What is Contract to Hire?

What is Contract to Hire?

When using the service contracts of staffing companies, they will search for candidates, screen resumes, and conduct candidate screening. Afterward, they will send the client a list of the most suitable candidates for the position, and the client will make the final decision to select the appropriate candidate. Once the candidate is chosen, they will begin to sign an employment contract, and the salary will be paid by the staffing company. The duration of a contract-to-hire position can vary from short-term to long-term.

The difference between a contract-to-hire employee and a full-time/temporary employee:

  • Contract-to-hire employee:

The contract term may be predetermined or without a specific timeframe. Receives salary from the staffing company. Starts working through a staffing company.

  • Temporary employee:

Typically works for a short period, on specific projects, or seasonal work. Usually not committed to long-term or permanent employment. Often does not enjoy full benefits like full-time employees.

  • Full-time employee:

Directly hired by the company with a long-term employment contract. Enjoys full rights and benefits such as insurance, vacation, and monthly salary. Commits long-term to the company and often demonstrates a high level of commitment and responsibility to their work.

Contract-to-hire employees are considered an intermediate stage between temporary and full-time employees. It is essential to understand these definitions to avoid confusion between different employment types.

Advantages and Disadvantages of Contract to Hire

  • Advantages of Contract to Hire:

Trial before Commitment: Allows both the company and the candidate to test the work environment and see if they are a good fit before committing to full-time employment.

Financial Savings: Contract to Hire often saves initial investment compared to directly hiring employees with expenses such as insurance and benefits.

Flexibility: Provides flexibility for businesses facing fluctuations in staffing needs, such as specific projects or seasons.

Time Savings: Helps save time in the recruitment process, as staffing companies typically handle a significant portion of the hiring work.

Diversification of Workforce: Allows businesses to utilize diverse sources of labor, including individuals with specific skills and experiences not readily available in permanent employees.

Networking: Facilitates expanding the network in the industry and building relationships with experienced individuals.

  • Disadvantages of Contract to Hire:

Lack of Long-Term Commitment: For candidates, there is no commitment to a long-term job, creating uncertainty about the future.

Incomplete Benefits: Contract-to-hire candidates often do not enjoy full benefits like health insurance and leave until they become permanent employees.

Dependency on Staffing Company: Businesses may have to rely on the staffing company in the recruitment and management of employees.

Contract Disputes: Disputes or non-renewal of contracts may occur, leading to dissatisfaction.

What to Do When Hiring Contract-to-Hire Employees?

Detailed Planning: Before using contract-to-hire agreements, define goals, plans, and the time frame for testing candidates.

Clear Contracts: Ensure that contracts are clearly written, including terms, salary, and any relevant provisions.

Monitoring and Evaluation: Monitor the performance of contract-to-hire candidates throughout the contract period and evaluate their suitability for conversion to permanent employees.

Negotiate Conversion: Before the end of the contract, discuss the conditions and benefits of converting to permanent employment.

Build Good Relationships: Provide opportunities for current contract-to-hire candidates to build relationships with the company and colleagues.


If you are looking for effective recruitment solutions, Contract to Hire can be an attractive option. Understanding how it works and the differences between recruitment types will help you manage your workforce effectively.

This article has provided an overview of the Contract to Hire service and why it may be a smart choice for your business. From optimizing searches to saving time and finances, Shelby Global will help you execute Contract to Hire professionally. We offer flexible recruitment solutions to help you build a strong and responsive workforce.