Contract to Hire | What Employers and Contract Employees NEED to Know

Contract to hireThe first thing to know is that Contract to Hire is becoming increasingly popular, but, it does not suit everybody. The nature of work and the relationship between employees and their employers has changed enormously in recent years.

Of course, the 2020 Covid pandemic altered the workplace, and smart folks need to evaluate the benefits and downsides for themselves. This article will help you make those critical decisions.

What is a contract to hire?

Basically, a contract to hire allows employers to “hire-on-demand” employees. These employees agree to work for a specific period of time on a specific assignment.

This arrangement allows businesses maximum flexibility and scalability which can be economically very efficient. For individual employees, this contractual arrangement also provides flexibility and certainty if long-term employment is not a current goal.


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Should I do contract to hire?

hiring decisionsThis is not a one size fits all situation because the answer varies considerably with the needs and goals of both employers and employees. You’ll need to carefully assess your own individual situation before deciding to enter into a contract-to-hire arrangement.

It can be risky and it can be smart depending on your particular circumstance. Research the best staffing agencies and executive search firms to help you navigate these decisions.


contract to hire position

What is the difference between contract and contract to hire?

Essentially a contract employee is one who has entered into a specific legal arrangement, agreeing to provide skills for a particular time at an agreed upon pay rate with the company likely not wanting to hire this person in a direct-hire capacity.

A contract to hire employment situation means that the worker and employer have a third party relationship quite often with a separate company who acts as the “employer of record”. Both the worker and the search firm contracting for the worker’s services manage their relationship through this “third party”.


Can I quit a contract to hire job?

can i quitYou are free to leave any employment but if you have signed a contract you should consult with a lawyer, executive recruiter etc. to be sure what are your rights and responsibilities. Normally, you’re technically free to quit at any point. California for example is a employment at will state.

If your employer has been good to you, ethically and morally you should try to leave on good terms. And two weeks’ notice is the norm and the right thing to do when possible. Read: Everything You Need to Know About Putting in Two Weeks’ Notice


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What are the benefits of contract to hire?

contract to hireFor business owners experiencing seasonal demands for workers, contracting to hire the necessary workers for a specific amount of time can be economically efficient. Very efficient in fact.

For workers who prefer to commit to an employment period that will allow them free time for other projects, contract work can be a great solution. Taking on a contract assignment can broaden your resume and skill set while allowing you to sample a new work environment without making a long-term commitment.


Is contract better than full time?

Yes and no. The correct answer depends on your individual needs and circumstances. For some people, contact to hire is a no-brainer though.


contract for hire


Should I take a 6-month contract job?

contract jobTaking on a new job can help take the pressure off non-stop job searching while helping build your resume and it may also help you evaluate a work environment that might be somewhat different than your past experience.

A 6-month contract job can also stall your career if it’s not building on your experience or in any way relevant to the direction you’re wanting to take your career in. Carefully research that this 6-month contract job is in fact going to have you in a better position after this 6-month period than you were before taking this job. Research and consult with friends, peers, and mentors.


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How do contractors get paid?

Contract workers are paid by a third-party employer quite often who makes a contract with both the business needing short-term/contract employees and the workers who are agreeable to a defined length of employment.

As a worker, you will be paid by the executive search firm/employment agency etc. that has contracted with the company in need of employees on a short-term basis.


How do you negotiate contract to hire?

salary negotiationThis is where an experienced job recruiter adds real value to both sides of the contract question. Executive recruiters track salaries and trends and can advise about salary trends.

If negotiating on your own, it’s important to know your value. Knowledge is power. Research similar jobs and try to find out what they pay. Then be upfront. Tell the company when the opportunity presents itself the reasons why this particular job is a good fit.

Wait for the company to bring up compensation. And then once they make it evident that they want to seek details about what they will pay you for this position to be worthwhile,  be ready to relay your number in mind or a reasonable hourly range that would be fair to you all while keeping you excited to take on this opportunity.


what is contract to hire


Should I take a 3-month contract job?

career decisionThe length of your contract can reflect your tolerance for change. Agreeing to a short three-month duration of work could be a breath of fresh air, with the effect of dropping you into a work environment that might be quite a bit different than your last assignment.

You’ll learn something about yourself, and you’ll come out at the end with an opinion about what you like and what you want. That could be a good thing. 3-months is short enough that it doesn’t create that large of a gap in your employment history.

There are many reasons to not take a 3-month contract job. If you’re currently employed in a great job and have been in a position for many reasons, remember you will have to actively be pursuing additional work again in the not too distant future. The 3-month contract job will quickly be in your rearview mirror. You will be in constant job search mode if you continue to take on 3-month contract positions.


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Is a contract position worth the risk?

The risk is determined by your individual situation. Yes, you’ll take yourself off of the job market for a period of time, but you will also have something to add to your resume and a new job assignment may open doors to new opportunities.

It can quite often not be worth the risk but this all depends on your employment history. Make a list of the pros and cons.


contract to hire pros and cons


How do I switch from contract to full-time?

The first thing to do is express yourself! Build professional relationships with people so that you can have open and direct conversations.

If your contract position feels comfortable and if you think that the company may actually need a full-time employee in place, speak up and tell your supervisor that you are enjoying the work and feel that you could make a positive contribution as a full-time employee.

By working hard and putting yourself in a position to be recognized as a valuable team member, your request should be heard.


How do you turn a contractor into a salary?

contract to hireIf you’ve decided that you would like to make a transition from a contract worker to a salaried employee, be sure first of all, that you have worked long enough for your contributions to be noticed and appreciated.

Don’t try to change the dynamics in place until you have established a good relationship with your fellow workers and your supervisor. Put in enough time where you can be recognized for your work.

Next, express interest in making a long-term commitment, and be prepared to explain why you would like to continue. Keep in mind that the employer may prefer the flexibility of a contract workforce.

And on the other side of the spectrum, companies have the opportunity to turn an hourly contractor into a salaried employee by putting them on their official payroll. Quite often companies will notify recruiting agencies of their desire to hire contract workers. Transitioning workers from an hourly rate to a salary is very easy.


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Is direct hire good?

Yes. Direct hire is good (when appropriate).

The advantage of being hired directly by an employer is that salaried jobs come with benefits including vacation time, health insurance, leave policies, and more.

Contract assignments generally don’t include benefits.

Benefit costs are a factor in how employers manage their workforce although of course, employers pay a mark-up rate to the temp agency managing their contract workers.



How do I hire a contract employee?

You can hire a contract employee by using a staffing firm that specializes in providing workers for specific assignments.  The staffing firm becomes the actual employer and will charge a fee for their service and is responsible for wages and providing W-2 forms to the IRS. Learn more: Job Placement Services

An employer can also choose to enter into a contract with a short-term worker for a specific assignment. As an employer, you should request a W9 form from your contract worker which lists their name, address, and social security number.

If you pay a contractor more than $600 in a year, as an employer you must provide a 1099-MISC form to report total payments made.


What happens if you break a contract job?

Breaking any contact has legal consequences and the best way to manage such issues is to read your employment contract carefully before signing it. You should always consult with the appropriate professionals before signing any contract if you’re not 100% confident and comfortable about what you’re signing. When in doubt, get a second opinion.

There are risks for breaking a contract job. For example, employers may be able to sue for compensation if you do not complete specific work during a contract job or give proper notice.


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Why do contract jobs pay more?

Benefits benefits benefits. Or lack thereof re: contract jobs pay morebenefits for contract jobs.

As a contract worker, you are unlikely to receive the same kind of benefits provided for full-time employees although you may expect to earn more as a contract worker. This is an important consideration when deciding whether to accept a contract position versus a full-time job.

Learn more: The True Cost of Employee Benefits Packages


Can you end a contract job early?

You may be able to end a job before the end of your contract depending upon whether the position was different than promised or your contract allows for an early stop.

As always, read the contract carefully before you sign in order to avoid surprises.

Contact a professional if you have any questions. It’s better to be safe than sorry when it comes to contract terms. Be very careful and take the appropriate amount of time to act with full confidence.


contract hire


Is it better to be employee or contractor?

Decisions about Contract to Hire are unique to each individual. It’s important to evaluate your goals and current life situation before deciding which kind of employment is best for you.

Often people either have an employee work history or a contractor work history. Research the pros and cons of each. Start here to understand the possibilities more.


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What are the pros and cons of contract work?

employment pros and consSome of the advantages of contract work include flexibility and potentially a higher rate of pay. Since you are not making a long-term commitment, you may be able to try out a job working in a field that you had not tried before.

You may also have increased flexibility and more opportunities to enjoy the benefits of work/life balance.

The disadvantages include a lack of valuable insurance benefits (health, dental, and vision insurance etc.) and a lack of job security.

Contract workers can often feel like they’re always looking or soon to be in the process of looking for a new job. This grows tiresome eventually unless this is something you enjoy.


Can contract to hire jobs become permanent?

contract to hireYes. Contract to hire jobs can become permanent positions in a number of ways. The employer may decide that the position is of greater importance or the contract worker is a really good fit into the company culture.

Contract workers who decide that their contributions are worthy of a full-time job can also suggest that they join the permanent workforce at the company they’re currently working a contract job for.

This can end up being a win-win situation for both the worker and the company.


Does contract work look bad on a resume?

No, but sometimes it can so the correct answer is “it depends”. The appropriate experience almost always looks good on a resume if it fits nicely with the position that you’re applying for.

The way you describe your work experience can be a game-changer. If your contract work is highly applicable to the position you’re applying for, then this will most likely look great on your resume.

Why would an employer not want you to have great, relevant experience?


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What is the best way to pay a contractor?

The best way to pay a contractor is by check so that you have an accurate record of payments made. At the end of each year, you must file a 1099 tax form, listing the amounts paid. Your accounting software can make this job easy.


contract hiring


Why do companies hire contractors instead of employees?

seasonal workerOne word: flexibility. For example, when a contract worker is hired to fill in for a full-time employee out on leave, the terms can be very specific and convenient to the company.

Why would a company not want a flexible employment relationship that could be tailored to their needs?

Another advantage to hiring contractors is that benefit costs are eliminated. And in the case of a need for seasonal workers, the term of employment can directly match the need.


How long does direct hire take?

contract to hire4-6 weeks on average. The time needed to find a suitable full-time employee can though vary considerably, depending on the job description and labor market.

An experienced professional staffing group can generally get the job done faster and more efficiently than a do-it-yourself proposition. Although online companies claim the advantages of a huge number of resumes on demand, a savvy executive headhunter can expedite your search and offer a panel of highly qualified applicants faster than you can sift through the maze of resumes that you will receive from job advertisements. Learn more: What Is A Headhunter


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Is it cheaper to hire a contractor or employee?

In the short term, a contractor or a contract to hire will be the cheapest option. In the long term, an employee who is committed to a company and well trained can bring valuable situational awareness to a company’s success.

Companies that strategically hire contractors and employees when most applicable to their needs, will be set themselves up for success. Learn more: Qualified Staffing


To sum up, Contract to Hire

Contract to Hire is a proposition that has advantages and disadvantages for both employers and employees.

In order to make the right decision, it’s best to evaluate your current situation as well as project what your business and your life may be like in 6 months or a year.

Make a list of the pros and cons. If you are an employer, talk to executive recruiters to get professional advice.