Most of the time it's the job of a staffing group to not only find, place and qualify talent but to educate their clients on the process and options for adding support. A company’s hiring policy and procedure are usually unique to that culture and when a staffing company becomes the mediator in that process, the difference between a successful placement and a failure could come down to the way that candidate was brought on. This means the simple differences between direct hire and contract to hire hold a lot of importance.
The first option, direct hire, defines the process of a “Head Hunter” sending over a candidate, the client interviewing them, offering them the position and then the candidate starts as a direct employee. The benefits of this are, above all, cost and appeal. The client can usually save money if they know this candidate will be a good fit. For instance, an entry-level candidate at 20% of salary (industry standard) would be much cheaper than paying a mark-up, the candidates pay rate and benefits over a contract period (usually lasting 6 months). Many sharp and higher-level candidates will not work on a contract basis. They wish to be added to the client’s payroll as soon as possible in order to receive benefits such as 401K, vested interests and full health benefits. Most contract benefits don't offer these. However, the main drawback of a direct hire is shorter guarantees. TriMech’s direct hire guarantee is 30 days. Using this as an example, a client has only 30 days to examine if a candidate is a good fit technically and culturally. If a candidate leaves after the time period is up, there's no refund. Once a guarantee is over and a candidate leaves the employer, a client can be forced to pay direct hire fees and still have the need unfilled.
Contract to Hire
On the other side of this, we have contract to hire. Contractors come on a client site to work as an employee under the staffing agency. This allows companies to limit overhead, work first-hand with a candidate, see how they mesh with the environment and see if they are worth their salt, so to speak. Most agencies see this option most appealing as it is difficult for candidates to “burn” our clients. Let’s say, in a worst-case scenario, a candidate comes on board, does not meet the expectations of the client and after two weeks is let go. During that time, regardless of the quality of work, the candidate has been completing tasks to some degree and the client has spent very little on a failed placement (none in terms of benefits, 401k and overhead). Contracting serves as a small insurance policy to verify if this person will be a proper fit. Finding the right people for your company is difficult and allowing those six months to see the best and worst of your new hire provides a great sample for management to decide on converting this person to a full-time employee. Our clients prefer to work with us because we allow clients to convert candidates at any time during the contract portion.
Controlling the flow of people onboarding has been the key to many companies' success. A company culture, which is so valuable and becomes the identity of many businesses, is based mainly on the employees, unless a company has strong guiding principles in place. One wrong hire can set a company back in budget and resources beyond conceivable measure. Through these two options, our clients grow and replace staff in order to keep up with production. Both direct hire and contract to hire have obvious advantages over each other, in the end, it's the duty of the Staffing Group to guide their client into what process would be the best fit for their organization.
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