Contract positions are becoming more and more commonplace in the employment world. In fact, many industry experts believe that 50% of the workforce will be contract workers within the next 20 years. See J.T. O’Donnell’s Linkedinarticle “Underemployment is the ‘New Normal’ – Here’s how to Beat it”. The reasoning is quite sound for both employer and employee alike.
The IDC reports businesses spend $85B+/year to make the hiring process more efficient and effective with investments in comparative profiling, psychometric testing, research, and training. And, “in a recent Career Builder Survey of over 6,000 hiring managers from the world’s ten largest economies, more than half report making a bad hire that caused significant harm to revenues, productivity, client relations, or morale costing more than $50,000 per bad hire”.See LexSisney’sLinkedin article “How to Hire Like the NFL’s Best Teams”.
It stands to reason then, that efforts to cut the costs of making bad hires can yield significant cost savings. Enter contract to hire. Contract positions are used by professional sports teams, businesses contracting projects to other businesses, actors and actresses with production studios, etc., etc. It protects both parties from being stuck in a position that one or both of the parties is unhappy with by designating a specific time frame or other set of criteria by which the relationship can be dissolved and each party can move on. Or, at this pre-determined point both parties can agree that the relationship is a win-win and either a new contract over a specified time frame or a permanent arrangement can be negotiated. It’s effectively a “try before you buy” arrangement for both parties.
When was the last time you bought a new car without going for a test drive first? Perhaps if you are in the market for a rare exotic you might make the purchase without a test drive, but you certainly have done your homework on such a rare find. This would be similar to the hiring of a top notch C-level executive within an organization. Have you purchased a home without first at least stepping inside and learning about the neighborhood?
The point is, a contract to hire arrangement offers a business a chance protect itself from making a bad investment in it’s people. It also offers employees the opportunity to prove themselves as well as get a feel for how they fit with the company culture before creating a more permanent bond. There are additional benefits as well:
Benefits for employers:
- The ability to fill short term staff needs due to maternity leave or work related injuries
- Easy employment and administration of seasonal help
- No hassle HR and benefits administration because the staffing firm who handles the heavy lifting typically supplies the contractors
- Protection from significant costs of overtime by using additional contract employees to step in when overtime hours are approaching
- Contractor employees are a great source of expertise for limited time project work and implementations
- A solid time frame within which a full evaluation of potential full time employees can be made. The application of skillset to the work environment, work ethic, and the match with company culture are areas that are difficult to gauge within the short and confined restraints of the average hiring process
Benefits for employees:
- The ability to gauge the fit with the company culture, the superiors whom one will report to, and the fit for the work and work environment prior to making a long term commitment
- In some cases a position is not deemed a good fit by either the employer or contract employee and the arrangement ends at completion of the contract. The benefit to the employee is that “contract position” can be used on the employee resume as opposed to “fired” or “wasn’t a good fit so I left” to explain a short term run with an employer
- In a situation where an employee made a significant contribution to the company within the contract period the employee has extra bargaining power to negotiate the terms of a permanent position
- In certain circumstances the employee has the ability to work more than one contract simultaneously. And the employee has the ability to work on arranging another employment arrangement as he/she reaches the end of the current contract as opposed to being let go or terminated out of the blue.
Business Development Manager