In an Uncertain Market, Should You Hire Contract or Contract-To-Hire Employees?

How to Decide Whether a Contract or a Contract-To-Hire Is Right for You & Your Company

The economy is still under the cloud of Covid-19. While there are signs the worst may be over, it is still a challenging environment for companies to navigate.

People are redefining what they want from their work life, and this has led many to quit (the Great Resignation).

Vaccine mandates come and go, and many employees are seeking flexible work in which they get to spend at least part of the week working remotely ─ they believe they are more productive and benefit from an improved work/life balance.

Just when a business believes it is safe to consider investing for the future, along comes another variant that takes us back to square one.

With so much uncertainty, many companies are filling their staffing voids with contract staff. Should you? Or would you be wiser to consider contract-to-hire staffing as a solution in the coming months?

What Are the Differences Between Contract Staff and Contract-To-Hire Staff?

A contract staff is an individual who is hired to do a specific job for a specific time. The company does not have any commitment to the contract staff, other than to pay agreed wages. Often, though, contract staff are given benefits by the staffing agency with whom they are registered. There is no obligation on the part of either the hiring company or the contract employee to renew the contract.

Contract-to-hire staff are, effectively, a half-way house between contract staff and permanent hires. A company hires contract-to-hire staff when they believe a more permanent need for the employee will exist at the end of the contract period. In this instance, though there is no obligation for the employer to offer permanent work, they may do if they wish ─ though the employee does not have to agree to take the permanent role.

What Are the Advantages and Disadvantages of Hiring on a Contract Basis?

There are many benefits of hiring contractors over employees. They are more flexible, cost-effective, and can be hired on an as-needed basis. Contractors can work on a part-time or full-time basis, depending on your needs.

Contractors are cost-effective because you only pay for services when you need them. You also don’t pay for other overhead expenses like health insurance and other benefits that you would normally provide to an employee.

However, you may also find that you pay a slightly higher rate than you would for full-time employees (though this is offset by not paying for other perks and benefits), and there is no guarantee that the contractor will be available when needed. Also, if you need to extend the contract, you may find that the contractor has already agreed terms elsewhere ─ so there may be continuity issues.

When Should You Hire Contract Staff?

It is often better for a company to hire contract staff when they need additional help from time to time with projects that their employees cannot take on. Existing employees may lack the time or specific skills needed. Your current employees can focus on what they do best and still get all their work done, while your contract employees ‘fill in the gaps’.

When you need to grow your team quickly, contract staff can be a great option. You don’t have to invest in training or equipment, and you don’t have to worry about the long-term commitment of your employees.

What Are the Advantages and Disadvantages of Hiring on a Contract-To-Hire Basis?

Like hiring contract workers, one of the main benefits of hiring on a contract-to-hire basis is that it allows companies to temporarily hire workers when they need them without having to make a long-term commitment or pay benefits and payroll taxes. It also provides an opportunity for contractors to work on their skills and prove themselves before being hired full-time by the company. You get a ‘try-before-you-buy’ member of staff.

Because there is the potential to be made a full-time employee, you may find that your contract-to-hire staff are more dedicated, more willing to learn, and more engaged with your processes.

When Should You Hire Contract-To-Hire Staff?

You should hire contract-to-hire staff when you are not sure how long you will need them for, or if you believe that your growth will lead to the need for a full-time employee in the future. You need specific skills, but aren’t certain that they will be needed in the future, or that your level of business will continue to justify the expense of a full-time employee. For example, you may have won a new contract to supply goods or services, but it is, yet, only for the short term.

Contract-to-hire staff can be a terrific way to assess out whether or not someone will work well with your company culture before you make them an offer of employment. If they do not work out, then it is less costly than hiring someone full time and having them quit after only one or two months of employment.

Considerations to Make Before Hiring Contract or Contract-to-Hire Staff

The answer to this question is not as simple as it might seem. There are many factors to consider when deciding whether to hire contract-to-hire staff.

The first thing to consider when hiring contract or contract-to-hire staff is the skillset they can bring to the table. This will help you determine the tasks that they will be able to take on and how much time you will need them for.

The second thing to consider is if you are hiring them for an immediate need or if it is, in fact, a longer-term plan.

You should also consider how much work you have in the pipeline, if there are any other projects that need to be completed, and how your existing staff would be impacted by your business plans ─ and, if things don’t go as planned.

You must plan financially, too. Often the cost of contract staff is posted in Capex expenditure, while full-time employees are part of your workforce budget. If your budget is limited, or does not allow you to hire new employees in the current budget period, then hiring contract-to-hire staff could be a good option.

How Can You Make the Best Hiring Decision for Your Company?

We’ve witnessed many difficulties in the labor market in the last couple of years. We all hope that 2022 will be the year when we return to some stability and normality, but it is too early to say whether this will be the case.

Should the market turn positive rapidly ─ as we saw in the middle of last year – experience now tells us that we are likely to find it more difficult to hire talented candidates; competition for those candidates will be met with upward pressure on compensation packages; and those companies who are understaffed will suffer more acutely from supply chain issues.

The solution is to plan early, and remain flexible. This is where TECHEAD excels for its clients. To learn how we help you hire effectively for your future, contact TECHEAD today.

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