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What Is Contract-to-Hire Employment?

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Turnover and unemployment compensation claims are costly outcomes business owners want to avoid. Contract-to-hire opportunities give both the employee and the employer the ability to test the waters prior to making a long-term commitment.

Significance

Contract-to-hire agreements set a length of time for which the employee will work for the employer. At the end of the contract period, the employer decides whether to make the employee an offer for permanent employment or dismiss the employee.

Types

The majority of contract-to-hire opportunities are available through staffing agencies. The staffing agency acts as the middle man, recruiting candidates for job openings at clients' companies. The temporary agency collects a fee during the contract period and may receive a bonus if the employee is hired on a permanent basis. Less common are contract-to-hire arrangements negotiated between an independent contractor and a company, without the assistance of a third party.

Benefits

Employers benefit from the contract-to-hire arrangement by having an opportunity to see how the employee works in the company environment during the contracted period, without the expense or liability of hiring the employee directly. The employee benefits by getting to know the company's culture before committing to a permanent employment arrangement.