When should I consider Contract-to-Hire and using a Contract Recruiting Service?

One Solution: Consider the Most Common Contract-to-hire Roles 

When leading workforce capacity, there are so many factors to consider not only related to the skillsets and additional headcount needed but also in how to hire those roles once identified. One potential solution to the question posed here is to look at what other organizations and industries are doing to manage their workforce needs. Working with a contract recruiting organization gives you the flexibility to look at talent through several pricing models including the ability to hire in a contract-to-hire method.  

 

How does pricing for contract-to-hire relationships work?  

In this solution, the employer selects the final candidate for hire and the contract recruiting agency employs that individual hourly for the beginning of the contract period. This timeline is most often 90 days but can be as long as 180 days or as short as 30 days. Generally there will be a contractual agreement outlining the number of hours to be completed by the Contractor and the associated fees to hire the resource direct to the client based on that prorated scale. For example, after just 30 days, there may be a 15-20% ‘buyout’ fee due; whereas after 120 days, the fee may be waived entirely. It is very important to negotiate this rate before hiring someone on a contract-to-hire basis. You will be paying a premium hourly rate that includes a profit margin for each hour the contractor works prior to this period. Those fees may range from 40-120% markup from the contractors hourly pay rate and associated costs such as taxes and benefits.  

 

What’s going on in the marketplace? 

Below are some statistics and professional information to review and understand the state of contract employment in late 2023 as we enter 2024. I include the date here because the nature of employment during this time has been fairly volatile in the past 4 years. As we enter an election year in 2024 and continue to have economic uncertainty in the marketplace, employers will continue to have a need for multiple types of hiring to meet market demands as well as to meet the expectations of potential employees.  

 

What types of roles are most common in contract-to-hire arrangements?  

  1. IT Professionals: According to a survey by the American Staffing Association, IT professionals are among the top candidates for contract-to-hire positions. In the fast-paced world of technology and with the volatility from high rates of layoffs in the tech industry beginning in late 2022 and continuing through 2023, this approach allows employers to evaluate a candidate’s skills thoroughly as well as hire on a shorter-term commitment. Contract recruiting offers significant flexibility within the technology industry especially. 
  1. Finance and Accounting Experts: Finance and accounting professionals often find themselves in contract-to-hire roles, giving both parties ample time to assess compatibility. These critical roles cannot be left open for long periods of time. Contract recruiting allows these roles to be filled in days rather than weeks or months and gives the organization the flexibility to fill the seat quickly and then test the candidate during the contract-to-hire period. In this way, the organization can meet the needs of workload without making unvetted decisions out of a necessity to fill the seat quickly. 
  1. Marketing and Creative Professionals: The ever-evolving world of marketing and creative industries welcomes contract-to-hire candidates with open arms. It’s like auditioning for the role of a lifetime, whether you’re a graphic designer, content creator, or social media guru. Many professionals in these fields prefer to work for multiple employers to gain skills across multiple industries and projects. Those short-term assignments allow creatives to build a strong portfolio in a short timeframe. 
  1. Low wage/High Turnover roles: Administrative roles, Customer Service, and Manufacturing/Warehouse roles are commonly filled using contract-to-hire resources due to the high cost of hiring, onboarding, and turnover. Allowing contract recruiters to take on the burden of hiring and payrolling roles that often turnover within 45 days is a viable financial equation to ensure that costs are more predictable by budgeting for higher hourly rates up front and then maintaining the direct costs for employees who are likely to stay for the long term after an initial probationary period. 

 

As you consider your workforce capacity and planning for 2024, let’s discuss how Recruiting Experiences can help you manage contract recruiting services across all your departments and business needs.  

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