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Direct Hire vs. Contract Hire – The Difference and Benefits


Contract to Hire and Direct Hire are two of the most common types of hiring. While deciding which hiring process is suitable for your organization, knowing the difference between direct hire and contract to hire is essential.

2020 changed the course of history, especially changing the way people work. The outbreak of the novel coronavirus has left many professionals unemployed yet many organizations are facing a staff shortage.

Hiring became a challenge for recruiters and HR professionals. New strategies were put into place to accommodate the regulation of social distancing for safety reasons. 

However, the pandemic has also become the dawn of a new era for the gig economy. Due to limited budget, resources and demand, recruiters have leaned towards gig workers/contract workers.

Now that we are at the end of the second wave of the pandemic, recruiters are in a dilemma because they know the benefits that contract staffing brings for their organization. At the same time, they are uncertain of straying away from the conventional direct staffing.

In this article, to assist recruiters in their decision-making process, we will share the benefits and differences between contract to hire and direct staffing. 

What is a Contract to Hire?

When a temporary staffing agency hires a candidate on a contractual basis, which entails working only for a few months or even a year or two for an organization, it is referred to as contract to hire. Contractual hiring can be done for independent contracts, seasonal work, and part-time work, etc.

Temporary staffing grants you the opportunity to get the best suitable candidate for your vacant job role without any commitment to pay the costs associated with it when the service required is done.

As the client, you can sit back and let the contract staffing agency find the best talent for you. If you like their service, you could even turn the contractor into a full-time employee.

What is direct hire?

Also called direct placement, a direct-hire is when hiring agencies source, interview, and test candidates’ skill sets for organisations that need new employees. Usually, these agencies hire full-time employees, but some hire for part-time positions also.

Once the candidates have passed the screening process and tests arranged by the hiring agency; as an employer you can now get to do your part and see if the candidate is a good fit for your company and offer them the job role accordingly.

Advantages of Contract Hiring vs. Direct Hiring

Benefits of a contract to hire or temporary hiring

  • Contract to hire reduces recruitment costs as the staffing agency recruiter will take care of the entire recruitment process, such as sourcing, interviewing, payroll management, leave tracking, etc. 
  • As you will be employing the contractor only for a limited time, you will not have to hand out monthly salaries (once the service is required or the project is completed) as you would to a permanent employee. In other words, you will save money. 
  • By hiring a contract staffing company such as contract-jobs.com, they will help you hire employees as per work demand, which will help you save time, resources, and energy. 
  • By hiring contracts to hire workers, you will enjoy the flexibility of engaging employees in case of employee absence or according to seasonal demand. 

Benefits of direct hire

  • Like contract staffing, direct staffing reduces the recruitment costs as the hiring agency will handle the entire recruitment process such as sourcing, interviewing, payroll management, leave tracking, etc. 
  • You will get many candidates as employees are looking for a sense of stability and security. 
  • Direct staffing allows you to choose from a list of talented candidates the hiring agency has already shortlisted. So, only the best in the job market will be presented to you. 
  • Direct hiring allows recruiters to get more candidates by making the perks and benefits that full-time employees enjoy – a selling point. 

Contract to hire vs. Direct hire – Which is best for your organization?

There are significant differences between direct hiring and contract to hire via a staffing agency. Like everything else in life and in this world, both contract and direct staffing have advantages and disadvantages. Now, how you see them depends on your service requirement. 

For instance, if you are looking for someone who will be a part of your organization, then definitely use a direct staffing agency. But, if you are looking for someone who will be able to help you with just one project or two or some to work temporarily while your permanent employee is on maternity leave, then contract staffing is your answer. 

While comparing contract hire vs. direct-hire processes, both come with their benefits. The answer to, ‘Which is better; Contract staffing or Direct staffing?’ is entirely up to the requirements of your company. 

We hope this helps you in clarifying whether you should opt for direct staffing or contract staffing. 

We will leave you here with our best wishes. 

Also Read: How to choose the right staffing agency for your organization

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Last modified: August 12, 2021