What Is Temp to Hire? Definitions, Benefits, and More

Recruiting employees on a temp-to-hire basis can be a good decision for your organization if you want to fill vacant positions but still wish to test workers before making a long-term commitment. 

Under the temp-to-hire arrangement, you recruit employees on a temporary basis (maybe three to six months) with the possibility of offering full-time employment at the end of the probationary period. 

Temp to hire allows for employer agility, scaling your operations up or down depending on market conditions. If you identify opportunities, you can employ temporary workers to help you deal with demand and determine if you’d like to offer them permanent positions.

The temp-to-hire approach also allows you to screen employees and see if they fit your company. Apart from looking at their performance capabilities, you can also consider their interactions with coworkers and their fit with the company culture. With this option, you can make more effective hiring decisions.

Keep reading to learn more about temp to hire, including how it works, its benefits, legal considerations, and tips for managing temp-to-hire workers.

What is temp to hire?

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Temp to hire involves hiring employees for a specific period. You can choose to offer them a full-time position when this time lapses. Employees working in temporary positions are generally not eligible for benefits such as health insurance and paid vacation, which reduces labor costs.

It’s important to note that temp to hire only sometimes leads to full-time employment. As an employer, you can evaluate a temp-to-hire employee’s strengths and weaknesses, character, commitment to the company, and workplace relationships before deciding to offer a full-time job. 

If you deem the potential employee’s performance unsatisfactory or face unexpected economic downturns (such as a recession), you can end your temp-to-hire employees’ contracts rather than giving them permanent roles.

If you’re someone looking for a job, a temp-to-hire position can help you experience an organizational culture before determining if you wish to stay there permanently. The temp job also allows you to acquire new knowledge and skills to enhance your future job search.

How temp to hire works

Temp to hire is a straightforward process that allows you to quickly begin meaningful work arrangements with employees. It typically works in the following way.

• Identify vacant positions. First, evaluate your organizational needs and identify positions to fill. Outline roles and responsibilities for the vacant positions to ensure clarity. You can also use this phase to determine if temp to hire is the best strategy for you to engage candidates. Temp to hire may be a good approach if you wish to test potential employees before hiring, scale the company in the future, or handle short-term projects.
• Find suitable candidates. The second phase involves looking for employees to fill the positions—which you can do by yourself or save time by working with a temp agency offering staffing services. While doing this, you should clarify that you’re offering work on a temp-to-hire basis. In other words, explain that you’re taking them on as temporary employees with the possibility of full-time employment in the future.
• Sign a contract. Once you’ve found temp-to-hire workers, they must sign a contract that covers the entire period they will work for you. Apart from formalizing your work relationships, a contract highlights their roles and responsibilities, pay or compensation, work duration, and other crucial components.
• Evaluate performance. As a temp-to-hire employee settles in, it’s important to continuously analyze their performance to determine if they’re a good fit. Look at each worker’s contribution toward achieving organizational goals. How well do they relate with others? Do they demonstrate commitment to boost the company’s performance? Determine whether their overall behavior aligns with your culture.
• Offer full-time employment. If you’re satisfied with each employee’s performance, you can offer them a permanent role. When this happens, note that the previous short-term contracts are no longer applicable. You should, therefore, provide new documents for employees to sign to acknowledge their new status. 

Differences between temp to hire and other hiring methods

From temporary staffing to direct hiring and contract-to-hire, companies and businesses use many methods to recruit talent, whether on a temporary or permanent basis. 

The following sections will dive into these hiring techniques and see how they compare to temp to hire.

Temporary staffing 

Temporary staffing involves hiring an employee for a short period of time. For example, companies can use temporary staffing during peak seasons when they experience high demand or when some employees go on vacation, parental leave, or sick leave. The extra hands allow companies to continue their operations with minimal interruptions.

Unlike temp to hire, temporary staffing does not provide a suggestion of full-time employment when the contract ends. However, a company can generally offer to extend contracts if they still need the temporary employees.

Temporary staffing and temp to hire may differ in terms of how employees approach work. A worker may take a temporary staffing position for any personal or financial need but may not feel a strong connection to the company. Someone who works in a temp-to-hire role has at least some interest in working for the company for a longer term and may show stronger engagement, motivation, and performance outcomes. 

Direct hiring 

Direct hiring is a straightforward process allowing organizations to hire employees permanently from the outset. Once they join the company, workers recruited through direct hiring are eligible for all benefits applicable to their positions.

With direct hiring, there’s not a probationary period or trial to test all the employee’s skills. Organizations tend to follow a longer and more thorough recruitment and interview process for the highest assurance that they’re hiring the right people for the long term. 

In contrast, temp to hire is more flexible because it provides an opportunity for the employer to evaluate the employee’s work performance before committing to a permanent hire.

Contract to hire

Contract to hire is quite similar to temp to hire because they both involve hiring employees on a temporary basis and for a short period of time. Once the contract period ends, a company can offer permanent positions to these workers. 

Nevertheless, organizations have more control over employees compared to independent contractors.

Employees and independent contractors’ work arrangements also differ in how they perform their duties. Contractors have more freedom because they work through a staffing agency or independently, meaning a company may not fully control what they do. In a temp-to-hire arrangement, organizations have more influence since they consider temp-to-hire employees part of their workforce.

Looking to build long-term relationships? Upwork’s contract-to-hire program can help you find suitable freelancers and shift them to full-time roles in your company. Get started today.

Benefits of temp to hire for employers

From reduced hiring risks to higher retention rates, the temp-to-hire talent acquisition method allows you to experience numerous benefits. Read on to learn more about these benefits.

Reduced hiring risk

Hiring an employee on a permanent basis can be risky, as it involves a long-term commitment. Despite taking job seekers through intensive recruitment and screening processes, you may not discover behavioral traits or skill gaps affecting performance at an early stage. Such personal attributes can dilute your organizational culture and introduce unforeseen challenges in the workplace.

Temp to hire helps mitigate risks by allowing employers to assess the employee's skills, work ethic, and cultural fit before making a permanent offer. As a result, organizations can choose to keep employees who seem reliable and committed and release those who don’t fit well.

Cost-effective

Temp to hire is a cost-effective recruitment technique, especially when filling short-term employment gaps. Employers can reduce the costs of recruiting, screening, and onboarding new employees while still meeting their staffing needs.

When you decide to offer full-time employment to temp-to-hire employees, it's easier for most of these workers to fit in since they already know their way around an organization. This means spending less on recruiting and employee onboarding processes.

Higher retention rates

A high turnover rate puts you at a disadvantage because you lose talented staff who can be difficult to replace. You may have to spend more on recruitment and training to fill vacant positions. Being short-staffed may introduce challenges for you to meet some of your organizational goals.

A temp-to-hire method can help resolve these HR issues by increasing your retention rate. With this hiring method, employees can assess the company culture and work environment and determine if it suits them. If they're satisfied with the work conditions, they can decide to accept a permanent position if offered and stay in their positions. 

Improved hiring process

The direct hiring process can last for a long time and consume significant resources. Employers may have to sift through hundreds of resumes and conduct multiple interviews to find suitable employees or work with recruitment agencies to locate the right talent.

Temp to hire streamlines the hiring process by allowing employers to do on-the-job performance assessments of the worker. Organizations can then use this information to make better-informed decisions about whether to offer temp-to-hire employees permanent positions.

Legal considerations for temp-to-hire workers

Temp to hire is a quick way to find and recruit employees with an option for permanent retention. However, you must follow different rules and regulations to avoid penalties and fines.

Here are the top legal considerations when working with temp-to-hire employees.

Proper classification

Remember to classify temp-to-hire employees as employees and not independent contractors. Though temp-to-hire employees aren’t fully assimilated into your organization, they are still regarded as your workers. 

If you engage independent contractors, they must be classified as contractors but will change classification if you ever convert them to employees.

Spell this out in the work contract to ensure clarity. Note that any misclassification may expose you to legal liability and penalties. 

Compliance with labor laws

Though you’re dealing with temporary employees before giving them a permanent offer, you still must abide by the Fair Labor Standards Act (FLSA) that defines minimum wage and overtime standards.

You must also create a safe work environment. Ensure that you identify and eliminate any hazards in the workplace. Provide safety clothing and gear whenever required and give relevant training to temp-to-hire employees to promote their safety.

As an employer, you must also abide by Equal Employment Opportunity Commission (EEOC) anti-discrimination laws.

Note that some of these laws may not apply to the hiring of independent contractors. Consider engaging an employment lawyer on Upwork to help you understand applicable laws.

Unemployment insurance

A temp-to-hire employee may be eligible for unemployment benefits if they’re terminated before getting a permanent position. As an employer, you must comply with all unemployment insurance requirements, including paying federal and state unemployment taxes and responding to unemployment claims.

You should know when unemployment insurance is applicable to protect yourself from wrong claims. Consider researching local laws and working with experts to deal with unemployment insurance appropriately.

Tips for managing temp employees

Looking to hire and manage temp-to-hire employees? Here are some tips to boost your recruitment process and workers’ productivity.

• Clearly define the job description and expectations
• Provide training and support
• Communicate the possibility of permanent employment
• Provide regular feedback
• Offer opportunities for growth and development
• Consider their fit within the company culture

Clearly define the job description and expectations

Ensure that your job description is specific. It should outline employees’ roles and what’s needed to perform the job well.

You should also help your temp-to-hire employees understand their work assignments and timelines for completing different milestones. Include roles and responsibilities in the work contract so employees know what’s expected from the start. 

You or your HR team can review these roles with potential employees and answer any questions. Use this time to clarify your expectations, including targets you expect the employee to hit.

Knowing their job descriptions and company expectations can enable these employees to stay focused and deliver quality work.

Provide training and support

Though temp-to-hire jobs require qualified candidates with appropriate knowledge and skills to do the job, you still must provide relevant training and support. 

Job-specific training helps new hires understand how your company operates, putting them in a better position to do their jobs effectively and efficiently. 

Communicate the possibility of permanent employment

To keep your temp-to-hire employees motivated, ensure they know about the possibility of becoming full-time workers. This can push them to work harder and go the extra mile for your company. 

Nevertheless, remember not to provide guarantees or promises since you may have to let temp-to-hire staff go—if you deem their performance unsatisfactory or when the probation period ends.

Provide regular feedback

As you do with other staff members, provide regular feedback to temp-to-hire employees so they know how they’re performing and where they can improve. 

Performance reviews help employees identify their strengths and deal with their weaknesses. Conduct these reviews throughout the temporary employment period (not just when the contract ends) to give employees time to learn and adjust. 

While doing performance reviews, always stay positive and let employees know you’re helping them improve. Be specific on the areas you need your employees to improve instead of pushing them to be like other workers. This is also a perfect opportunity for you to interact and establish healthy relationships with temp-to-hire employees.

Offer opportunities for growth and development

Give your temp-to-hire employees opportunities to learn and develop new skills. You should also organize training sessions for new employees to boost their knowledge. 

Besides, delegating tasks and assigning new roles can help improve temp-to-hire workers’ morale and preparedness and influence them to stay with your company.

Consider their fit within the company culture

When working with temp-to-hire employees, consider how they fit within your company culture. Do their behaviors and worker interactions align with your organization’s values? 

A good temp-to-hire employee should be honest, hardworking, and ready to collaborate with the rest of the team. Such a worker communicates well with colleagues and makes solid contributions to the organization. 

Poor workplace relationships, lack of involvement in organizational events, frequent conflicts, and disengagement, among other issues, could indicate that the employee does not fit in your culture.

Observing your temp-to-hire employees’ traits can help you decide whether to make a permanent offer or let them go.

Find temporary workers to help fill skills gaps on Upwork

Temp to hire is a cost-effective way of hiring new employees. It improves your hiring process by allowing you to test temp-to-hire employees to see if they fit well in your company before retaining them as full-time hires. 

Plus, it lowers your hiring risks by ensuring you only give permanent positions to employees whose behaviors align with your company’s values.

Upwork is the perfect place to begin your search when looking for temporary, contract, or part-time workers to fill vacant roles and boost productivity within your company. You can meet and connect with hundreds of experts and professionals with diverse skills, knowledge, and experiences who are ready to help. Get started today.

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Upwork does not provide legal or tax advice. Each reader and company should take the time to adequately analyze the laws that apply to their business endeavor or situation.