Atlanta Tech Recruiting Blog

The Temp-to-Perm Dilemma | February 17, 2011

One of the biggest concerns to technologists that are passively looking for their next role is the abundance of companies (typically Fortune 1000’s) that want to hire people on a temp-to-perm basis. For those that do not know, temp-to-perm (AKA contract-to-hire) is a hiring method that allows companies to hire the candidate as a contractor with the right to convert to a permanent employee after a pre-determined period, typically six months. This staffing method started before the recession, but became a much more common method of hiring following the downsizing and budget cuts that came with the economic downturn.

Let’s look at a few rationales for hiring entities using a temp-to-perm strategy:

1)     Large organizations have a difficult time “firing” employees that are underperforming or are “divisive figures.” Firing an employee for cause requires extensive documentation and even with the paperwork in place, can still result in a frivolous lawsuit. Temp-to-perm hiring allows employers to make better permanent hiring decisions based on actual performance. Companies are now hiring candidates that are proven to be “good or better” at what they do.

2)     Because temp-to-perm is the ultimate trial period, it allows the companies to make faster hiring decisions.

3)     Temp-to-perm hiring eliminates the one-time fee to recruiting agencies. Instead, a company pays for the “fee” over the course of the contract.

From a candidate’s standpoint, it’s very easy to look at these rationales and say this is another example of large corporate greed.

However, there are benefits to this hiring method for potential employees:

1)     Accepting a permanent position typically requires a candidate stay at a company for 2+ years to avoid being labeled a “job-hopper”. However, they base the decision to make this 2+ year commitment on a few interviews where everyone puts their best foot forward. Would you commit to a 2 year relationship with a companion after 1-3 dates? Unlikely. Temp-to-perm hiring allows the candidate to spend 6 months getting to know their company “warts-and-all” before committing to a longer-term relationship.

2)     There is typically a final negotiation at the end of the contract period before the person joins permanent. This can allow the salary offer to be based on actual performance. That can be a huge benefit for employees who excel at what they do.

3)     Hazard Pay! For the consulting period, the candidate will get paid typically 10%-15% above the target base salary (based on a 40 hour week) for the risk of not being a permanent employee right away. This allows candidates to save additional money in their “rainy day fund” during their contract period.

4)     Candidates get paid for every hour they work. This often leads to either a 40 hour/week cap (which few permanent roles offer) or the ability to make substantially higher compensation due to hours worked during the contract period.

5)     Due to your firms ability to weed out underperformers and divisive figures, the permanent staff is often a more cohesive unit and of higher median skill.

The net-net of this is that Temp-to-Perm hiring has many benefits for Fortune 1000 companies. However, there are benefits to potential candidates. To reap these benefits, you must be confident in your abilities and be willing to capitalize on the fact that true stability lies in the level of expertise that you have in your given field.

Is the temp-to-perm hiring model here to stay? We’ll discuss that in my next post. Stay tuned…

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1 Comment »

  1. Problem you find is that often it costs more than recruiting in my experience, the company often has a “hire” fee once you convert them to FTE. That fee can be the same as the recruiting fee, but the agency has already made money off the hourly wages.

    Make sure you negotiate all fees and do proper calculations of actual cost before you enter into these agreements. This keeps it a fair playing field for all parties involved.

    Thanks for the great post Doug!

    Comment by Jonah — February 18, 2011 @ 7:38 pm


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About author

My name is Douglas Kling. I am the Director of Recruiting for Hunter Technical Resources. 17 years into the recruiting business, I am loving it as much as Day 1! The goal of the Atlanta Tech Recruiting Blog is to add value to job seekers and technology organizations by providing insight into hiring dynamics within the Atlanta Technology Community. I can be reached at: douglas@htrjobs.com All blog posts are written by me and NEVER by a ghost writer...

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