Contract vs. Direct Hire

What type of employees work for your company?

Organizations will always be on the lookout for new talent while they grow. There are many options to hiring employees and companies need to consider all of them when hiring new employees. According to the American Staffing Association throughout the course of a year, America’s staffing companies hire nearly 15 million temporary and contract employees. The most common types of employment are direct hire, contract-to-hire and short/long term contract.

According to the 2017 Harvey Nash CIO Survey, most IT leaders prefer hiring full time employees, but 12 percent continue to hire flexible contingent (contract) employees for more than half of their technology team. For 72 percent of respondents their contingent staff make up less than 25 percent of hires. Each type of employment has it’s pros and cons and organizations need to weigh in on what’s most important and beneficial to them.

A direct hire involves a full-time permanent offer with a salary, health benefits and other company perks. Organizations hire directly when they are looking for someone that will grow with the company and fit their culture. It can be pricey hiring multiple people and sometimes companies often hire contractors to offset the cost.

Companies often hire an employee for a certain amount of time under a contract, usually through an agency, and at the end of the term they decide to offer them a full-time role or not. The “try before you buy” motto has proven to work great for organizations to see if a candidate fits what they’re looking for with less of a risk. It gives an organization the opportunity to assess the candidate.

Organizations also offer contracts to employees that are strictly for a set amount of time or project based. Once the term is over the position ends or sometimes companies will extend the contract if needed. This can be very resourceful for companies who have seasonal peaks and only need extra help during curtain times or projects.

DIRECT HIRE

PROS

  • Attract higher quality applicants due to the expected level of job security and benefits offered
  • Negotiate salary by offering other office perks and benefits
  • Finding someone who fits your culture that will be an investment and loyal to your company
  • Offer candidate security of a long-term, permanent position

CONS

  • Pay for benefits such as health, retirement, and PTO and on boarding costs
  • Cost of material and equipment for new employees
  • Recruiting costs
  • Candidate can quit at any time
  • The time and cost it takes to fill direct-hire roles

CONTRACT TO HIRE

PROS

  • Hire quickly and get job done in a timely fashion
  • Benefits or health insurance costs are offered by the agency or candidate supplies their own
  • Opportunity to see if the candidate will fit well in the role and evaluate his or her performance
  • Easy to convert employee to direct at anytime

CONS

  • A contractor can work on multiple projects if it’s not prohibited in the contract
  • Employee could get a direct hire opportunity elsewhere
  • Cost of training candidate

CONTRACT

PROS

  • Candidate comes already experienced and gets job done quicker. In most cases they won’t need training
  • Help in seasonal peak times and can get job done efficiently and quickly

CONS

  • Loyalty and commitment might be low since the candidate could be working on multiple projects or get other offers while they are on contract with you.
  • Higher hourly rate since they are usually very experienced and aren’t receiving any benefits or long-term opportunities

Almost 40 percent of the U.S. workforce are working in contract positions or “contingent” roles. Contingent workers are defined as freelancers, independent contractors, consultants, or other outsourced and non-permanent workers who are hired on a per-project basis and can work on site or remotely. Contract work isn’t just the last resort job you take when you can’t find full-time work.

In today’s job market candidates take contract roles for many reasons such as having a flexible schedule, remote options or the freedom to work on multiple projects. It might benefit your company to hire more contractors for certain roles. Micro Tech Staffing Group can help you find those people and offer multiple hiring options.


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