Customer demand for your product is growing, and business is booming. While it is an exciting accomplishment, you notice that your team is struggling to keep up. The pressure in the office is becoming palpable. Every person seems to have more tasks than they can accomplish in a month. The obvious solution is to hire more people before your team starts burning out and disengaging.
Before you begin drafting job descriptions and posting positions online, you should explore all your hiring options. Yes, traditional direct hiring has many advantages and can be the best solution for growing companies like yours. However, in many circumstances, contract-to-hire is a better way to fill vacancies. It will depend on various demands to determine which is best for you and your organization.
Direct Hire vs. Contract-to-Hire
The most significant difference between direct and contract-to-hire is the length of the engagement. Direct hires are individuals you bring into your organization with the intention of keeping them long-term. This traditional method of hiring is framed as a full-time position at a company that is vested in the future and growth of the employee. Direct hires may not have all the skills you need now or five years from now, but they are excited to learn, and you are willing to train.
Contract-to-hire is often a short-term hiring arrangement. The length of employment being determined by seasonal demands, the length of a project, or similar time sensitive scenarios. Depending on staffing needs, the position may be full- or part-time and may last only a few months or longer. While some contract-to-hire employees will receive a contract extension or offer for full-time employment, most will move on to another position at the end of the contract.
In both cases, you gain a valuable employee to fill a staffing or skills gap. Choosing one over the other lets you set the employment terms. Both are beneficial, so a deeper understanding of how they can work for your company is essential.
Direct Hiring
Hiring employees directly is the most common way to fill open positions. Hiring managers or recruiting professionals advertise the position, vet applicants, and interview candidates. It’s a process that can take weeks or months to complete, though the time to hire can vary significantly. Jobs in niche markets requiring specialized skills often take longer to fill. Current unemployment rates can also influence how quickly you find a great applicant and how many applications you receive. Long-term outcomes are at the heart of direct hiring, which leads to several benefits for both employers and employees.
A Succession Pipeline
To maintain strong talent in top-level positions, succession planning is necessary in all organizations. Identifying and training current low- and mid-level managers for future leader roles is an important retention tool. It can help ensure individuals are ready to fill positions internally as the organization grows. It also gives employers and employees a vision and a plan for the future.
Reduced Turnover
Employers who hire long-term demonstrate their willingness to invest in their employees. When employees feel valued, they are more engaged and productive and less likely to leave the organization.
Financial Savings
From recruiting to training, the cost of hiring new employees is high. Hiring for the long-term and striving to retain current employees saves time and money.
Knowledge Retention
Every company is unique, and no two operate the same way. Each time you hire a new employee, the training begins over again. Training takes time and can slow progress. Long-term placements allow employees to grow and develop knowledge and expertise specific to their position within the organization.
BUT, direct hiring may not be best if:
- You need to fill a position quickly, as direct hiring may take longer.
- Your organization is experiencing seasonal or unpredictable growth, as you may end up overstaffed when demand drops.
- You are on a tight budget. Direct hires also demand the costs of benefits as full-time employees and may cost more to keep on staff.
Fractional Hiring
Contract-to-hire, or fractional hiring, can be an excellent option for quickly filling gaps within your organization. Is the need for increased headcount only a temporary one? Does this hiring demand require less than a full-time employee? If you are uncertain, or determine the additional manpower is merely a temporary need, then, fractional or contract hiring with the help of a staffing agency might be your best solution.
Decreased Time-to-Hire
Do you need employees to shoulder the extra load burying your staff, as soon as possible? Staffing agencies build ongoing relationships with skilled individuals, placing them in positions that match their skill set. Their network of vetted employees ready for their next placement can help you fill positions quickly.
Lower Ongoing Costs
Fractional employees are employees of the agency—not your company. You are still responsible for paying them the negotiated rate, but you are not responsible for covering benefits, or other expenses that come with direct-hire employees. Contract or fractional hires, in many cases, will cost less than a direct-hire employee, even if they have the same skills and experience.
More Flexibility
If you know the work won’t fill 40 hours per week, you don’t have to hire someone to work 40 hours per week. Contract-to-hire employees work for your company part-time, full-time, or until a project is done. The terms of the contract determine how much and how long they will work for your organization. And if things aren’t working out, parting ways is simpler in a contract-to-hire situation.
Specialized Skills
The new project you just landed requires your team to use cloud services in a new way. Do you send your team to training or hire a full-time cloud expert? Sometimes, the best solution is to temporarily bring in an expert. If the skills your team lacks are specific to one project, it may make sense to use fractional hiring to bring in a specialist. You only incur the cost of an extra employee for the duration of the project, and the team may learn something along the way.
BUT, contract-to-hire may not be best if:
- The hiring need is truly a long-term demand for the organization and retaining such talent is essential.
- There is a steep learning curve in your organization. Training-intensive positions may be better suited to direct hiring.
- You want to build a cohesive team to help your organization meet long-term goals. Because the position is temporary, contract-to-hire employees may not be vested in long-term success.
The Right Hiring Approach
Every year, companies nationwide use direct and fractional hiring to meet their staffing needs. Both the methods and the outcomes are vastly different. Yet, the two approaches can be the perfect solution, depending on the circumstances. If you’re not sure which one to choose, contact a professional placement firm. They can advise you on the best way to meet your recruiting needs. Their experienced recruiters can guide you through the process of direct hiring or assist you with finding fractional employees. With an expert on your team, you can fill vacancies or expand your team as needed.