What Is a Contract-to-hire Conversion?

As a recruiter, you’re always looking for new ways to work with clients and make placements. Contract-to-hire agreements allow you to make two placements for one job order. With contract-to-hire conversions, you reap twice the rewards from the same opportunity.

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.

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.

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.

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.

Looking to offer contract talent to your clients, but don’t want to worry about managing your own back-office? Use FoxHire’s contract staffing services. Our recruitment back-office solutions manage the administrative details of your contract workers, so you can get back to making placements.