Everything You Need to Know About Contract, Contract-To-Hire, and Direct-Hire
Are you about to enter the job market for the first time? Or are you employed for quite some time now and wondering what other work arrangements can you explore to maximize your time and income?
There might be other arrangements that you haven’t explored like working at two different jobs at the same time. Maybe you’re looking for a more stable job offers security to your career. Or you may want to explore the flexibility only available to freelancers.
You may have encountered various employment jargon such as contract hire, contract-to-hire, and direct hire. Like anything else, there are pros and cons associated with each type of contract and we’ll help you find out which of these would suit you best.
A recent study from the American Staffing Association revealed that companies in the United States hire 16 million temporary and contract employees in a year.1
Contract employees are hired to perform a specific project or provide short-term services. Usually, they do not receive long-term benefits, nor is the company mandated to pay taxes to the government on their behalf.
Despite these limitations, there are also a handful of benefits that a contract worker can enjoy.
Contract workers usually come laden with experience. In some cases, heavy training is no longer necessary. However, when a contract worker is also expected to perform a task efficiently, the contract employee might still be asked to undergo specialized training to execute the job well.
Contract employees also get to enjoy their time more than direct-hire employees. It’s because they are not required to work regular hours in a company for long periods. Hence, they may show up during specific peak hours and leave once they are done. This also means they may accept other work commitments and earn extra income on top of their normal grind.
Many people view contract work as less secure employment than direct hires. This is because, in exchange for the flexibility offered by contract work, only a few contract workers can get the benefits and perks that companies usually offer their non-contractual employees. This no work, no pay policy means that work has to be rendered no matter what for you to get paid.
In other cases, your employer may engage you as a contract-to-hire employee. This means that you are hired first as a contractual employee. Then, after a thorough evaluation, the company decides whether to hire you for a permanent role or not.
Companies usually get contract-to-hire workers to gauge if the employees eventually become a suitable addition to the company, especially concerning the company culture, branding, and the employee’s credentials and other qualifications.
Contract-to-hire workers are therefore evaluated for a specific period. If their performance is deemed satisfactory, they receive an offer for more permanent work.
The flexibility offered by contract-to-hire positions bodes well for a job candidate who is still determining if they want to pursue a certain role short term or long term. But even if you are only looking for short-term work, you still enjoy the benefits of a contract-to-hire role.
First, it increases your qualifications and adds to your work experience. You also get to expand your professional network in a contract-to-hire position.
By the time you consider more permanent work in the company, your contract-to-hire role might have already enabled you to determine your suitability for that specific role or the company. Should they want to hire you as a permanent employee, you have also already demonstrated your value to the company by being a contract-to-hire worker.
Taking part in contract-to-hire work does not mandate your company to hire you after the contract period lapses. Hence, even if you have come to love the job and the company of your colleagues, your employer can still end your contract and not offer you a permanent position.
In addition, employers are not obliged to provide contract-to-hire workers with the same direct employment benefits, such as health insurance, paid time off, or tenure benefits.
Direct Hire Employment
A direct-hire employee is a worker who received a full-time and long-term offer to work for a particular company. This employment type often comes with a compensation package, including salary, health insurance benefits, and other company perks.
Companies usually resort to direct hiring when looking for an employee that will occupy a crucial position within the organization. In most cases, a job candidate who is a direct hire is seen by the employer as someone who fits the company’s brand and company culture to a tee and will grow with the company for their mutual benefit.
Job security is the foremost attribute that direct hire employee values the most. This is why many high-quality job candidates often end up as direct hires. Being a direct hire offers you a steady income in the long term and the opportunity to occupy a higher position in the organization after a few years.
You also get to enjoy all the perks and benefits of the company for direct-hire and tenured employees.
Direct-hire workers do not get to experience the flexibility and independence that contract workers and freelancers usually enjoy. Since you will be working full-time for the company, you are expected to spend your full day with the organization. This directly limits the other opportunities and income-generating ventures you can enter into while being a direct-hire employee.
Thus, job candidates who want to avoid being tied exclusively to one company tend to pass up the opportunity to get a direct hire placement.
Which of the Three Suits You Best?
As a job candidate, you must consider all important factors once you decide to be a direct-hire, contract, or contract-to-hire worker. As you may know by now, these three categories all have pros and cons, but it all boils down to what matters most for you when looking for employment.
During the pandemic, Contract Employment provided solutions that Direct-Hire could not offer. In fact, many employees found themselves at a loss when companies started laying off thousands of employees worldwide. This threat in the industry was worsened when companies could no longer sustain their economy and had to let go of more and more employees.
On the other hand, companies were forced to close as it took too much toll on their business. For most, continuing was no longer viable and they had to accept the inevitable end. This is where Strategic Systems comes into play as it offers all three solutions where employees can find the suitable employment they need.
If you are still undecided, the next best step is to take the hiring process seriously once you are shortlisted for a role. Ask as many questions as you can during the interview process. More importantly, consider your finances. Do you still have room for some budget flexibility, or do you need to have a steady source of income as soon as possible?
GET EXPERT HELP FROM STRATEGIC SYSTEMS
If you need more help on the job category that would suit you best, seek expert help from us at Strategic Systems. Explore the diverse roles waiting to be filled and find the sweet spot where we get to match your profile with the jobs that can pave the way for your career growth. Talk to us today, and let us make your success our business.
1“Staffing Industry Statistics.” American Staffing Association, 9 June 2022, https://americanstaffing.net/research/fact-sheets-analysis-staffing-industry-trends/staffing-industry-statistics/#tab:tbs_nav_item_1.