If you think about it, in any state that has passed at-will employment laws, a company can fire an employee at any time for any reason.
At will means that employees without a written contract can be fired for almost any reason—that is, fired for cause or fired for no cause at all. Both the employer and employee are free to terminate the employment at any time.
So why the profusion of contract-to-hire job offerings lately? Why not just hire people and fire them later if they don't work out?
In a typical contract-to-hire arrangement, a company will contract workers from a staffing firm. The workers are employees of the staffing firm. They are covered by worker's compensation and often also receive other benefits.
Let's drill down into this a bit. From the employer's perspective, is the contract-to-hire option a good idea? And from the candidate's perspective, should you embrace the contract-to-hire opportunities that are out there or shy away from them?
When clients ask us to provide personnel, a surprising number of them embrace the contract-to-hire model with great enthusiasm.
We always want to understand a client's motives and motivations better. Do they REALLY need to operate in that model? If they do, they stand to lose out on candidates who will only consider direct-hire opportunities which, rightly or wrongly are perceived to be more stable than contract-to-hire.
Here are the top five reasons why companies opt for the contract-to-hire model:
The inability or unwillingness to fire is a company culture issue. Some companies are so close-knit that firing anyone for any reason—even firing someone who is caught red-handed stealing from the petty cash drawer—destabilizes the entire staff.
Complex hiring processes often slow things down so much that good candidates are lost to other job offers. One company we've heard about has an initial interview of 1-2 hours duration followed by a ½ day interview with the technical lead followed by a full-day interview with the full team, which includes pair programming. Getting these interviews scheduled can span several weeks. For a contract-to-hire role, only the ½ day interview is required. To convert to direct-hire-employment, the candidate must still go through the rest of the interviews, but these are rarely done with the competition and pressure of other offers pending.
Using contract-to-hire to generate a direct-hire slot is a tried and true technique in many companies. When another resource joins the team and demonstrably increases the team's throughput, it becomes significantly easier to lobby for the direct-hire slot. The argument is much easier to make with concrete metrics than with hypothetical or hoped-for gains.
No matter the rationale for using the contract-to-hire model, a company must recognize that it is excluding a portion of the job-seeker pool by going this route. Someone with direct-hire employment that is perceived to be stable—no financial difficulties, restructuring or other earth-shaking events underway—is less likely to even consider or pursue contract-to-hire. This is a cold, hard fact. So if a company offering a contract-to-hire role is failing to attract desirable candidates, they should take a close look at their assumptions. If direct-hire is an option, then re-offering the slot as direct-hire will often help them land a candidate.
In addition, companies should be forthright about why they are offering the role as contract-to-hire. When interviewing candidates, they should explain the reason or rationale behind contract-to-hire. Often times that calms whatever nervousness the candidate has, making them far more accepting of the model.
As a prospective employee, the $64,000 question is whether or not contract-to-hire is, indeed, less stable than direct-hire employment.
If you have been unemployed long term, then any job—no matter the employment model—looks very attractive. But if you've only been unemployed briefly, or if you are currently employed but trying to make a move for career reasons, should you rule contract-to-hire in—or out?
The three pieces of advice I give candidates:
First, remember that employment in Michigan (and most states) is at-will. While some companies are very nervous about firing their employees, most are not. You can be hired on Monday and fired on Friday. So the stability of a direct-hire job offer is an illusion.
Second, remember that if you interview for a contract-to-hire role, you have the right to ask the company why the role is being offered in this model. The information you get may provide insight into the company.
For example, if a company tells you that they are loathe to fire people once they are hired, that says that once you make it through the probationary period, job security is favorable.
Conversely, if a company tells you that they are trying to generate a direct-hire slot by bringing someone in on a temporary basis, that might not give you a good feeling. Will there be slots next year? Or is the manager operating on a wing and a prayer?
Third, observe the interviewing process in a detached fashion to measure just how thorough it is. Is the interviewing process adequate for the hiring manager (or even yourself) to determine that you are a good fit for the role? The number one place where contract-to-hire falls apart is when the interviewing process is so abbreviated that nobody would be able to determine if the match is a good one. That kind of abbreviated interviewing comes from a hiring manager who really (really really really) is looking at you like a part in a machine. If you happen not to fit right, it's easy to throw you on the scrap heap and get another part. My advice: run for the hills.
Many, many of our candidates are in direct-hire roles that started as contract-to-hire. So we—and they—know that it works!
This is a technical/business article catered to developers, hiring/project managers, and other technical staff looking to improve their skills. Sign up to receive our articles in your email inbox.
Stout Systems is the software consulting and staffing company Fueled by the Most Powerful Technology Available: Human Intelligence®. We were founded in 1993 and are based in Ann Arbor, Michigan. We have clients across the U.S. in domains including engineering, scientific, manufacturing, education, marketing, entertainment, small business and robotics. We provide expert level software, Web and embedded systems development consulting and staffing services along with direct-hire technical recruiting and placements.