Temp-to-hire employment can be an excellent way for organizations to find and evaluate new talent before making a full-time commitment.
Whether you're a small business looking to grow your team or a larger company needing additional talent, the temp-to-hire process can help you find the right people for the job.
By providing a flexible and customizable approach to recruitment, these agreements can save you time and money while also ensuring you find the best possible candidates for your open positions.
This guide will provide an in-depth exploration of temp-to-hire employment agreements, covering their definition, typical inclusions, and a sample to assess for use in your organization.
What is a temp-to-hire employment agreement?
A temp-to-hire employment agreement is a legally enforceable contract that establishes the terms and conditions of a temporary position, with a provision stating the possibility of permanent employment upon successful completion of temporary duties.
Organizations use this type of contract when they want to evaluate a potential employee’s or independent contractor’s job performance and assess their compatibility with the company's culture before making a long-term hiring commitment.
A temp-to-hire employment agreement differs from a temporary contract agreement, which only specifies the conditions of a temporary work assignment for a fixed duration without any promise of permanent employment.
Companies commonly use temporary agreements for short-term roles, such as covering employee absences, completing specific projects, or meeting seasonal demands.
How does a temp-to-hire employment contract work?
The temp-to-hire employment process involves several steps, from sourcing a temporary worker to evaluating their suitability for full-time employment. The first step is to hire a temporary worker through job boards, social media platforms, freelance websites, or other staffing methods.
Then, the organization drafts a temp-to-hire contract and both parties sign it. This contract will specify the terms of the temporary assignment, the conditions under which the worker can transition to full-time employment, and the termination process.
Once the temporary employee starts their assignment, they are expected to fulfill their duties to the best of their abilities. The organization will evaluate the worker's performance (and the business’s needs) at the end of the designated period to determine whether to extend a full-time employment offer.
If the worker is deemed suitable, the company will provide a formal full-time employment job offer and a separate contract to indicate the hiring status. Conversely, the organization may choose not to offer a full-time position if it determines the worker is unsuitable for the position or if the staffing need no longer exists.
What does a temp-to-hire employment agreement include?
A comprehensive temporary employment agreement must include key details like job responsibilities, compensation, and the duration of the temporary assignment.
However, organizations shouldn’t overlook some other sections, as well. Consider hiring a legal consultant to help your organization create employee agreements and ensure all sections are adequately covered.
The following list outlines some critical terms to cover in a temp-to-hire contract.
Terms of agreement
Contractual terms describe the period of time in which the agreement will be effective, including a start date and an end date. It should also specify that the contract may extend into a permanent position, renew, or terminate under certain conditions.
These conditions may include changes in the project scope, additional funding, or the temporary worker's satisfactory performance.
Information about parties involved
It’s important to include critical information like legal names, phone numbers, email addresses, and locations of both the temporary worker and the business in the contract.
This information may be essential for recordkeeping and payroll purposes, and also ensures that both parties can be easily identified and contacted if necessary.
A temp-to-hire contract should outline the job description and responsibilities the temporary worker is expected to perform during their employment.
This may include job-specific tasks, general duties, and any special initiatives the worker will be responsible for completing.
The agreement must also state whether the hire will be classified as a temporary employee or independent contractor. This distinction is important for the company’s compliance with applicable labor laws and will have an impact on how and how much the worker is paid.
Depending on your organization’s operational requirements, the new hire may be offered a flexible or fixed schedule with a set or varying number of hours (including full-time or part-time hours).
The employment contract must clearly specify the expected number of hours the temporary worker will be required to work per week. This information should also include any anticipated fluctuations in the number of hours, such as seasonal changes, busy periods, or downtimes.
Dress code and property provided
Dress codes can vary significantly between different companies and industries. Some businesses require business attire, and others prefer more casual clothing.
The contract should clearly outline dress code expectations, including acceptable styles of clothing, appropriate footwear, and allowed or prohibited accessories.
Additionally, the contract should list all company property provided to the temporary worker, including equipment, uniforms, and any necessary tools or materials.
Every organization needs to establish its own terms of service agreements, industry standards, and best practices for the temporary worker.
The contract should clearly outline these expectations, including punctuality, work quality, and professional conduct guidelines.
Compensation agreements are a crucial component of the temporary employment contract. They should contain information like annual salary, hourly rate, or fixed project fee.
This section should also outline potential commission compensation, bonuses, perks, or performance incentives.
Additionally, it should specify payment frequency, payment method, deductions for the temporary worker's pay, and any applicable overtime compensation policies.
This clause, if appropriate, restricts the temporary worker from competing in the same industry or assisting a competitor for a specified period after the termination of their employment.
No conflict of interest
This section of the employee contract should outline conditions regarding conflicts of interest, including the prohibition of working with competitors or engaging in activities that could harm the company's interests.
It may also cover conflicts of interest that may arise from the hire's personal relationships or financial interests, as well as any social factors that could interfere with their ability to perform their job duties objectively.
Nonsolicitation and noninterference
A nonsolicitation clause prohibits the temporary worker from soliciting or hiring current employees, clients, or business partners for their own financial gain.
You may also include a noninterference clause that prohibits the worker from interfering with business relationships. This can include actions like encouraging customers or suppliers to end their relationship with the business.
Businesses can apply these restrictions during employment and for a specific period after contract termination.
This clause should detail your company's policy regarding employee absences and any conditions for taking time off. You may outline the process for requesting and approving time away from work and the consequences for unexcused or excessive absences.
This section should include all information related to the end of the contract when the company makes a decision as to whether to offer a new contract or terminate the worker. This includes the notice period required for both parties, conditions under which the contract may be terminated, and any potential consequences for early termination.
It should also clarify the circumstances under which the temporary worker may be terminated, such as for performance issues or violation of company policies.
Return of property
This section specifies that the temporary worker must return all company property upon contract termination.
This includes laptops, phones, tools, and any other equipment or materials provided to the temporary worker during their employment.
Confidential information and data protection
It’s important to ensure new hires that their personal information will be strictly confidential throughout their employment. This section should also stipulate that the temporary worker must keep all business information confidential.
This includes records, business plans, financial information, customer data, and any other sensitive information they may have access to during their assignment.
This section of the contract specifies which jurisdiction's employment laws will govern the agreement. For example, the terms and conditions of the employment relationship could be regulated by either state or federal laws in the United States.
No modification unless in writing
To minimize the risk of disputes, specify that all parties involved must make agreement modifications in writing, not via verbal agreement. This requirement ensures that any contract amendments are properly documented, with clear and concise terms that are mutually agreed upon.
This section requires all parties to sign and date the document to indicate their agreement to the terms. Signatures create a legally binding agreement between parties and ensure that both the worker and organization are committed to the agreement and give their informed consent.
Temp-to-hire employment agreement example
Here is an employment contract sample that includes the sections mentioned.
Terms of Agreement
This temp-to-hire agreement is between the company (name) of (address and phone number) and the worker (name) of (address and phone number).
The worker will start this temporary assignment on (date) and continue until (date), after which the worker will be considered for hire after evaluation of conditions, including but not limited to company funds and worker performance.
Any modifications to the contract terms and conditions must be made in a written agreement and cannot be altered through verbal confirmation.
The worker is expected to perform all assigned duties, including (a list of responsibilities).
In addition to the listed responsibilities, the worker is expected to perform any other duties, projects, or initiatives assigned by the company in its best interest.
The worker will be classified as (an employee or independent contractor).
Compensation and Work Hours
The worker will receive an hourly rate of (pay rate) for this temporary period and will be expected to work a minimum of (number of hours) per week.
Company Procedures and Dress Code
The worker must adhere to all company terms of service during the temporary period, including the company's dress code. The company will provide the worker with a copy of the policies and procedures, which the worker must review and acknowledge in writing.
Nonsolicitation and Noninterference
During the temporary period and for a period of (length of time) after the temporary period ends, the worker agrees not to solicit or interfere with any of the company's customers, clients, vendors, or employees for personal gain or the benefit of any other person.
Confidential Information and Data Protection
Any intellectual property, including but not limited to inventions, trade secrets, designs, software, trademarks, and copyrights, created or developed by the worker during their employment with the company, shall be the sole property of the company.
During the temporary period and for a period of (length of time) after the temporary period ends, the worker agrees not to engage in any business or activity that competes with the company within a (geographical region) radius of the company's location.
Conflict of Interest
The worker agrees to disclose to the company in writing any potential or actual conflict of interest that may arise during the temporary period or after being hired as a permanent employee.
The worker must inform their project leader of absences and provide a reason and estimated return date. The project leader must approve time off for vacations or holidays in writing.
Termination and Return of Property
Either party may terminate this agreement at any time and for any reason, with or without notice. Upon termination, the worker must return all company property, including but not limited to keys, badges, equipment, and documents.
This agreement shall be governed by the laws of (state/country).
By signing below, both the company and the worker acknowledge that they have read, understood, and agree to abide by the terms and conditions of this temp-to-hire agreement.
Company Name: __________ Signature: __________ Date: __________
Worker Name: __________ Signature: __________ Date: __________
Note that the above document is an example of a temp-to-hire agreement and is not intended to be used as legal advice. Creating a legally binding agreement requires careful consideration of specific legal requirements. Therefore, consulting with a qualified legal adviser before drafting your own agreement is recommended.
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Upwork does not provide tax or legal advice. Each reader and company should take the time to adequately analyze the laws that apply to their business endeavor.
Each state’s laws are different; consider consulting a local attorney so they can explain your state’s rules and regulations before making a decision.
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