Contract Hire vs. Direct Hire- Which is Better?

Contract Hire vs. Direct Hire- Which is Better?

Hiring a new employee can be a burdensome and time-consuming process; it all depends on what your or your clients’ professional needs and requirements are, and the level of experience that you want in a potential candidate.

Almost every staffing agency in USA does both contract-to-hire and direct hiring.  But the popularity of contract services continues to grow and the candidates often keep asking the questions of “Why do companies prefer hiring contractors instead of employees?”

Before we continue any further, let’s understand what C2H and Direct Hire actually are.

What is Direct Hire and Contract-to-Hire?

Contract-to-Hire means that a candidate is placed for a short-term position for a particular period of time with the possibility of being hired as a full-time employee at the end of the contract. These short-term contractual roles give both the employer and the candidate, an opportunity to get to know one another before committing to full-time employment.

Direct Hire, on the other hand, means that a company which is intended to hire you offers a job directly. They are usually used to fill the permanent roles unlike a temporary or a contract-to-hire role. The employee, in direct staffing, is given benefits and remuneration from the company just like any other staff member.

Now let’s break down the difference between the two by understanding their pros and cons-

Pros of Contract-to-Hire-

  • Candidates get to evaluate the company culture before making any decision.
  • Candidates use these opportunities to test different career paths and explore which job is right for you.
  • After the candidate is done proving his/her worth during the contract, he/she has some leverage when it comes to salary negotiations.
  • Even if a candidate is not selected as a full-time employee, the contract time will help him/her by exposing them to new technologies and experiences thus helping them to build up their resume.

Cons of Contract-to-Hire-

  • The employer may invest less in your professional development.
  • Your employer won’t provide the benefits (like paid vacation time, sick days, health benefits, etc) nor are they obliged to pay severance if the contract ends without a permanent offer.
  • Things might not work out for the candidate. If it is decided that he/she is not a good fit and does not extend a permanent job offer, then they have to start looking for a new job.
  • The coworkers might not want to invite the contractual candidate to their inner circle or share information with you because they know that he/she is only there for a short span of time.

Pros of Direct Hiring-

Direct hiring by a staffing agency offers a variety of benefits to both the candidate as well as the agency:

  • From the very first day, the directly hired candidate is a part of the organization (employee) on its payroll thus allowing him/her to avoid the allowance costs associated with contract-to-hire candidates.
  • Direct hiring attracts a larger pool of candidates i.e. the hiring manager or recruiter is more likely to see a greater number of highly-qualified candidates.
  • The candidates have a stronger sense of loyalty thus are more likely to be stable, engaged.
  • The candidate gets the benefits like sick leaves, vacations, health benefits, etc. from the very first day unlike C2H.
  • Unlike C2H, there is a sense of job security (as long as the candidate is dedicatedly and efficiently doing the work).

Cons of Direct hiring-

Now that you the advantages and disadvantages of both, there are a few things that you should keep in mind-

  • Talk to your recruiter or hiring manager about the goal of this job- whether it is a short-term project or a means to find a long-term employee.
  • The goal of C2H roles is to bring on employee long-term. So as long as you are doing well and there’s no change in the company’s goals, relax your mind about converting to permanent.
  • It doesn’t matter if you are a direct hire or a contractor in terms of stability, employers have the right to let you go at any time!

No matter the differences and the benefits are, what matters is that you should NOT turn away the potential opportunities just because an employment starts with a “contract”.                                                          

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