Why Contract To Hire?

Posted: 1/22/2014

By: Elias Cobb, Quantix Recruiting Manager

Here's another question I get from a lot of candidates. Many people are reluctant to take a contract to hire or are wary of the set up. There are a few reasons why a company will want to do a contract to hire rather than a direct hire and there are a few factors you, as the employee, need to consider.

In my experience most companies, believe it or not, DON'T do a contract to hire (CTH) to "try before they buy." The vast majority of the time the client cannot approve paying a fee to a consulting company, so they set up a CTH arrangement. The consulting company bills the employee out to the client over a set period of time and when the prescribed amount of time is over, releases the contractor to the client for hire for no fee.

Photo Credit: Jon Prete, Recruiting Blogs

The "try before you buy" idea is a bit overrated anyway, in my opinion. Most companies will have some sort of probationary period when you start anyway, so almost every job is a bit "try before you buy."

So, how do you set up a CTH, as an employee? There are a few things you need to find out from the consulting company. First, make sure you negotiate your expected salary when you convert to a permanent employee. You don't want any nasty surprises at the end of your contract. Second, you should ask for around 10% more money while you are on the contract on an hourly basis than you will receive as a salary once you convert. This is to help offset the lack of benefits and the instability of the contract, however slight it may be. Why not more than 10%? Well, most consulting firms, in my experience, will be reluctant to pay you much more than that. The biggest reason is that if you are earning significantly more money on the contract, it will be more difficult for you to accept the permanent position. Third, make sure you know how long you are expected to be on contract before you convert. It's usually between three and six months. Ask how many other CTH employees have worked for this client and how many of them were hired at the end of their contracts. If a client has a history of not hiring on their CTH contractors, you want to know that!

All in all, the majority of CTH contractors are hired on as permanent employees (again, in my experience). In my 10+ years, I can literally count on one hand the number of CTH arrangements that have not resulted in a permanent position. Obviously, there are a few that ended because the contractor was not doing a good job, but if that person had been hired directly, they would have been fired.