What is ‘Contract to Hire’? Everything You Should Know

‘Contract to Hire’ is a common term you may hear as you search for part-time, full-time or freelance employment.

But if you don’t quite understand what a ‘Contract to Hire’ agreement is and how it impacts your work, it can be frustrating.

In this article, we’ll discuss everything you should know about a Contract to Hire agreement including what exactly it is, pros and cons of contract to hire agreements, and and when you should probably take on a contract to hire position.

What is ‘Contract to Hire’?

A ‘Contract to Hire’ agreement is when an employer offers to hire you first as a contractor instead of a full-time employee with the understanding that they may hire you full-time at a later date.

Put simply, ‘Contract to Hire’ is a trial period for employers and contractors.

The employer and contractor agree to work together while staying open to the option of converting the contractor agreement into an employment agreement in the future.

9 Pros and Cons of ‘Contract to Hire’ positions

Now that we’re clear on what a ‘Contract to Hire’ position is, let’s talk about the upside and potential pitfalls of agreeing on a contract to hire.

Pros

Here are a few reasons you should consider taking on a ‘Contract to Hire’ job:

Chance to “test drive” your boss and company

Perhaps the biggest perk to a ‘contract to hire’ position is the chance you get to give your new boss and new company a test drive before committing to a long-term employment arrangement.

With a traditional job, you have to go through the interview process, the hiring process, the onboarding process, and then you finally get a chance to work with your new boss and team.

If at that point, you realize you don’t like the team or the company, you’ve wasted a lot of time. With a ‘contract to hire’ position, you come to that realization much sooner.

Of course, it could also go really well and you could realize this is a place you’d like to work either as a contractor or an employee for the long haul.

But in both cases, you get to your answer much more quickly.

Ability to explore lots of jobs at once

When you work as a contractor, you get to explore lots of potential jobs at once. That’s because most contractor jobs are not full-time positions; they are part-time or freelance roles.

So if you are the kind of person who likes to explore lots of jobs at once and have a lot of variety throughout your work day, then exploring ‘contract to hire’ jobs is an excellent option for you.

If you land on a job you really like, you can pursue getting hired by that company assuming it’s a fit for both of you.

Opportunity to prove your value

There’s only so much proof you can give during the interview process that you really are a quality candidate and should be hired by the employer.

With a ‘contract to hire’ position, you get the opportunity to show your value in a real work setting.

Naturally, this can be a double-edged sword. If you really are as talented and skilled as you claim to be during the interview process, it will show during your time as a contractor. However, if you oversell yourself, you may lose the opportunity to get hired after working as a contractor.

More negotiating power ultimately

If you ARE able to show your value during the contract work, then you ultimately have way more negotiation power when it comes to the hiring process.

For an employer or a client, there’s nothing worse than having to go find someone and retrain them to do the work someone else already knows how to do.

That means, if you do a good job at your ‘contract to hire’ position, your employer will likely be more willing to pay more and get better benefits which gives you more negotiating power.

Less onboarding

I’ve never met anyone who really loves the first few days of a new job. That’s because, no matter how great a company is, new employee onboarding can be a real drag.

When you take a job as a ‘contract to hire,’ You often forgo a lot of the traditional employee onboarding. Sure, there will be training and education. But quite often as a contractor, there’s less of that to deal with.

Cons

Okay, at the risk of painting two perfect a picture for ‘contract to hire’ jobs, let’s discuss a few downsides of taking a position like this.

Less-stable work situation

If you’re working as a contractor, you’re naturally going to have a less stable work situation. At least some people see it that way. Meaning, you may not always know where your next paycheck is going to come from.

But the truth is, job security is not what it used to be. Companies are not offering pensions or keeping employees around for 20 or 30 years like they used to.

And so while working as a contractor may be slightly less stable, you also have more power over the kinds of clients you work with and the projects that you work on.

No traditional employment benefits

When you work in a ‘contract to hire’ position you often don’t receive the same benefits that a traditional employee would.

We’re talking here about health benefits, 401k matching, company perks, and things like that.

There are 401ks and retirement plans for contractors, there are also great healthcare options. But those things wouldn’t be supported by your client-employer.

Constantly looking for new clients

Depending on whether or not your ‘contract to hire’ agreement develops into a full-time position, as a contractor, you’d be left searching for clients and jobs more often than if you worked as a traditional employee.

For some people, this is really exciting. For other people, it’s very stressful. It’s important to know whether you think this is a positive or negative effect of taking on ‘contract to hire’ jobs.

Less clarity of career path

When you take a traditional job as an employee, there’s quite often a very obvious path upward in the company.

When you take a ‘contract to hire’ position, those lines get a bit more blurry. That’s not to say a ‘contract to hire’ job can’t turn into a lifelong career, but it’s something to keep in mind.

Should you take a ‘Contract to Hire’ position?

There are a few situations in which taking a ‘contract to hire’ job makes perfect sense.

For example, if you prefer running your own one-person business, finding your own clients, and working with lots of different companies at once, then a ‘contract to hire’ job is a no-brainer.

Alternatively, if you are having trouble finding a full-time position and can only find opportunities that fall under a ‘contract to hire’ agreement, it may be worth taking on one or two of these to get your foot in the door at a good company.

If you’ve been burned by a bad boss or a job you ended up hating in the past, Maybe it’s time to explore ‘contract to hire’ positions. The “test drive” nature of these positions allows you to make sure you’ve gotten it right before committing to a longer term obligation.

What other people are saying about ‘Contract to Hire’ jobs

We went out into a few online communities to ask other contractors, freelancers, and part-time workers what they think about ‘contract to hire’ positions.

The results have been pretty mixed. Here are some of the most impactful comments we found:

Reddit user AltOnMain says:
“In my experience contract to hire jobs are fine and often convert [to full-time positions], but they are with companies that have low trust in employees for whatever reason. … I think it is a good foot in the door because a lot of people will avoid jobs like this. ”

And Redditor Dry_Boots seems to agree:
“My current job was ‘contract to hire’. I was coming from a long unemployment after a layoff and would have taken anything at that point. It was a good deal. They did hire me, and I’ve been there 5 years now. It turns out they do almost all their hires from contract to try them out first before putting them on the books.”

Not everyone is quite so positive about it, though.

One discussion we found included this comment:

“I’m not a fan of ‘contract to hire.’ It means the company is both cheap and too clueless to know how to interview people. It’s likely you’ll be on a weak team and never get hired perm[anently]. If you want to work W2, get a W2 job.”

And another commenter felt similarly, from what we could find:

“They can work out, but I am leery of them after seeing multiple [clients] just refresh the contract at the end of the period with no incentive to hire full-time.

“If you are doing well and can be picky, I would personally avoid them. If you need a job and are having trouble finding them it can be worth it, but it would not be my first choice. … To me it just seems like a company not wanting to commit to employees.”

Deciding whether or not to take the position

Ultimately, I can’t tell you whether or not you should take a particular ‘contract to hire’ position.

Hopefully, the information in this article has been helpful and informative and can give you enough of a foundation that you can make that decision and feel confident in your choice.

Whatever you choose, remember: nothing is permanent. You can always pivot later.

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