Temp-to-Perm Hiring Brings Benefits When Done Right

​Contingent workers—such as temps, contractors and gig workers—bring lots of advantages to organizations, including cost-efficiency, increased flexibility, a larger labor pool and access to specialized talent. They also can be prospects for hire after a trial run. 

Temporary-to-permanent hiring can be a successful talent acquisition strategy, especially during tumultuous economic times, said Tonya Tatro, global vice president of client solutions at ManpowerGroup, a global staffing and recruiting firm headquartered in Milwaukee.

Tatro discussed with SHRM Online the benefits of hiring contingent workers as employees, recommended guidelines for converting contract workers to employee status and gave tips to avoid missteps in the process. 

SHRM Online: What are the benefits of employers hiring from among a contingent workforce?

Tatro: The current economic crisis is continuing to change the employment landscape, and employers need to be strategic to achieve business goals. Hiring talent from among a contingent workforce can reduce the risk of making bad hiring decisions, which can be costly and time-consuming. By working from a pool of talent that has been proven and qualified, the employer is at an advantage and has an opportunity to bring in the right talent with less risk.

Cost savings is one of the most critical aspects of managing in today's environment. Most organizations think of the total employment cost as salary and benefits and forget that the additional costs, such as hiring costs or lost time, are significant in today's marketplace. That is why contingent workforce organizations can help employers fully understand their workforce cost, which includes labor—wages, benefits and recruitment—and opportunity—turnover, overtime and unfilled orders—as well as hidden costs—safety, compliance and training.

Additional cost savings with temp-to-perm hiring is decreased recruitment costs through experience-based hiring, hiring process optimization and a reduction of voluntary and involuntary turnover. As the economy improves, a contingent workforce allows employers to scale accordingly during the economic recovery by gradually and efficiently rebuilding permanent staff while focusing on market demands. If the budget wasn't approved in the past but you're experiencing growth now and you're within your agreed-upon conversion window, you can proceed to conversion of talent with quicker onboarding.

SHRM Online: What should employers know about the process of converting contract workers to direct hires?

Tatro: Hiring permanently from your contingent pool of talent offers immediate productivity and greater ROI [return on investment] to your business. However, before you proceed to offer, I believe there are key items that employers should know about the process of converting contract workers to permanent roles. HR must be sure to discuss any adjustments or changes to the new perm employee's employment as they transition to full time and ensure an open line of communication with them, the workforce partner that initially hired them, the talent acquisition team and the hiring manager.

Ensure all questions and concerns are addressed in partnership with their point of contact from the hiring organization. It is likely this individual has been their career advocate during their contract assignment and may have some insights valuable to your company during the transition. A smooth onboarding process is critical to ensure they trust the new hiring organization while giving them a good first impression as a perm employee.

Certain services are worth hiring a professional firm to manage, and their involvement with the onboarding and acceptance will accelerate a smooth process. Your partner will be able to assist with salary or pay rate negotiation to make sure they align to your company's salary bands, including benefit transition and registration. There is usually a contract in place between the contract partner and the employer about the right to hire their employee. Be sure you are familiar and aware of their transition process and any fees associated. It is critical that you make the partner aware of your intent to hire prior to engaging directly. You can always hire at any time from the contract partner; however, be aware of the conversion schedule and your company's obligations to hire. It is also important to communicate why some items such as background checks and drug screening will need to be completed again, as well as creating a new profile in the system, new security access and new user IDs. You will want to work with the hiring manager and partner to ensure that continued development and training services are aligned to ensure there are no gaps.

SHRM Online: What are some recommended guidelines for employers converting contingent workers to employee status?

Tatro: When you make the decision to proceed with hiring, reach out to the contract partner company to share your intent to hire the contractor as a direct employee. You will want to ensure that both parties agree and are aligned to the terms of the agreement, including any transition fees and salary offer, the new benefit package and premiums, and any nondisclosure or noncompetition agreements that may be in place. The contract partner can also have a discussion with their employee, the contractor, to see if there is a genuine interest in joining the company permanently and help to gauge salary alignment.

Once all three parties agree, you can then approach the worker directly about the new opportunity to join your organization permanently. Other important items to consider include ensuring performance measures are accurately qualified under the new employment agreement with the hiring manager and discussing ongoing training and gaps. Be sure to set clear expectations with all parties on the timing and details of the transition.

SHRM Online: What are some of the common missteps employers experience in this process?

Tatro: Upfront planning is critical to set the stage for success. There are some common challenges that companies face when hiring temp-to-perm, especially when a strong communication plan or process is missing.

One important point is ensuring that you are aware of the terms of your contract agreement and any fees associated with hiring based on the timing of the conversion. This is an agreed-upon contract term with your partner organization that is negotiated at the commencement of your partnership. It is important to be aware of these terms when the decision to hire perm is made so there are not any surprises.

Another important step is making sure the salary you are going to offer is in line with the expectations of the potential new hire to ensure acceptance and a good first impression of their perm employment. Salary band alignment can be discussed at the beginning of the contract term, so this obstacle is prevented during conversion.

There is a risk that the employee may not accept your offer, so working with your contract partner on all details will ensure success by all parties. Other items to align internally are ensuring there are no gaps in paycheck receipt [and] communicating the control of work and who will be managing and setting expectations. The best way to ensure you do not make missteps is open dialogue and communication with your contract partner at every step of your partnership.