The rise of technology and the gig economy—where people take on various jobs for different employers—has increased contract employees. As per McKinsey Global Institute, the companies plan to increase the contract-to-hire hirings by 42%. Other experts opine that nearly half of the workforce comprises a contractual workforce.
A contract-to-hire arrangement can be the best choice if you are hunting for a new job opportunity but are unsure where to start. You get the autonomy of a contract worker while still having the safety net of a full-time employee if you do a good job. But what is a contract-to-hire position? And how do contract jobs work?
According to Financial Express, the IT and business process management (IT-BPM) sectors have significantly increased contract-to-hire positions. The amount of contract-to-hiring done in FY21 was 42% more than in 2022 and it is expected to increase by 50% in FY22 than in FY21.
Meaning of contract-to-hire
"As the term implies, a contract-to-hire arrangement refers to an arrangement where an employee is hired for a short period and a certain amount of payment. After contract-to-hire employment, full-time employment is possible if the employee performs well during their contract period."
How do contract jobs work?
Companies usually hire contract workers through a
- recruitment agency,
- staffing agency,
- or by hiring someone, they already know.
These are the choices that enable quicker hiring. Staffing or recruiting agencies provide employers with access to various potential employees. This benefits both companies and employees, as companies can find someone quickly for contract work, and employees can find work on an urgent basis. The Economic Times state that the contract-to-hire hiring is significantly higher in North and East India.
Today, more businesses are using the contract-to-hire model to hire new employees. That is mainly because of the uncertainty in the economy and a need to shore up staffing levels quickly.
Contract-to-hire vs full-time role
Both full-time employees and contract workers follow different and distinct rules. The following is the differentiation between a contract-to-hire vs direct hire:
|Contract-to-hire positions allow you flexible hours of work.||They maintain a regular work schedule.|
|You work for a definite period, such as a season, or only when a company needs them.||In a contract-to-hire vs direct hire, for direct hire, often, year-round employment is guaranteed.|
|You get paid hourly or on a one-time basis for services provided in a contract-to-hire vs direct hire.||They obtain consistent compensation through an hourly wage or annual salary.|
|They work under flexible rules.||They receive internal training and finish particular work tasks.|
|They usually do not receive workplace benefits.||In contract hire vs direct hire, a direct hire gains employee benefits.|
|They typically get paid once the job is finished and accepted by the client.||The company manages or handles its business and withholds taxes.|
|Some employments allow them to work remotely or in their office facility.||They can use the company's tools and equipment.|
Pros of contract-to-hire
While it may seem like contract-to-hire positions only benefits employers, the truth is that contract-to-hire positions also benefit employees. Forbes states that many large companies like Apple and Google do more contract-to-hire-based hiring than direct permanent hiring. A contract-to-hire can be beneficial in many ways, regardless of whether you seek a short-term or long-term job. Some benefits of a contract-to-hire position include the following:
1. You can take a trial first
The contract-to-hire process is like a trial run. A candidate can enjoy a contract-to-hire deal in many ways. One of which is that they can take a trial approach.
- Modern remote worker seeks flexibility in their working environment. Nobody wants to be forced into a position where they do not thrive.
- The brief duration of the contract-to-hire allows employees to taste both their job and the business they will be working with. After their contract has expired, they are free to leave if they are unhappy. This won't have a long-term detrimental effect on either party.
2. Shows how valuable you are
Contract-to-hire positions allow you to prove your worth to a business. You can convince your employer that you would be a great long-term choice for the position. You can use your abilities and knowledge to improve your role, the team, and the business throughout your brief tenure. It is possible to obtain a permanent position when you have made quantifiable and apparent contributions.
3. Helps to know the company culture
Employers often use contract-to-hire to conduct "working interviews" or to determine whether a candidate and the company are a good match. It can lead to better hiring for employers. Meanwhile, the employees can also get an estimate of what the company and its culture are like. And after receiving a formal offer, you can consider taking a contract-to-hire position while negotiating your salary.
4. It helps you enhance your resume
Contract-to-hire positions can play a significant role in your professional career, mainly if they cover the gap between two permanent employment opportunities. It can be a good choice as you look for a longer-term position, primarily if you haven't heard back from possible full-time employers. These contract-to-hire work projects add to your experience and enhance the quality of your resume.
With AllRemote, you can build a comprehensive resume. AllRemote allows you to:
- Tailor your resume as per your job profile
- You can either upload and edit your previous resume or enter the details to create a new one
- You can select from various resume templates
- One-click apply or download the pdf of your resume
5. Enhances your credentials
By working on a contract-to-hire basis, you can develop your expertise in your field or in a specific task.
- You might be given many highly specialized tasks to master in these positions
- To apply at expert rank in a full-time job, you can use this experience to hone your skills
- You can concentrate on one or a few aspects of your career
- You can develop your reputation as a quick learner by taking on a number of these positions at various companies
6. Contract-to-hire jobs can fill your employment gaps
No need to worry that a contract-to-hire position would result in an employment gap on your resume. Consider the possibility that the position may fill a gap if you've been out of work for a while.
Contract-to-hire positions can be an excellent method to fill in gaps in full-time employment. They can add experience to your resume. Contractual work provides new experiences to develop your abilities within a short period. You can mention them in future interviews, even if the position is temporary or part-time.
7. Easy justification for unemployment
When your contract expires without a permanent position, it will be much simpler to justify unemployment. You can highlight how this job allowed you to keep up your professional activities and skill set. Unemployment is a question that will be out of the list.
8. Builds up a professional network
A contract-to-hire position might also aid in expanding your network of professionals and contacts. A job offer at the same firm, a client's company, or another company with mutual connections could all result from the relationships you create while working there. You may also be able to ask for a positive referral or recommendation during the next job search if you make a good impression on the employer, even if they do not offer you a long-term position.
9. It helps you test out potential career options
Use a contract-to-hire position to test out potential career options. The opportunity may also connect you to others in your field with whom you can speak about their skillset and professional experiences. They might be able to provide you with more advice and insight when you choose a career. The contract-to-hire method is like a hit-and-trial method where you try out various things until you fit in one entirely.
Cons of the contract-to-hire
Contract-to-hire positions offer several advantages. But there are some considerations you should keep in mind during the job search process.
1. It might not be a stable temporary job
Even if you enjoy your profession and perform well, your employer might not decide to keep you on when your contract expires. Employers use contract hiring to supplement staff during peak times or cover for a full-time employee on leave.
2. It doesn't allow you to excel in a particular field
Even if a job could only be temporary, an employer might keep you in mind for other positions. That is especially if you go above and beyond expectations and significantly promote the business. Employers may occasionally have more temporary work available and might consider hiring you for that, either as an extension of your existing contract or on a fresh one. This hopping from one field to another doesn't let you be the master in one.
3. Might lack employment benefits
Benefits, including health insurance, paid time off, and pension options, are not frequently provided to contract workers. In situations where you are hired through a staffing or recruiting agency but hired through the company full-time, your time as a contract-to-hire employee may not count toward total benefit accrual.
When should you choose a contract-to-hire
A person can opt for contract-to-hire jobs in many situations, such as:
If a person has a financial urgency
A contract-to-hire job is a readily available help in a financial emergency. Instead of waiting for the entire month, you get the salary as soon as you complete your work. You can ask for an advance as a security of the project.
If the person is interested in pursuing a career in a field or job but isn't sure whether to do so
If you are interested in a kind of work but are unsure whether you want to make it full-time employment, then go for a contract-to-hire. For instance, you might like photography only as a hobby and not as a profession.
If the person wants some extra credit or experience that would benefit them
Contract-to-hire helps you go the extra mile to earn extra credit. The work you do is beyond the current work you are doing. Thus, additional labor adds to the current experience.
If someone wants to acquire a skill for their professional development or personal gain
If you want to learn a skill, then contract-to-hire is your best choice as it allows you to acquire and experiment with your new skillset.
FAQs about a contract-to-hire
Do those working in contract-to-hire positions have less job security than those employed as direct hires?
A common misconception about direct-hire versus contract-to-hire employment is that the presumed stability of a direct-hire position is considered important when it is not. The difference between stability in both situations—whether in a direct-hire or six-month contract-to-hire position—is negligible at best. When considering a contract-to-hire position, you should investigate the company's track record of turning contract positions into full-time employees. You should know how contract jobs work. Ideally, your staffing firm can give you an idea of this.
What distinguishes contract-to-hire workers from independent contractors?
Although they may sound similar, employees working under contract and independent contractors differ. Due to their self-employed status, independent contractors are responsible for paying employer and employee payroll taxes.
Do jobs that are contract-to-hire pay more? Are there any benefits?
Generally, you can presume that a contract will pay better than a direct-hire position. For instance, when you convert, the compensation structure is typically similar. Still, you gain the advantage from the standpoint of total compensation. You now have a premium benefit package based on what the client provides rather than what staffing companies offer.
Which job roles have a higher tendency to be contract-to-hire positions?
Project management and project-based tasks heavily rely on the contract-to-hire role. Because people are typically hired for a specific project and then show the company the value they can add. It follows naturally that it is a common practice for contract or contract-to-hire positions. Then, if there are additional projects open, it might be helpful to engage them directly.
Software engineering is also prevalent, although to a lesser extent. That is if a specific product needs to be released or in a consulting situation when a project needs to be finished.
What should you look out for when considering a contract-to-hire position?
Knowing what to expect when you sign an employment contract is necessary. It is also essential to understand how contract jobs work. If you're hired full-time after three months of work, your contract is a genuine contract-to-hire opportunity. However, suppose your employer requires you to record only 35 hours per week even if you work more than that while you are under contract. In that case, you should look elsewhere for employment.
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