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Recruiting agencies are always looking for new ways to work with clients and make placements. Contract-to-hire agreements allow agencies to make two placements for one job order. With contract-to-hire conversions, you reap twice the rewards from the same opportunity. Additionally many agencies that adopt contract-to-hire recruitment see an increase in closing percentage for each job order by an average of 10%!

What is a contract-to-hire conversion?

In recruiting, there are different types of workers that contract staffers can place. Three common kinds of employees include temporary workers, direct hires, and contract-to-hires.

Temporary workers fulfill your clients’ short-term needs. They are hired for reasons such as seasonal changes, project work, or a full-time employee’s leave of absence. Temporary employees work for a predetermined period as stated in a contract.

Direct hires work on a long-term basis. You recruit direct hires for full-time positions. You find the right candidate, and the client hires them on permanently.

A contract-to-hire employee is a middle ground between temporary workers and direct hires. Sometimes, companies that hire a contract worker want to bring them on full-time. This is known as a contract-to-hire (also referred to as temp-to-hire, or contract-to-permanent) conversion.

How does contract-to-hire work?

First, the worker is placed as a contractor and usually makes an hourly rate. After a specified time period (usually three, six, or 12 months), the client evaluates the worker and decides if they will offer a permanent position. The employee can accept or deny the offer.

If the employee accepts, they typically need a contract-to-hire salary conversion to go from hourly to salary. You are no longer connected to the employee after they are hired full-time.

You place contract-to-hire workers with the intention of the client hiring them permanently. Placing a contract-to-perm employee does not automatically mean they will convert to full-time. The client is not obligated to hire the employee after the contract is up. And, if the client extends a permanent offer, the worker is not obligated to accept. However, some contract assignments serve as a probationary period for workers, with a more guaranteed conversion opportunity after 60-90 days. This is common on the healthcare space.

Some contract-to-hire conversions are planned. Other times, a client decides they want to hire a temporary employee permanently. Contract workers can convert to full-time employees before the time frame is up. Contracts can also be extended if the client is unsure about hiring the employee for full-time work, or if the candidate just wants a little more time in the sun, which is common in travel healthcare roles.

Temp-to-hire contract

Since a business can offer any temporary worker a full-time position, use a temp-to-hire contract with every client. Establish a contract-to-hire procedure before the employee begins work.

The temp-to-hire contract must include the contract period, as well as employee evaluation methods. Contract-to-perm conversion fees also need to be included in the contract. Make sure your clients understand the contract-to-hire agreement before onboarding an employee. We offer some free conversion fee templates to help get you started.

Benefits of contract-to-permanent workers

Contract-to-permanent positions offer benefits to recruiters, clients, and candidates. Take a look at the following advantages of temp-to-hire agreements for each party.

Recruiter benefit: Placing contract-to-hire employees opens the door to future opportunities. You make an initial placement with the client. That’s a huge positive, not just because of the money earned from the placement, but also because of the potential it creates for future business.

Recruiter benefit: Contract-to-hire placements can be more profitable. You typically get paid twice for the same placement. You’re compensated for every hour the contractor works during the contract period. Then, you’re paid a conversion fee once the contractor becomes a direct hire. The only thing better than getting paid for a placement is getting paid twice for the same placement!

Client benefit: Temp-to-direct placements offer companies the ultimate flexibility. Hiring authorities can see how the contractor will work before extending an offer of full-time employment. Those same officials are likely to remember recruiters who provided them with such flexibility.

Candidate benefit: Temp-to-hire arrangements also offer flexibility to candidates. The employee gets to try out the job and company culture before committing to full-time work.

In today’s uncertain economic environment, temp-to-direct placements are becoming more commonplace. You should regularly look for contract-to-hire opportunities with your clients. If you are unable to offer contract to hire through your agency, and employer of record (EOR) may be able to help. EORs offer recruitment back-office solutions to help manage the administrative details of your contract workers, so you can focus on finding great candidates and clients.

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