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Direct Hire vs. Contract To Hire

When you’re on the lookout for top talent to help your company grow, you’ll probably come across a number of terms used by different recruiting agencies and headhunters to describe their services. For example, some recruiting agencies provide direct hire recruiting, while others offer temporary or ‘contract to hire’ services.

Now, the real question is this: ‘Which hiring process is best for your company?’ To help you answer this, we will compare direct hire vs. contract to hire processes, defining both and going through their unique advantages for different situations.

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What is Direct Hire?

Also known as direct placement, direct hire is an immediate job offer to a qualified candidate from the recruiting agency, which is usually a permanent role in the company. A recruiting agency works to search, qualify, and hire permanent employees on behalf of their clients. Although it is, in general, a permanent, full-time position with benefits, direct hire can sometimes be used to fill temporary positions, as well.

While the recruiting agency handles the direct hire recruiting process, the new hire goes straight onto the company’s payroll and becomes a permanent employee once an offer is made and accepted. A direct hire typically means the company is willing to commit to a long-term relationship with its recruiting partner. Under this partnership, the recruiters can do a thorough job finding and interview the best top talent for the role.

What is a Contract to Hire?

The contract hire process is similar to a direct hire one in terms of how the recruiting is carried out however the difference lies in a less upfront commitment on behalf of the client when it comes to hiring the chosen talent. Contrary to the direct hire scenario, where the selected candidate starts their employment on the company’s payroll, in a contract to hire process, the contract employee begins their engagement on the recruiting agency’s payroll.

Even though direct hire recruiting instantly makes the new hire an employee of the company (recruiting agency’s client), the contract to hire process allows more flexibility by providing an option to hire the contract worker directly after the end of the contract period or choose not to move forward. The length of a contract may vary from short-term to indefinite. In any case, the client can always convert the contractor to a permanent employee if and when it meets their individual needs.

Direct Hire vs. Contract to Hire

When comparing direct hire recruiting versus contract to hire process, it is important to carefully consider the pros and cons of each before choosing one solution. The reason for this is simple: the hiring process that makes the most sense for one open job position might not necessarily be the best option for the next role.

Advantages of Direct Hire Recruiting

There are four main pros of direct hiring:

Direct Hire Promotes Loyalty

One of the biggest advantages of direct hire recruiting is that it allows new hires to feel safe in their position and part of the team – from day one. This naturally promotes a sense of loyalty to the company and can lead to greater retention over time.

Some positions like management and executive roles and those that spend a lot of time with clients aren’t well-suited to many turnovers. Direct hiring can help companies fill positions that require a long-term commitment from the hired talent.

Direct Hire Facilitates Speed

Working with a direct hire recruiting agency allows companies to fill their permanent roles more quickly than they’d be able to do it independently, keeping productivity high and downtime low. 

Direct Hire Attracts Stronger Talent

Since a permanent role offers more security than a contract one, direct hire positions are usually more attractive to top talent. This is especially true for passive candidates, who need more encouragement to leave their current job than those actively searching for a job. Candidates also love the appeal of direct hire positions since they offer instant access to the company’s benefits program.

Direct Hire is More Cost-Effective

Because direct hire candidates go directly onto the company’s payroll, the company can avoid any additional costs associated with the recruiting agency keeping the new candidate on their payroll. While it doesn’t offer as much flexibility, paying a one-time fee to a recruiting agency is usually a better and more cost-effective option.

To sum this, direct hire recruiting is a great option when companies want to get permanent staff, find qualified candidates quickly, and attract talent who want to stay in the company for the long term.

Advantages of Contract to Hire Recruiting

Benefits of contract recruiting include:

Chance to Assess the Candidate

Contract to hire recruiting allows the company to assess a potential candidate in action without committing to putting them on their payroll. There’s less risk on the company’s part, allowing them to evaluate culture fit and effectiveness in the position before assuming the added costs of a new permanent hire. However, this also gives the candidate a chance to assess the company, which can also be a positive thing. It lowers the possibility of the wrong hire ending up in a role where they’re not happy or productive.

Faster Interview Process

Although working with a recruiting agency is a proven way to reduce the hiring time for direct hires, its impacts are even faster when it comes to contract hires. Contract to hire recruiting has a much shorter interview process, which speeds up the hiring cycle.

Control Benefits Costs

Since contract workers stay on the recruiting agency’s payroll until the company decides to hire them, there’s no need for the company to add employees in the assessment period to their benefits program. Contract workers are paid hourly and do not go on the company’s benefit plan until they become permanent staff, which can help control costs.

Adapt to Uncertain Workload or Timeline

Contract to hire is a good option for companies dealing with uncertain workloads or timelines. Using this type of hiring allows companies to get someone up and running to fill their immediate needs with the option to keep them on full-time if the demand for their skills persists.

Nevertheless, it’s advisable not to use a contract to hire to fill a temporary vacancy, such as a project-based or seasonal position, because a contractor will expect an opportunity to become a permanent employee if they perform well.

Conclusion

If your goal is to hire the best of the best talent for your open roles, choosing the right recruiting agency is just as important as interviewing the right talent and choosing the right recruiting option. Depending on your situation, either one of the recruiting processes discussed in this article may be a better option for your needs than the other.

Hundreds of new candidates are looking for job openings every day, and CIBR Warriors are there to help you find the right one for you. For more help on advancing your career or finding a perfect candidate in IT and Cybersecurity, contact us. We’d be happy to answer your questions and provide you with the best advice for getting started.

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