In today’s world, new methods of engaging with employees are being adopted by companies....

What is Contract-to-Hire? Pros and Cons

In today’s world, new methods of engaging with employees are being adopted by companies. They could be remote workers, freelancers or from non-traditional roles. Therefore, contract-to-hire is becoming more relevant and useful in the workplace environment today.

Table of Contents

  • What is contract-to-hire
  • Contract-to-hire vs temporary employees
  • Pros of a contract-to-hire
  • Cons of a contract-to-hire

What is contract-to-hire

In a contract-to-hire agreement, the staffing agency and the employer agree to employ a person for a certain fixed length of time. The employee works for the company but remains on the payroll of the staffing agency. At the end of the agreed-upon employment period, the employer can decide to either hire the person  as a permanent employee or decide otherwise. If it is the latter, the person can move on to another opportunity.

Contract-to-hire jobs allow both the employer and the employee to test the waters before becoming full-time employees. An employee does not have the security that a full-time employee might enjoy.

Contract-to-hire vs temporary employees

Although these two terms are very similar, there is a difference between contract-to-hire and temporary employees. Temporary employees are traditionally employed for a duration of one year or less for a specific role or project. There are several reasons why temporary workers are hired like seasonal jobs, project work or to fill a vacancy when someone goes on leave of absence. While contract-to-hire workers are also brought on board only for a specific length of time, it is mostly when the company has a need to fill a position. So, provided the contract employee is a good fit, there is a high possibility of the person getting a permanent position when the contract period is over. At this point, the person transitions from being an employee of the staffing firm to being an employee of the company.

Pros of a contract-to-hire job

  1. The employee gets a chance to evaluate the company culture and whether they like their colleagues before making a decision to work at the company full-time, as an employee. In addition, you get to amass vast experience even as a contract worker.
  2. It allows the employee to demonstrate their value to the company. You get a chance to prove how good you are at your work and for your employer to actually see it for themselves.
  3. As a contract employee, you may have the opportunity to negotiate a better compensation and benefits package. This is because they are already aware of how you perform and they may be willing to pay more than when recruiting someone whose performance they may have no idea about. Your contractual period actually becomes a “working interview” for the employer.
  4. Sometimes employers do not have people with the required skill sets to execute a project and decide to go for contract-to-hire employees. It is easier since permanent employment involves a longer hiring, on-boarding and training process. A contract employee may be able to start sooner and get to work faster.
  5. Contract employees are often less expensive to hire than permanent employees since they are paid only for the time they are required to work.
  6. The hiring process is easier and smoother for the company as the staffing firm handles the work of finding the right candidate which is often a tedious and time-consuming process.

Cons of a contract-to-hire job

  1. You have to consider that even though you like the company and your colleagues, there is a possibility that you may not get the permanent job depending on whether you are the right fit for the job. You still however get a chance to improve your skills and resume.
  2. As long as you are a contract-to-hire employee, you are on the payroll of the staffing agency and hence will have no access to the benefits offered by the company that you are working for.
  3. Contract employees may not be invested in the company and its success. They may move away if they get better opportunities.
  4. A contract-to-hire position may not attract highly-qualified candidates as these people look for permanent employment and good benefits and a sense of job security.


A normal interview process does not provide a thorough evaluation of a candidate’s capabilities. Here a contract-to-hire position will serve as a trial run. This gives both the employee and the employer a better chance of understanding each other and checking out whether they are a fit. In the long run, this may enhance the employee retention rate. This method also significantly reduces the risk that employers have to take before filling a position. The risk being that they can bring the temporary contractual staff on board only when they are fully convinced and need that particular employee. This helps the employer avoid building a clunky workforce with high attrition.

Contract-to-hire helps companies to stay productive in times of unexpected growth, catering to the demands of scaling up to a new client or for extending the tenure of an ongoing project.

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