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January 18, 2023 · 3 min read

Contract to hire vs direct hire

One thing that comes up a lot in conversations with new clients centers around our deeper focus on contract and contract-to-hire positions, over the more traditional direct-hire model. With the trend in the tech industry heading towards more contract and contract-to-hire roles, how do you know what’s right?

There’s so much pressure in hiring, because we all know that getting the right people on your team is essential to any company’s success. And when you’re a growing company, that pressure can feel overwhelming. From deciding where to start sourcing your candidates, to getting the right fit for your team, to keeping them on board and engaged. It can be a lot. 

And we’re not saying that heading down the contract-to-hire road fixes all of these hiring anxieties, but it can help to take some of the worry out of the process. There will always be situations where making a direct hire is the best decision, but we hope to shed a little light on how the shifts in hiring practices over the last few years can be used to your benefit.

Cost-savings and increased flexibility

Contract-to-hire has a lot of benefits, but none more prominent than the ways it can save your company money. The cost in both time and real dollars spent is reduced with contractors, not to mention the reduced costs for benefits, as those are generally only extended to full-time salaried hires. Employing contractors also allows you to scale up or down, depending on your company’s current needs, so you can be flexible with right-sizing your team to meet current project needs and budget scope.

Reduce your hiring risk

According to Glassdoor, it costs an average of $4,000 and a little over four weeks to execute hiring a full-time employee–and that’s just the hiring process. Add in new equipment, training costs, hiring bonuses, and more, and you can quickly hit the $15,000 mark. Bringing on someone in a contract-to-hire capacity means you are better able to evaluate whether this person is worth the financial risk, and reduces your chances of making an incompatible hire. You can see how they work with the team, what level of professionalism they operate at, and determine if the work they’re producing is equivalent to the value they should provide.

Improve employee satisfaction

There has been no shortage of news stories over the last few years about how workers are job hopping to get bigger raises and more flexible working conditions. As much as a contract period is a way to help you determine how good of a fit an employee is, it’s also a time when that employee can feel things out and see how they think they fit in. For some, the promise of career advancement and job security are the drivers they need to make that trial period really count. For others, it may serve everyone involved to part ways once the contract is up. In the end, contractors who convert are ones that are far more likely to be invested in the opportunity and the company, staying with you beyond that initial period because they see the potential for growth with you.

Don’t just take our word for it

We work with contractors every day, so it’s easy for us to sit here and extoll the virtues of contract-to-hire positions. Our CEO even wrote an article for TechCrunch about why it’s worked so well for us, and why it makes sense in a shifting economy. In Silicon Valley, this hiring practice has been in place for years, well before we heard the phrase “unprecedented times” ad nauseum. A recent Forbes article referred to the practice “quiet hiring,” where contractors are brought in to fill in gaps, while internal employees are promoted to better utilize their skills.