Contract-to-Hire: 5 Major Benefits for Tech Enterprises and Employees in India

Tech-driven solutions and products have taken over the world. Consequently, enterprises are always searching for talent with specialized tech skills. However, another trend has emerged in recent years: Employers are opting for contract-to-hire positions for tech roles.

In this post, we dissect why the contract-to-hire model is trending now more than ever and its many benefits for business. Further, we explore its benefits for the jobseekers and if there is any catch. Here’s why enterprises incorporate contract-to-hire positions for tech roles in India.

What is Contract-to-Hire?

Contract-to-Hire roles are on the spectrum of employment arrangements where the employee gets hired by a staffing firm on a contract. The contract can be as short as 3-6 months in most cases, but it can also go up to 3 years in rare cases.

During this contract, the employee gets a regular salary and all the employee benefits of a full-time hire through the staffing firm. For instance, unlike independent contractors, they don’t have to worry about deducting taxes from their income, and they get health insurance. However, the employees work with the client of the staffing firm. These clients range from multinational companies to startups.

At the end of the contract, if the engagement goes well for both parties (the employer and the employee), they sign the employment contract. Therefore, it is considered a flexible and scalable model for staffing. But is contract-to-hire a model fit for all enterprises? How is it good for business? Let’s figure it out.

Why contract-to-hire positions are on the rise:

Following the lockdowns, contract-to-hire positions have increased in number to a great extent. That’s because enterprises got the chance to test out short-term and remote roles as they were rushed to begin their digital transformation journey.

Moreover, there has been a massive spike in the demand for tech workforce by IT firms, startups, and captive units of multinational companies in India. The IT services industry alone created 5 Lakh new jobs in India in FY 2021-22. These firms have developed great demand for skills like full stack development, Cloud technologies, React JS and Cybersecurity.

There has also been a surge in short-term roles as companies become more sensitive about employee costs after the pandemic. Contract roles cost less, that too without much compromise on the quality of hire.

Even in the market unpredictability, contract roles are comparatively easier to manage with lesser legal responsibilities for the company. Our top clients hiring contract-to-hire staff include IT services players, global capacity centers, software product companies, Big 4 consultancies, and high-growth startups.

For employees, it provides the chance to upskill and earn at the same time, while opening doors for more opportunities. Here go the top 5 benefits of having these roles in a company’s hiring strategy.

Top 5 Benefits of Contract-to-Hire for Enterprises

With the growing interest in contract-to-hire positions across sectors, it’s important to explore the appeal of this model. To put it plainly, the contract-to-hire model is considered a cost-efficient way to get the right hire just in time. The contract to hire might be the best choice for IT and tech roles in enterprises. Here’s why:

1. Access to niche skills

Being a specialist staffing firm, we know the challenge of hiring for tech roles. However, for many tech companies, contract-to-hire can be the best option to fulfill their hiring requirements. The recruitment is done by staffing partners who have developed sourcing channels to hire tech and IT professionals for niche skills for the enterprise. Some employees might even prefer a contract or contract-to-hire role as we will discuss further. Hence, it is easier to hire talent specializing in niche technologies. 

2. Hiring in bulk

Whether for tech or nontech roles, unexpected hiring requirements can arise quickly in the expansion phase. You might need to execute a new project, but the team has a skills gap. Employing an indirect workforce through a staffing firm allows you to engage more people without adding overhead costs to the enterprise.

Moreover, with the help of staffing partners, you can access remote contractors across geographical locations. Offering remote positions grows your potential to hire specialized quality talent even more, and that too at lower costs.

3. Fills urgent needs

When there’s an immediate hiring need, rushed decisions can lead to great costs that can be avoidable. However, contract-to-hire positions require a much shorter turnaround time than hiring for full-time positions. This allows enterprises to fill urgent hiring requirements at lesser costs. Several companies take multiple rounds of interviews before deciding to hire a tech professional full-time because of the higher stakes and costs involved. But the contract-to-hire process involves quicker onboarding as there are fewer interview rounds. The entire process can be over in just a week or two and never takes more than a month.

Quickly deploying talent for short-term projects makes teams agile in innovation and building products, which ultimately makes the enterprise an agile player in the marketplace.

4. Budget Flexibility

Hiring full-time employees is usually a long and cost-consuming process. For high-demand tech roles, the vetting process can be even more extended and expensive. In the tech ecosystem where companies have to provide competitive salaries to attract skilled tech talent, contract roles can be an easy way to cut costs on overhead space.

Contractors are acquired at lower costs since the enterprise gets to save up on costly employee benefits coverage like health insurance and tax-related fees. The staffing firm covers all the employee benefits and related costs, and the enterprises get to offload projects to their temp staff before making the commitment to hire them full-time.

Hence, this model not only gives you budget flexibility to hire specialized talent but also puts you in a position to make informed hiring decisions for a full-time role.

5. Try Before You Hire

Although companies do skill assessment rounds, it’s always doubtful to assess the skills properly before engagement. And when it comes to hiring for tech roles and assessing them for niche tech skills, one can never be sure. Contract-to-Hire roles allow you to assess the skill sets, team fit, and culture fit at lesser costs and liability. You get to evaluate the talent on a monthly basis during the contract period, before making a hiring decision.

Tech professionals in most cases have to be team players to succeed at their job. However, a candidate’s compatibility with the company and their team can never be assessed by a few rounds of interviews. Contract-to-Hire roles in the tech sector are a great way to figure that out.

Therefore, it might be the answer if you’re looking to make better-informed hiring decisions and strengthen your tech department.

Top 5 Benefits of Contract-to-Hire for Employees

Just like the employer, contract-to-hire is also a test drive for the employee to know about the company’s culture and team dynamics. So, it’s a great way to make sure that you don’t get stuck at a job where you don’t fit. Here are the top 5 benefits for techies to take up these roles.

1. Employee benefits

A big misconception about contract-to-hire roles is that contractors don’t receive employee benefits in contract roles. Contract-to-Hire employees get almost the same benefits as full-time employees, such as health insurance, paid leave, and other benefits through the staffing firm. In any case, make sure to engage with a reliable staffing firm, and always assess and clarify the terms of the employment contract.

2. Flexibility

Another admirable feature of contractual positions is the flexibility to shift jobs. In fact, contract-to-hire might be a good way to dip your toes into the gig economy. Several organizations have modified their hiring strategies. Many of the policies are now appealing to contractors. For instance, enterprises are offering remote opportunities to contractors.

Contract-to-Hire roles also have lesser commitment than a full-time job. You can leave at the end of the contract if you find the job unsatisfactory. Plus, the nature of work is non-monotonous since you get to work on a variety of projects.

3. Grow your network

In contract-to-hire jobs, you get to work with people from a variety of backgrounds. This is a great opportunity for you to make connections and grow your network for your next job/gig. People have landed great companies through referrals gathered in their contract roles. That means even if you go without a job offer at the end of the contract, you can get referrals and recommendations from your employer to land another job.

4. Negotiate salary better

Salary negotiations can be tough if you don’t have the work experience to back your claims. Contract-to-Hire roles put you in a better position to negotiate your compensation. You get to gather quantifiable evidence of your work during your contract with the company. On the other hand, if you are not sure about your skills yet, contract jobs are a chance for you to develop relevant industry experience during your tenure as a contractor.

5. Chance to upskill

This leads us to our next point. In contract-to-hire roles, you get a chance to work with new technologies and projects. And the criteria for hiring candidates are comparatively easier to crack for contract-to-hire roles. If you have a skills gap, taking up contract-to-hire roles can give a rise to your learning curve. On top of that, you get to expand and sharpen your skills while getting paid.

The Catch

Contract to hire jobs does not assure you full-time employment with the company at the end of the contract. It is based on the assessment of your performance during the contract. However, in many cases, employers may consider you for future openings. Hence, clarifying all your doubts and queries about the terms of the contract before getting into it becomes crucial in contract-to-hire jobs.

The Bottomline

Contract-to-Hire positions can be a great choice for employers and employees. As enterprises realize the many benefits of the model, the contract-to-hire model is bound to create a surplus of opportunities for tech talent. Open communication can bring about a fair deal for both parties.

Xpheno is the reliable staffing partner of several marquee enterprises. For enterprises, we provide talent at scale. For techies, we bring IT and Engineering professionals on contract to Hire that could be the right deal for their career plans. Feel free to get in touch!