These are challenging times for organizations who are trying to hire the required resources. Hiring new employees is a time-consuming process and can be burdensome, depending on the professional needs and the level of experience that is required in a potential candidate. Whether looking to hire, it’s crucial to understand the differences between contract-to-hire and direct hire. Both these methods are designed to suit varying needs.

Contract-to-hire

Contract-to-hire means the employee is placed in a short-term position for a set period of time, with the possibility of being hired full-time when the contract ends. The short contractual roles allow both employer and employee the opportunity of a trial period before committing to full-time employment. A contract-to-hire employee is technically employed by the staffing agency but is under contract to work for the client company.

How contract-to-hire works

In contract to hire, a staffing agency fills in the positions and handles most of the front-end recruiting tasks like sourcing candidates, reviewing resumes and shortlisting candidates. Then the shortlisted candidates are passed along to the client for any final interviews. The end-user company makes the final decision, with insights and guidance from the staffing agency if needed. A selected candidate begins the employment contract on the staffing agency’s payroll and not the company’s. The contract duration can vary from one month to being indefinite, and in almost all situations, the client has the option of hiring the employee full time or terminate the contract employment.

Direct hire

Direct hire means a direct job offer to a candidate from the intending client company, usually for permanent roles in the company. The employee that joins the organization through direct hiring is given all company benefits and remuneration. In direct hire, which is also known as direct placement, the staffing agency finds, qualifies and hires permanent staff members on behalf of their client. These are usually full-time positions with benefits, though sometimes they are used to fill part-time positions as well.

How direct hire works

The staffing agency handles the recruiting tasks, but the selected candidate is on the client’s payroll and becomes an employee of that company. Typically, a direct-hire search means the company maintains and is committed to a long-term relationship with their staffing partner who does a thorough job of shortlisting the best candidates for the role.  Contract-to-hire vs Direct hiring

There are various advantages and disadvantages to both Contract-to-hire and Direct hiring and they may alternate depending on the requirements of the specific business.

Long-term vs. Short-term If there is a need for a specific skill set to fill a short-term need, like a project with a definite beginning and end point, then a contract-to-hire ensures paying only for that talent to complete that particular job and scaling down as soon as the project is over. However, for a long-term solution, a direct hire can save costs and time.

Changing Skill Requirements Sometimes companies do not have the internal skillsets required to effectively execute one or more stages of a project or the skill set doesn’t exist within the company. This is when the company has to decide to hire a contract employee or permanent hire.