Contract to Hire

What is Contract to Hire?

Contract to Hire in HR refers to a hiring arrangement where an organization initially hires an employee on a temporary or contract basis with the intention of offering them a permanent position after a specified period. It serves as a trial period for both the employer and the employee to assess mutual fit and suitability for a long-term employment relationship.

Contract to Hire Key Features

  • Temporary Employment: Initially, the employee is hired on a temporary or contract basis for a predetermined duration, typically ranging from a few months to a year.
  • Evaluation Period: During the contract period, the employer evaluates the employee’s performance, skills, work ethic, and cultural fit within the organization.
  • Conversion to Permanent: If both parties are satisfied with the arrangement, the employer may extend a permanent job offer to the employee to transition them from a contract position to a full-time, permanent role within the organization.
  • Flexibility: Contract to Hire arrangements offer flexibility for both the employer and the employee, allowing them to assess each other before committing to a long-term employment relationship.
  • Cost Savings: Employers may opt for Contract to Hire arrangements to manage staffing needs, reduce hiring risks, and control costs associated with recruitment and onboarding.

How Does It Work?

  • Contract Agreement: The employer and the employee enter into a contract agreement specifying the terms and conditions of employment, including the duration of the contract, compensation, benefits, and other relevant provisions.
  • Performance Evaluation: Throughout the contract period, the employer evaluates the employee’s performance, skills, and fit for the role and the organization through regular feedback, performance reviews, and assessments.
  • Decision Making: At the end of the contract period, both parties assess the arrangement and decide whether to proceed with a permanent job offer. Factors such as job performance, cultural fit, business needs, and budget considerations influence the decision-making process.
  • Offer Extension: If the employer decides to extend a permanent job offer, they communicate the offer terms to the employee, including salary, benefits, and other terms of employment.
  • Acceptance: The employee may accept the permanent job offer and transition into a full-time, permanent role within the organization, typically with a formal onboarding process.

Contract to Hire Best Practices

  • Clear Expectations: Clearly communicate expectations, roles, responsibilities, and performance criteria to both parties at the outset of the Contract to Hire arrangement.
  • Regular Feedback: Provide ongoing feedback and performance evaluations to the employee throughout the contract period to facilitate continuous improvement and alignment with organizational goals.
  • Open Communication: Maintain open and transparent communication with the employee regarding their performance, career aspirations, and potential transition to a permanent role.
  • Fair Treatment: Treat contract employees with the same level of respect, recognition, and opportunities for development as permanent employees to foster a positive work environment and engagement.
  • Timely Decision Making: Make timely decisions regarding the conversion to permanent status, ensuring that both parties have sufficient time to plan and prepare for the transition.


Contract to Hire arrangements are prevalent in various industries, including technology, finance, healthcare, and professional services, where organizations seek to evaluate candidates' skills and fit before offering permanent employment.

If the employer decides not to offer permanent employment after the contract period, the contract typically ends as per the agreed-upon terms, and the employee may seek other job opportunities.

Learn more