When the economy is tight and companies are leery to commit to hiring new permanent employees, a contract-to-hire (C2H) arrangement is an excellent option. This type of arrangement benefits candidates during a recovery cycle and even during good times.
If you are an integration professional, what factors should you consider before deciding if a C2H arrangement is right for you?
What Is Contract-to-Hire?
Contract-to-hire jobs are a valuable tool for employers looking to staff integration projects efficiently and effectively. With them, a company can bring in temporary employees for specific work and evaluate skills, personality, and cultural fit in the organization before offering permanent positions. This approach is particularly useful in managing integration projects, which require diverse sets of skills.
Contract-to-hire jobs offer flexibility to both the employer and the employee. The employer can hire specialized talent for the duration of a project without committing to a long-term arrangement, which lets them scale their workforce up or down as needed in a cost-effective way. The employee gains experience and the opportunity to showcase value to an organization.
These positions can also help mitigate integration-project risks. By engaging temporary team members, companies minimize the financial risk of hiring, onboarding, and providing benefits to permanent employees who may not be good fits for the business. A contract-to-hire position also allows potential full-time hires to learn more about a company before they commit to permanent roles there, reducing the risk of turnover and related costs.
Contract-to-hire is a specific means to a specific end. Contract-to-hire agreements outline the length of time a contractor will work for a specific employer. At the end of that set period, the employer will decide if the contractor will be hired as a permanent employee or dismissed.
Contract-to-Hire AgreementComprehensive, clearly written agreements are crucial for organizations bringing on contract-to-hire professionals. These contracts set clear expectations for both parties and help ensure a good working relationship. Below, we detail some of the key terms and conditions that should be included in any contract-to-hire agreement.
- Contract duration: The contract should specify the length of the contract-to-hire period, including start and end dates. It should also include provisions for renewing or extending the contract.
- Compensation: The agreement should outline the payment structure for the position, including pay rate, any bonuses or incentives and reimbursable expenses.
- Benefits: Any benefits that may apply during the contract-to-hire period should be discussed, including health insurance, retirement plans and paid time off.
- Confidentiality: The document should discuss provisions for confidentiality to prevent the professional from disclosing any confidential company information.
- Intellectual property rights: The agreement should detail matters relating to intellectual property rights, including ownership of any intellectual property developed during the contract-to-hire period. It should also specify how the company may use any pre-existing intellectual property owned by the professional.
- Non-compete clauses: If there are any non-compete clauses that will restrict the professional's ability to work for competing entities following employment at the company, these should be outlined in the document.
How a C2H Arrangement Can Benefit Employers
Contract-to-hire relationships work well by allowing both contractor and employer to benefit from a trial period prior to a full-time hire. The contract evaluation period often calms uneasiness and allows for faster initial on-boarding, preventing important company initiatives from falling behind while the company waits to find the “perfect” candidate.
When an integration contract-to-hire arrangement breaks down, it is usually due to a lack of leg work to ensure that expectations are set, checked, and properly managed on each side. Open communication most always prevents or solves any issues. However, both sides must be willing to ask the right (tough) questions and evaluate what the other party hopes to achieve from the arrangement. Most often it’s the unanswered question that leads to failure. However, most true contract-to-hire arrangements will result in success for everyone.
Managing Risks and Challenges
Contract-to-hire arrangements offer companies many benefits for integration projects, but there are a few potential risks to consider. Below, we discuss four of the most common challenges – and some mitigation strategies.
- Turnover: Contract-to-hire positions give an employer the flexibility to adjust staffing levels to suit company needs. However, they also run the risk of leaving a project without enough trained professionals, as a contract-to-hire individual may choose to leave at any time. This can mean delays and additional costs. To lessen this risk, an employer should consider building up a pool of potential contract-to-hire candidates to fill unexpected vacancies.
- Project delays and requirement changes: Integration projects are complex and can be delayed unexpectedly, affecting a contract-to-hire professional's ability to deliver on agreed-upon milestones. Project requirements may also change mid-project. An employer should build flexibility and “buffer” time into the contract to account for delays and changes.
- Cultural fit: Unlike a traditional employee, a contract-to-hire worker may not have as much time to adapt to a new team or get a feel for the company culture. Prior to bringing on one of these hires, an employer should conduct thorough interviews and assessments aimed at determining cultural fit.
- Communication challenges: Effective communication is crucial for the success of any integration project, but a contract-to-hire professional may not be fully integrated into the team before beginning work. This can lead to communication challenges and confusion about expectations. To lessen the risk of running into these hurdles, an employer should lay out clear communication channels and protocols so the professional knows exactly what work is expected and when. The employer should also make certain the new team member is included in all relevant team meetings and updates.
Pros and Cons of C2H Arrangements for Contractors
Just as there are potential benefits and drawbacks of contract-to-hire arrangements for employers, there are pros and cons for contractors.
Pros for a contractor:
- The ability to try out a company before you commit fully. With a C2H agreement, you get to experience the culture, work environment, and job responsibilities with no long-term commitment.
- The opportunity to demonstrate your value. If you are a real pro in what you do, working in a C2H role gives you leverage to negotiate salary and benefits when the time comes because you have proven your value to the position during the agreement period.
Cons for a contractor:
- No guarantee of future employment. If the employer decides at the end of the agreement period not to extend an offer of permanent employment, you will need to start over on the job search front.
- No benefits and less financial security. A C2H employer does not pay benefits. Further, if the contract expires and the employer does not offer a permanent position to the contractor, no severance will be paid to the contractor.
Onboarding and Integration
Effective onboarding is essential for the success of contract-to-hire employees. Below are some of the top key considerations to take into account when designing a sound onboarding process.
- Offer training: For a smooth transition onto a team, the employer should offer contract-to-hire employees training on the company's culture, policies and procedures. It should also give any job-specific training – including mentorship and shadowing – necessary for the person to perform the role effectively.
- Provide necessary resources: The employer should give the worker all the resources necessary for proper job performance, including access to necessary hardware and software, job-related company documents and any other resources specific to the project and role.
- Set clear expectations: To avoid misunderstandings and confusion, an employer should establish clear expectations for its contract-to-hire employees, including role details and responsibilities, deliverable timelines and project goals.
- Integrate contract-to-hire employees: To ensure that a new contract-to-hire employee feels welcomed onto a new team, the company should offer opportunities for social interaction (such as invitations to team events and outings), make thorough introductions to key project stakeholders and give overviews of project objectives.
- Provide feedback: The employer should give the worker regular both feedback on job performance and opportunities for support where needed. This might take the form of scheduled check-ins and periodic performance reviews, as well as offers of career-development opportunities.
Offboarding and Exit Strategy
As important as it is to onboard contract-to-hire workers properly, it’s also critical to plan offboarding and exit strategies. Below are some strategies for an employer parting ways with a contracted hire.
- Transition responsibilities and knowledge: To ensure that the project runs smoothly after the worker’s departure, a company must create a plan to transition project learnings and responsibilities to other team members. This might mean assigning tasks to other employees, documenting processes and arranging mentorship and training for the professional’s replacement.
- Conduct exit interviews: Exit interviews with a departing contract-to-hire employee can give a company helpful insights into a specific project's successes and challenges, and provide it with feedback to improve. During an exit interview, the employer should ask the professional about their experience at the company, what they learned and what they liked and disliked about their time there.
- Obtain feedback for improvement: An employer should also gather information from the professional on what it might improve at the organization, either within the project specifically or at the firm as a whole.
- Ensure compliance: An employer with a departing contract-to-hire worker should take measures to ensure that the offboarding process meets with all applicable regulations, including laws relating to termination, benefits and final pay.
- Maintain relationships: Even though they are leaving, departing contract-to-hire workers can prove to be valuable future contributors to a company. The employer should keep up relationships with these individuals and consider them for future projects or as permanent employees should the need arise.
Should You Accept a Contract-to-Hire Agreement?
If you are a contractor contemplating accepting a C2H agreement, here are some factors to consider:
- Are you a fit for the role based on skills, experience, and career goals? Your skillset, background, and career goals must align with the role for the best outcome. This alignment ensures that you are placed into a satisfying and mutually beneficial role, instead of just accepting the offer of income until something better comes along.
- Why does the company prefer a contract-to-hire arrangement? If the company has a history of hiring on a contract-to-hire basis, then things generally work out well. If the employer has never hired in this fashion, clear expectations of performance and goals should be set and reviewed regularly.
- Are there limitations or additional expectations to be aware of until you are hired full-time? Ask questions about things like system access, overtime, and travel. Asking these questions will help you avoid overlooking a critical requirement for success.
- Is it safe to leave an existing job for a contract-to-hire position? Let’s assume that all your questions are answered and the company is stable, with a history of successfully placed contract-to-hire employees. Let’s also assume that you have done your legwork and the prospective employer has provided a solid job description, a date you can expect to convert from contract to full-time status, and a plausible salary range. If you know and are satisfied with the answers to those questions, the opportunity can be a good move if the job aligns with your goals and is a match for your skills. In a stable company, a well-planned and executed contract-to-hire scenario poses no more risk to a solid performer than a permanent hire.
Adding contract-to-hire workers to the payroll is a sound strategy for companies that need extra project talent but aren’t sure about bringing on additional full-time employees. As mentioned previously, there are several actions that should be taken by an organization considering these hires.
First, the company should conduct a comprehensive evaluation of the potential contract-to-hire professional to ensure that the person has the necessary expertise and skills to perform the job. This might include technical-skills evaluations as well as consideration of the person’s work ethic and likely cultural fit.
The right kind of onboarding is crucial for achieving integration-project success with a contract-to-hire employee. The company should furnish all the necessary resources, training and tools the worker might need and integrate the individual into the team and organizational culture.
The company should establish clear expectations at the outset of the working relationship. Regular performance evaluations and feedback should be part of the new team member’s experience at the company.
Also critical is a comprehensive, clearly written agreement that outlines the terms and conditions of the worker’s employment. The contract should include information about compensation, benefits and contract duration, as well as all relevant legal considerations, such as confidentiality, intellectual property rights and non-compete clauses.
Finally, careful planning and management are an essential part of the successful integration of a contract-to-hire employee. A company should build flexibility into its contract with the professional to allow for project changes and delays, and establish effective communication channels to reduce risk where possible.
Are you an employer or an EDI professional looking to enter into a contract-to-hire position or find another employment option? Remedi can help. Contact us today to discuss your unique situation.