Temp-to-hire staffing allows companies to hire the candidate as a contractor with the right to convert to a permanent employee after a pre-determined period, typically six months. This staffing method started before the recession, but became a much more common method of hiring following the downsizing and budget cuts that came with the economic downturn.
Let’s look at a few reasons to use a temp-to-hire strategy:
1) Large organizations have a difficult time “firing” employees that are underperforming or a cultural misfit. Firing an employee for cause requires extensive documentation and even with the paperwork in place, can still result in a frivolous lawsuit. Temp-to-hire staffing allows employers to make better permanent hiring decisions based on actual performance. Companies are now hiring candidates that are proven to be good at what they do.
2) Because temp-to-hire is the ultimate trial period, it allows the companies to make faster hiring decisions.
3) Temp-to-hire staffing eliminates the one-time fee to an employment agency.
AND… there are benefits to this hiring method for potential employees:
1) Accepting a permanent position typically requires a candidate stay at a company for 2+ years to avoid being labeled a “job-hopper”. However, they base the decision to make this 2+ year commitment on a few interviews where everyone puts their best foot forward. Would you commit to a 2 year relationship with a companion after 1-3 dates? Unlikely. Temp-to-perm hiring allows the candidate to spend 6 months getting to know their company “warts-and-all” before committing to a longer-term relationship.
2) There is typically a final negotiation at the end of the contract period before the person joins permanent. This can allow the salary offer to be based on actual performance. That can be a huge benefit for employees who excel at what they do.
3) Hazard Pay! For the consulting period, the candidate will get paid typically 10%-15% above the target base salary (based on a 40 hour week) for the risk of not being a permanent employee right away. This allows candidates to save additional money in their “rainy day fund” during their contract period.
4) Candidates get paid for every hour they work. This often leads to either a 40 hour/week cap (which few permanent roles offer) or the ability to make substantially higher compensation due to hours worked during the contract period.
5) Due to your firm’s ability to weed out underperformers and cultural misfits, the permanent staff is often a more cohesive unit and of higher median skill.
The net-net of this is that Temp-to-Perm hiring has many benefits for small to large companies and to potential candidates. Try before you buy!