In the world of work, talent acquisition takes on many forms beyond the typical direct, permanent-employee route. One of those alternative options is called contract-to-hire. This hiring arrangement brings an employee on board as a contractor for a predetermined period.
In this blog, we’re discussing everything you need to know about a contract-to-hire arrangement, including how it works, why it can be beneficial for your organization and how it compares to other hiring practices.
What Is Contract-To-Hire and How Does It Work?
Simply put, a contract-to-hire arrangement means that an individual is initially hired as an independent contractor with the possibility of being brought on as a permanent employee once the contract is up. During the contract period, the individual typically works on specific projects or tasks. They generally have the same responsibilities and expectations as a regular, permanent employee. But on paper, they’re still an independent contractor.
At the end of the contract period, the company will evaluate the contractor’s performance, skills and cultural fit within the organization. They use this information to determine whether they would like to offer them a permanent position.
It’s a little unconventional, but a contract-to-hire arrangement can actually work in favor of both the contractor and the employer in different ways. For example, this type of arrangement allows both the employer and the contractor to assess each other before committing to a long-term employment relationship. From the employer’s perspective, they might think:
If given the opportunity, would this person be a good fit for us?
Does this candidate have the skills and experience demanded of the role?
How do they get along with other employees?
On the other hand, the contractor may ask themselves questions like:
Can this employer meet my needs in terms of compensation, job satisfaction and professional development?
Do their values and culture align with my own?
Questions like these, and more, are examples of what contractors and employers can discover about each other throughout the contract-to-hire process.
Industries Where It’s Common
Contract-to-hire is common in industries with high demand for specialized skills. It’s also useful when companies want to manage risk before making a permanent hiring decision.
You might see these types of roles in:
Information Technology (IT): IT companies often hire contractors for specific projects or to fill temporary skill gaps. Software development, cybersecurity, network administration and data analysis are roles that are frequently offered as contract-to-hire opportunities.
Finance and Accounting: Financial institutions and accounting firms may hire contract workers for tasks such as auditing, financial analysis, tax preparation and project management.
Creative and Media: Advertising agencies, design firms and media companies often employ contractors for roles in graphic design, content creation, video production and marketing.
Engineering and Construction: Engineering firms and construction companies frequently hire contractors for specific projects or to address short-term staffing needs. The roles may be in civil engineering, project management and construction supervision.
Education: Schools, colleges and educational organizations sometimes hire instructors on a contract to fill temporary vacancies or meet fluctuating demand.
No matter the industry or specialization, here’s how these arrangements typically unfold at a glance:
Employers identify a need for additional resources or talent.
Recruiting strategies begin.
The employer identifies a suitable contactor and contract negotiation begins.
Onboarding starts.
The contractor carries out their duties.
At the end of the term, the employer evaluates the contractor.
The employer makes a hiring decision.
The contractor transitions to a full-time employee.
What’s the Difference Between Direct Hire and Contract-To-Hire?
Permanent employees and contract-to-hire folks typically share similar job responsibilities and are treated nearly the same. It can be difficult to determine the difference between a full-time position and a contract role. The main differentiators are the employment relationship and the timing of the hiring process. Now that we know the conditions of contract-to-hire arrangements, here’s how direct hires compare:
Initiation: In a direct hire arrangement, the employer hires an employee directly into a permanent position without an initial contract period.
Intention: A direct-hire employee is typically hired with the intention of a long-term employment relationship from the outset, whereas contract workers aren’t necessarily expected to stick around afterward.
Timing: The hiring process for direct hires usually involves standard recruitment procedures, such as job postings, interviews, background checks and negotiations of salary and benefits. For a contract role, workers are typically head-hunted or found through staffing agencies.
Tenure: Direct hires are expected to remain with the company for an indefinite period, whereas those who start as contract employees may leave sooner, depending on their contract terms.
The Potential Value
There are more than a few good reasons why some employers opt for contract-to-hire arrangements. Examples include:
Access to specialized skills and experienced workers: Employers can access specialized skills and expertise temporarily through contract-to-hire arrangements. As such, they can address short-term needs or projects that require specific technical or niche skills without hiring permanent employees.
Risk mitigation: By initially engaging contractors on a temporary basis, employers can mitigate some of the risks inherent to direct hiring. These arrangements allow employers to assess the contractor’s performance, skills and fit within the organization before making a long-term commitment.
Reduced administrative burden: Hiring contractors through staffing agencies or as independent contractors can reduce the administrative burden associated with payroll processing, taxes and compliance with labor regulations. In this type of arrangement, this responsibility often falls on the staffing agency or the contractors themselves.
Agility: By engaging contractors temporarily, employers can respond more quickly to changing market conditions, project deadlines or business priorities. They can adjust their workforce size and composition as needed to stay competitive and adapt to evolving circumstances.
Common Challenges With this Hiring Model
Of course, reaping the benefits of this hiring arrangement isn’t without its challenges. Since contractors are, on paper, working for themselves and providing a service to your organization, employers may lack control over how jobs get done.
So, let’s start there before outlining a couple of other common challenges:
Limited loyalty and engagement: Unfortunately, some contractors may not feel the same level of loyalty or commitment to the organization as permanent employees, especially if they are uncertain about their long-term relationship with the company. This may affect their engagement, productivity and collaboration with colleagues.
Job security: According to a recent survey, 85 percent of employed individuals express worry about their job security in 2024. With the cost of living at an all-time high, contract roles may be less appealing to those looking for long-term reliability in their employer.
Limited pool of candidates: Finding qualified contractors who are willing to consider contract-to-hire positions can be challenging. Some candidates may prefer the stability of permanent employment or may be hesitant to take on temporary roles with uncertain long-term prospects.
Competition from other organizations: Employers may face competition from other companies offering permanent positions, particularly in industries or regions with a high demand for talent.
Contract-To-Hire FAQ From Employers and Contractors
Still, have questions about contract-to-hire arrangements? We’ve got answers:
Can Contractors Quit a Contract-To-Hire Arrangement?
It depends on the contract terms. In some cases, yes, contractors can quit a contract-to-hire arrangement. Howeverm the process and implications may differ depending on the terms outlined in the contract and any applicable employment laws.
It’s also important to note that, while it’s possible in some circumstances, quitting early may strain the employer-employee relationship or damage a contractor’s reputation. So, read the contract carefully!
What Should Be Included in a Contract-To-Hire Agreement?
A contract-to-hire agreement should include any essential details that are pertinent to the job at hand, as well as conditions for employment and a termination clause. At the bare minimum, it’s good to have:
The contract period (start date and end date).
Scope of work.
Compensation.
Evaluation criteria to be eligible for full-time employment.
Confidentiality and non-disclosure information.
A termination clause.
Finding the Right Candidates for Your Open Roles
ApplicantStack is built for better hiring practices across the board, including seeking and securing the perfect contract-to-hire candidate for your job opening.
With this type of work arrangement, employers typically want to move quickly. Whether there’s a looming deadline or a special project that needs to be completed ASAP, finding, hiring and onboarding the right contractor has never been easier. To learn all about how Applicantstack can streamline your hiring and onboarding processes no matter the arrangement, check out our self-guided tour.
Salary is one of the first details job seekers look for in a posting. Along with education and experience requirements, compensation immediately determines if someone will apply for the job or move on to the next one. Common practice has been for companies to put off salary discussions until it was time for an offer. Some prefer to present a large salary range in the job listing. Shifts in the job market have seem greater movement towards salary transparency, with some states even requiring it by law.
What Is Salary Transparency?
Salary transparency is the act of openly discussing wages in job postings, in interviews, and as a part of company culture. As recently as 1953, discussing salaries openly within the company or with others outside such as the news media could be a punishable offense. The National Labor Relations Act was passed that year to protect a worker’s ability to “discuss wages in face-to-face conversations, over the phone, and in written messages. Policies that specifically prohibit the discussion of wages are unlawful.”
While companies do have some ability to limit wage discussion on social media under electronic use policies, it’s unlawful for a company to retaliate against a person for communicating about salary. They also cannot have any rules in place that prohibit those conversations.
Why Does Salary Transparency Matter?
As part of the ongoing effort supporting employment equity, several states have passed laws that require salary range as a part of job postings. Emerging data from these efforts shows, at minimum, that women benefit from salary transparency. As of March 2023, California, Washington, Nevada, Colorado, Rhode Island, Connecticut, New York, and Maryland had enacted salary transparency laws. Fifteen more states are considering adding them in upcoming legislative sessions. Each state has its own job posting requirements. Some demand a list of all benefits, while others want to see just a salary range.
Gathering data to these laws’ effects will take some time. But according to The Center for American Progress, a recent (though limited) study analyzed Colorado’s pay transparency law. After its passage, the state’s labor force participation rate increased compared with the labor force participation rate of nearby Utah. Since the Beehive State has similar demographics and economic characteristics, it served as a good comparison. In a competitive labor market where companies are looking to cut through the noise and find the best candidates, salary transparency may be a promising solution.
Including Salary Detail in Job Listings
To new generations of workers, perceiving salary as a taboo topic is an unpopular stance. Recent data from The Society of Human Resources Management shows that a whopping “80% of U.S. workers are more likely to consider applying for a position if the pay range is listed in the job posting.”
Whether companies see this as a burden or an opportunity is up to them. Secrecy around salaries not only affects new hires, but current employees too. A company culture that discourages open discussion may be banking on an underpaid employee not realizing that their position is worth more than they are making. This can dramatically affect employee retention along with hiring replacement workers who find that practice distasteful.
Employers who are feeling adrift with new regulations and practices can take some comfort in the nuances of the discussion. SHRM points out that pay equity is about fairness. Fairness accounts for differences between people that are nondiscriminatory. Examples include special skills, years of experience, education, and location. Employees don’t have access to all the data and information available to HR. There are legitimate reasons to offer different salaries to different workers. It’s important to spend time documenting these reasons and make sure they are fair and easy for other employees to understand.
Benefits of Including Salary Range in Job Postings
Preparedness: Including salary information in job postings allows hiring managers to make these decisions in advance of the first candidate walking into the interview. It encourages scrutiny of past salary practices and adopting legally compliant policies (where applicable).
Trust: Transparent salary information fosters trust between job candidates and existing employees. As companies post job information on popular websites and social media, good and bad information can make its way to both potential and current workers. Extending this courtesy to both groups is vital for filling positions and job retention.
Quality: SHRM found that 66 per cent of companies who include salary information in job postings said the quality of their candidates improved, along with 70 per cent who said the number of their applications increased. A high caliber applicant pool saves you time and money.
Stand Out: Part of an employee’s compensation package is perks and benefits. If your small business feels like it can’t compete with larger companies from a salary perspective, you can list available perks that make your company culture unique. Examples include a gym membership, flexible work hours, or a generous PTO or holiday policy. For some workers, those benefits will outweigh the potential of a higher salary.
Productivity: If your company offers compensation that’s tied to performance, transparency makes it clear how employees can achieve their highest level of salary. It can foster healthy competition between employees who do a similar job. Secrecy can have the opposite effect, as gossip can discourage employees from doing their best work.
If your company has adopted salary transparency as a best practice, ApplicantStack can help. You can fill in the salary or salary range in every job listing for quick internal reference and to easily populate top job boards. Enjoy the peace of mind that comes with complying with local regulations and recruiting the best possible candidates for your company.
We’re excited to announce our inclusion in Indeed’s ATS Partner Program as a Gold Partner. We work closely with Indeed to build reliable integrations, optimizing hiring processes for countless businesses across all industries.
ApplicantStack + Indeed Integration
Indeed is the top-ranked job site in the world, drawing more than 350 million unique visitors on a monthly basis. The goal of the site is to put jobseekers first, offering access to open roles and the option to research companies they are considering working for. With over 245 million resumes on Indeed, employers can also find and connect with top talent, creating a mutually beneficial situation for the workplace.
ApplicantStack is designed for small business clients, helping them compete with major companies for skilled talent. Without the right applicants and new hires, it becomes more difficult to grow and maintain a stellar team. But the recruiting process can take a lot of time and effort, which small business owners may not have to give.
ApplicantStack levels the playing field, and the integration with Indeed gets open roles in front of a wider audience. Sponsored Jobs, which can be created and posted within the platform, attract nearly five times more candidates than non-sponsored jobs. Plus, the applicant-tracking system (ATS) streamlines the recruiting process while ensuring access to all data from one place.
Take Advantage of Indeed + ApplicantStack: A Winning Combination
Learn more about our integration with Indeed and how you can access an all-inclusive hiring & onboarding solution as you build your team.
Your company’s investment into a new hire can be measured by man hours, money, and time spent away from other tasks. But your commitment can’t stop at the job offer. The way you integrate new hires can be just as important as the recruiting process. A retention consultant suggests that replacing a newly hired employee can cost a business between 100 and 300 percent of their annual salary. The emotional costs may not be as easily calculable, but they are equally as impactful on flow and productivity.
According to a recent Gallup poll, almost half of workers are open to leaving their organization. The most common reasons cited fell under the categories of Engagement and Culture and Wellbeing and Work/Life Balance. Drilling down further into the list of reasons we can find some that might apply to new hires:
Unrealistic job expectations
The job was different than expected
Not treated with respect
Workplace culture
Coworkers
Insufficient training
Relocation
Physical working conditions
Here are some strategies to help get out ahead of some of the struggles new hires may face. A focus on employee retention is mutually beneficial to the company and the new members of your team.
Start Onboarding Immediately
During the hiring process, quick response times and open communication are vital to attract quality talent. It remains vital to maintain that level of attention to a new hire during the period before they start work and into their first days or weeks. Consider employing a variety of methods to introduce someone to your company and help them integrate, such as:
Pre-recorded video content or printed materials about company values and culture
Delivery of a welcome email and/or a package of company-branded items, office supplies, or a personal note
Quick turnaround on technology and office equipment requisition, especially if the employee is remote
Introductory meetings or video calls with immediate supervisors and HR
Assignment of a work buddy or mentor who can answer questions and help the new employee feel welcome
A plan or schedule of clearly defined benchmarks that will be part of their initial training period
Set Realistic Expectations as You Integrate New Hires
The hiring process is a time to sell the company to the candidate who’s selling themselves. Once someone is hired, the best way to welcome that new employee is through an organized onboarding process. This gives the employee, HR, and supervisors a chance to provide important details about job responsibilities and employee benefits.
After the blur of interviews and first-day jitters, it can be especially helpful to provide written documentation of everyday tasks, typical required work hours,\expected response times to emails, or how the company handles deadlines. Explaining the finer points of the employee’s new job can help clear up confusion before it leads to mistakes or frustration, helping to support your goal to integrate new hires more efficiently.
It’s just as important to shine a light on included benefits like vacation time, sick leave, holidays, retirement contributions, and health insurance. Show employees perks like coffee, snacks, or wellness initiatives. Giving equal time to available perks creates a culture of trust and acknowledges that a new employee’s health and contentment is valuable. These benefits are just as much a part of employment as work, and people want to feel like they are welcome to access any those perks.
Encourage Feedback
New hires take in information from a firehose in the first days and weeks of employment. They probably have more questions than answers at first, but seeking feedback about their onboarding experience can foster an environment of trust right away. Make sure new employees know the best people and methods for feedback. Should they go straight to HR? Will someone set up a meeting at a pre-planned time in the future? Is their immediate supervisor most open to an email or an in-person discussion? Does your company provide a survey or specific questions they’d like to have answered?
Showing you’re open to feedback right away indicates that this can be an open dialogue into the future. It says no matter how long a person has been with the company, speaking up is valuable. Wherever possible, responding to suggestions or ideas goes a long way in helping someone feel like a part of the team. Think of it this way: Bringing new talent can inject new ideas into daily tasks. There’s a learning curve for all new employees but it’s worth your time to encourage fresh insights.
Set New Hires Up for Success
If projects are languishing in a to-do pile, it might seem logical that the new person should take on the backlog of work. The new employee might feel eager to prove themselves and accept any work offered to them, even if they don’t understand what’s really involved. But evidence suggests otherwise.
“The manager’s job is to instead keep new hires focused on the essential work they should prioritize and by pointing them to ways they’ll make rapid progress on these goals.”
To integrate a new hire effectively, consider the following ideas as you consider the new employee’s first tasks:
Assign work that aligns with their skillset
Find tasks that have a clear start and end point
Pair them up with a mentor or smaller team so they don’t feel like they’re the odd man out in an established project group
Be intentional about offering praise, gratitude, and feedback
Create opportunities for frequent check-ins that aren’t specifically about deadlines
Be patient with early mistakes and offer gentle correction
Bringing new hires to an overburdened company can be a tremendous relief, but your investment into their success goes beyond the job offer. The onboarding tools in ApplicantStack let you turn candidates into new hires without all the extra manual data entry. Plus, you have a central location for the tax and company forms required and a detailed, consistent plan for onboarding. Take advantage of the onboarding solution and integrate your new hires to become crucial members of the team.
Finding the right person to fill an open role with your company can be a challenge. But even when you locate them, you might need to sell them on the organization. The latest generation of workers wants to feel like the company they work for aligns with their values and that they can make an impact.
So, that means you always have to be ready to sell your company and show how it benefits society as a whole. This concept can help you generate more interest in open positions and attract candidates who really care about the work they do. Explore our five tips to craft a candidate pitch that appeals to all who hear it.
What is a Candidate Pitch?
A candidate pitch, also known as a recruitment pitch, is a clear and succinct statement offered to a prospective new hire to inform them of the position and company. The goal of this pitch is to capture their interest. It should also encourage them to submit an application or consider an offer. By crafting and using a recruitment pitch regularly, your team can emphasize the value of the company and what it contributes.
Ways to Improve Your Candidate Pitch
As you consider how to pitch the company and open roles to a potential candidate, you can incorporate these five tips.
Tell a story
People respond more effectively to stories, as the information presented in this way is more memorable and relatable. As you craft your recruitment pitch, think about the narrative you could weave around the start of the business and how it has reached the point it is at today.
You might also think about incorporating elements of existing team members’ stories. For example, if you have an employee who has moved up from a lower level to a higher one, tell that person’s story. Demonstrate the opportunities for professional growth and development and investment in each individual’s potential and skillset.
Highlight unique selling points (USPs)
Every business has its own unique selling points. Your candidate pitch should emphasize these clearly. Describe what sets your company apart and what members of the workforce get to experience as part of the organization. You could also highlight some of the elements of your business that align with candidate values. Examples include any investments into inclusion, environmental sustainability or opportunities to advance.
Take advantage of resources
In today’s tech-heavy world, it’s worth taking advantage of all available resources. Artificial intelligence (AI) platforms are ideal for creating first drafts of content, including a pitch to sell potential candidates on open roles within your business. Input the information you have and see what you get. It’s easy to make adjustments where needed, and you’ll likely save some time on the first go-around.
Customize the content to your audience
As you craft a candidate pitch, consider the people who might apply for open roles. What do these individuals have in common with one another? Do they share certain skills or experience? Customize your pitch to what those people might be interested in hearing about the company.
Include a call to action
Make sure candidates know what the next steps are in the process with a clear call to action at the end of the pitch. If you’re discussing open roles, provide information about where to find additional details and how to submit an application.
Are you looking for additional resources to streamline your hiring efforts? ApplicantStack is your go-to, offering applicant tracking and candidate management tools that keep everyone on the same page. Whether you’re building a new time, backfilling an open role, or hiring regularly, you can count on this solution to make it easier to find and bring on talent. Give it a try (it’s free)!
