple contracts also allow you to build your resume and amass varied experience. That way you’ll look more attractive to future employees.

As a staffing company, we advise you not to take anything for granted. But if you go to work each day with a bad-ass attitude and nail your job during the contract period, you will get brought on as a permanent employee 90% of the time.

As with anything, there are some disadvantages to a C2H arrangement:

You may have to start over

In the event that the employer decides not to extend an offer of permanent employment at the end of the agreement period, you are faced with a new job search. However, if the employer isn’t happy with you, there’s a good chance you weren’t happy with them either. Naturally, a full-time offer would be secure. But after six months you’ll get a good feel for if you’re happy with the job, or if you’re just happy with the idea of job security.

No benefits, less financial security

Most of the time, a C2H employer will not offer benefits. If the contract is terminated and there is not an offer to come on full time, no severance is paid to the contractor. However, something to consider with the contract portion is that, when you’re with a staffing firm, they often offer benefits for the contract duration and placement help if the opportunity doesn’t work out.

If the company has a history of hiring on a C2H basis, things generally work out well. If the employer has never hired in this fashion, clear expectations of performance and goals should be set and reviewed regularly. Are there limitations or additional expectations to be aware of until hired full time? Be sure to ask questions about things like system access, overtime, and travel. Asking these questions will help you avoid overlooking a critical requirement for success. The client will ask if the contractor is a fit for the role based on skills, experience, and career goals. A person’s skillset, background and career goals must be in alignment with the role for the best outcome. This alignment ensures that the contractor is placed into a satisfying and mutually beneficial role, instead of just accepting the offer of income until something better comes along.

So, let’s assume that all your questions are answered and the company is stable with a history of successfully placed C2H employees. Let’s also assume that you’ve done your legwork and the prospective employer has provided a solid job description, a date that you can expect to convert from contract to full time status, and a plausible salary range. With the knowledge of those details, the opportunity can be a great one as long as the job is in alignment with your goals and a match for your skills. In a stable company, a well-planned C2H scenario poses no more risk to a solid performer than a permanent hire. Again, there is little difference between the employer not deciding to hire you at the end of a C2H situation, or the employer hiring you and then deciding to let you go after six months!

In summary, contract-to-hire is often appropriate for both companies and candidates. It shouldn’t be overused or used inappropriately by the company. The candidate should interview with a very critical eye. Many, many of our candidates are in direct-hire roles that started as contract-to-hire. It is all a question of what is right for you and what’s right for the client. Most importantly, for a contract-to-hire, it’s up to the staffing firm to know the answers to all of these questions. If they don’t, they are not doing their job!

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