There’s a relatively new hiring technique to find and hire candidates that’s growing in popularity. Some large companies have gotten away from direct hiring workers. They are using temp-to-hire.
Here’s everything you always wanted to know about hiring temporary employees, but were afraid to ask. We also explain how it reduces liabilities, the upside, and the Pros & Cons.
Frequently Asked Questions (FAQs)
Time Period Questions
Agency Benefit Questions
Temp-to-Hire Avoids Liabilities
Companies are beginning to realize that with direct hires come liabilities. These include payroll and admin costs, health and dental care costs, and other benefit liabilities like vacations and jury duty. The companies must also cover Worker’s Comp insurance, return-to-work programs plus federal and state taxes. Temp-to-perm positions avoid these liabilities by transferring the liabilities to the Agency that employees the candidates.
The duration a host company utilizes for temp-to-perm positions can vary. The time can be anywhere from 30-150 days. Most companies choose 90, but some outsource to an agency so the agency can handle all of the host company’s payroll and HR issues.
The Upside of Temp-to-Hire
Besides allowing the host company to avoid liabilities, there are some definite positives. Temp-to-hire allows candidates to basically audition for the position and it gives the host company something like an extended probationary period to observe the candidate.
Some worry that the candidates are hurt financially in this arrangement. However, the candidate makes the same whether they are a direct hire or in a temp-to-perm position. The Agency makes nothing from the candidate. If the host company hires a candidate at $20/hour, the employee gets $20/hour minus the same taxes and deductions that host company would deduct.
The host company would pay the $20/hour plus a markup. The markup covers the employer side of FUI, SUI, and Workers Comp Insurance.
- The Host Company gets to see how a candidate functions BEFORE they actually hire the candidate.
- The time for temp-to-hire is like an audition or try-out period.
- During temp-to-hire the host company pays no benefits. Depending on what the host company provides for benefits, this equates to anything from 33%-43% over the wage.
- Since the Agency is paying the labor costs, the Agency covers FUI, SUI, and Workers Comp costs.
- The Agency must provide general safety training.
- HR issues are handled by the Agency.
- Payroll and its issues are handled by the Agency. This includes things like garnishments, bad debt, and child support.
- If the host company finds that the candidate is not working out, the host company just tells the Agency that the candidate’s services are no longer required.
- The time for temp-to-hire can vary. You want the candidate long enough that they settle in so you can see their habits.
- If there is a possibility of a job at the end, then candidates are motivated to work hard and impress you.
- It’s non-traditional. The old way is hire and forget.
- The candidates are not really employees of the host company. They work for the Agency. But if the candidate is not working out or don’t fit in with your team, you just make a phone call and the employee is never heard of again.
- For the candidate, they don’t get benefits until they start working for the host company.
Frequently Asked Questions (FAQs)
How much do candidates get paid?
The candidate makes the agreed upon wage minus the standard deductions of federal and state taxes and garnishments, court directed debt, and/or child support payments. All of these are handled by the Agency.
Can we do a direct hire?
Absolutely! While most host companies use temp-to-perm because of the inherent benefits, some companies prefer to get the candidates onboard as quickly as possible. For those companies we offer a direct hire option.
What are the Agency’s costs?
The Agency pays all of the normal payroll costs that the host company would pay including federal and state taxes (FUI & SUI), and Workers Comp Insurance. The Agency also administers all garnishments, court directed debt, and child support payments, things that the host company doesn’t have to worry about.
How often are candidates paid?
The Agency pays candidates weekly. The payroll week ends on Sunday and the candidate gets paid every Friday after that.
Time Period Questions
Does the temp-to-hire period have to be 90-days?
No. We also do Direct Hires, conversion to Direct Hire, or temp-to-hire periods of anything from 30 days to 150 days. Many host companies find the 90-day temp-to-hire period convenient.
If a candidate doesn’t fit in with my team, must I keep him for 90-days?
No. While we carefully screen our candidates, we know that some may not fit in with your team for whatever reason. All the host company has to do is call us and the Agency takes care of the unpleasant side of removing a candidate from the workplace.
If I’m not sure about a candidate, can we extend the temp-to-hire period?
Absolutely! While we owe the candidate an explanation as to what’s going on, the host company can extend the agreed upon time period of the temp-to-hire.
Can we hire a candidate early if we have a 90-day temp-to-hire period?
Absolutely! If a candidate is really strong and the host company wants to be sure they keep them, they may bring the candidate onboard early with a conversion to direct hire.
Can we use temporary workers indefinitely?
Absolutely! Some companies prefer that the Agency handle their payroll and HR issues and the host company may never hire the candidate on directly.
What happens if there are HR issues with a candidate?
HR issues are not a problem for the host company. The host company notifies the Agency and the Agency handles everything after that including immediate termination if necessary.
How does temp-to-hire work?
Temp-to-hire is like an audition. Rather than just interviewing and hoping the candidate works out, the host company actually gets to see the candidate operate for a set period of time before making a hiring decision.
The temp-to-hire timeframe can be anything from 30-150 days or indefinite if the host company prefers.
How do we terminate a candidate?
Terminations for whatever reason is easy. The host company notifies the Agency and the Agency handles everything from there.
Do we have to maintain a paper trail and/or do counseling if a candidate doesn’t work out?
With a temp-to-hire, all of the HR requirements are eliminated. If a candidate doesn’t work out for whatever reason, the host company calls the Agency and the candidate is dealt with by the Agency.
Agency Benefit Questions
What are the benefits of temp-to-hire?
First, the positives. Temp-to-hire allows a host company to observe a candidate in action before they hire them. The host company gets to see if the candidate is punctual, reliable and dependable, not to mention skilled, before the host company ever brings the candidate onboard.
Second, temp-to-hire eliminates the negatives. The host company eliminates many of the payroll and HR issues that most companies would have to deal with if they had a full-time employee. Because the Agency covers the labor costs, the host company should not have to pay Worker’s Comp costs, the cost of benefits, nor the federal and state taxes.
Why is it so expensive?
An employment agency only appears to be expensive because the costs of payroll and admin and all of the federal and state taxes are separated out. If the host company was paying the candidate, the costs of taxes (FUI & SUI), Worker’s Comp costs, payroll and admin would probably be masked.
If a candidate gets injured, who covers the Worker’s Comp costs?
While OSHA requires the host company and the employment agency to work together to ensure worker’s safety, the Agency pays for Worker’s Comp insurance and covers all Worker’s Comp costs, provided that the host company is OSHA compliant.
What’s the probationary period for a temp-to-hire candidate?
The probationary period for candidates is basically extended. For example, if the host company has a 90-day probationary period and uses a 90-day temp-to-hire period, the candidate’s probationary period is in effect 180 days.
Who covers the Worker’s Comp costs with a temp-to-hire?
Worker’s Comp insurance rates and costs are generally derived from labor costs. Because the candidates work for Agency, the Agency pays all of the Worker’s Comp costs. Because the Agency has a very good online safety & training program and an unblemished record for worker’s safety, the company benefits from our very low rates. Some companies use us because our rates are as much as 37% cheaper than what they pay.