Contract to hire? Temp to perm? Pros and cons of this popular hiring strategy

In today’s hard-to-decipher labor market, many employers are relying more on an old strategy for bringing on new hires: temp-to-perm. Also known as contract-to-hire, this flexible model brings plenty of advantages, but not without its tradeoffs.

Understanding the pros and cons can help you decide if it’s the right fit for your organization.

What is contract-to-hire?

Contract-to-hire or temp-to-perm roles first bring on a job candidate as a temporary worker, and then after a trial period, a manager can decide whether they want to hire them in a permanent role at their organization – or not. Usually working with a staffing agency, an employer evaluates the worker’s performance, cultural fit, and long-term potential. If the new hire doesn’t align with expectations, they won’t receive an offer for a permanent position at the organization.

Benefits of contract-to-hire

In many employers’ minds, temp-to-perm roles offer a smart way to navigate hiring in uncertain times.

• Reduced risk of a bad hire: Hiring mistakes are costly – not just financially, but also for team morale and productivity. Temp-to-perm gives a trial period to assess a candidate’s skills and fit.
• Greater flexibility: Temp-to-perm hiring strategies allow for more scalability in your workforce, allowing you to bring on permanent workers as you need them.
• Faster speed to hire: Because short-term roles often require fewer approvals and less red tape than permanent positions, hiring managers can greenlight candidates faster.
• Real-world evaluation: Managers can see how a candidate performs in your actual work environment – how they collaborate, adapt, and contribute to your team.

Drawbacks to consider

While contract-to-hire can be a strategic tool, it’s important to remember that predictability and the ability to become permanent are among the top deciding factors when associates look for jobs.

• Risk losing top talent: If you take your time converting workers, high-performing ones will leave your organization once they are offered a better paying or permanent role.
• Increased onboarding costs: Temporary workers require onboarding, training, and the usual new hire treatment, which translates to time and money lost if the candidate doesn’t work out or chooses to leave.
• Limited access to in-demand talent: In competitive industries, top candidates, especially those with niche skillsets, have the luxury of only pursuing direct hire roles, so you may unintentionally miss out on your perfect hire.
• Uncertainty for the worker: Remember that a temp-to-perm role creates a lot of ambiguity for an employee. Don’t be surprised if this lack of clarity affects their engagement and performance.

Is contract-to-hire worth it?

The answer depends on your business needs, industry dynamics, and hiring goals. For companies looking to reduce risk and improve flexibility, temp-to-perm hiring can be a valuable strategy. But if your roles require specialized skills or your organization already suffers from high turnover, permanent recruitment may be the better path.

Ultimately, the key is to align your hiring strategy with your workforce planning. If you’re not sure, your staffing provider can help you decide what’s right for your operations.

Partner with Adecco for smarter hiring

For decades, we’ve been helping employers navigate the ins and outs of hiring. We know how important it is to have the right staffing solution in place.

Whether you’re already managing a temporary workforce, exploring temp-to-perm hiring, or need help with permanent recruiting, we have the experience and the analytics to help you build the perfect strategy.

Reach out today, and let’s build a staffing solution that works for you.