Temporary/Contract Hires vs. Permanent

When there is a positive change to your business, often you look at the option of hiring additional staff. If you are like most business owners, you would rather contribute to furthering your business. Spending time placing ads on the Internet or in newspapers, screening resumes and applications, interviewing candidates, having to make the hiring decision (which sometimes doesn’t work out), and then going through the new hire "negotiations" may not be how you want to spend your time. Some small business owners aren’t comfortable doing these tasks because they question their "human resource" expertise.

Using a temp agency to find new employees can spare you much of the hassle of recruiting. You can have a truly temporary arrangement, or you can try out a temp employee and later hire them permanently.

Hiring a Temp or Temp to Perm Employee

To help you make the basic temporary vs. permanent decision, please review the reasons it may make sense to hire a temp, below.

Why Hire A Temp?

  • You need someone part-time
  • The job is seasonal
  • You don’t expect to need this extra help long-term
  • You need help with a special project that has an end date
  • You need someone with specialized skills that you won’t need or can’t afford once the project is completed?
  • You have an emergency caused by someone who is absent unexpectedly and is planning to return

Even if your needs don’t meet one of these scenarios, you might consider a temp hire who can transition to a permanent position. This is known as a ‘temp to perm’ placement.

Temp to Perm Option

  • Temp agencies will use either their applicant database or recruiting skills to find a number of qualified applicants almost immediately — that’s their business.
  • Temp agencies are skilled at screening and selecting people.
  • There is no recruiting expense to the hiring company.
  • Most temp agencies will have a process in place that allows the hiring company to "convert" the temp to a "perm" (permanent) hire for an up-front negotiated fee or by keeping the temp for a specified period of time through the agency after which the hiring company may convert them to a regular or permanent hire.
  • If the person selected isn’t working out, he/she can be replaced quickly by the temp agency and there are almost never any negative legal implications for making a change (e.g., wrongful termination, unemployment compensation, etc.).

If you want to make sure someone will work out longer term without the uncertainty of the outcome, the best way to make that "permanent" decision is to "try before you buy." The advantage of this approach is that you can observe the person doing the job for a period of time before you have to make the final hiring decision. That’s the most reliable selection process going.

Here are a number of very good reasons to hire someone on a temp basis:

Temporary Hire



Saves time & money

May negatively impact teamwork

Not making a hire that "permanent"

If you get a "dud" it can decrease efficiency: adds to your costs and adds to your training time

If workload fluctuates throughout the year, use of temps avoids layoffs and the organizational "angst" that they bring

Loss of team culture in that the temp will not have the same benefits and perks your employees have

If temp to perm, try before you buy

Because job is temp, not motivated to perform at highest level

A quick and efficient way to obtain the productive capacity needed by the employee

If temp for six months or more, then may have legal issues on definition of who is an employee and who is in fact a temp

But does this approach actually save you money? In most cases it can, but you need to be sure you understand the temp agency’s compensation structure as well as what percentage of the fee is going toward paying the temp, what percentage is spent on taxes/benefits, and what percentage is their fee. Most temp agencies only charge you, the business owner, for the time actually worked, they pay the temp hire and assume full responsibility for all payroll taxes, social security, workers’ compensation and unemployment insurance.

Working with a Temp Agency

Before you agree to an arrangement with any temp or contingent hire company, you should complete a bit more "due diligence" by gathering information on the business and making sure the temp agency can reasonably perform on all the "advantages" they may cite to you, since they are marketing their services to you. Below is a list of that information.

  • How long have you been in business and can you give me contact information for three current customers?
  • How do you test prospective hires? What is your selection process? Do you do a drug screening?
  • How quickly will you have people for me to speak with?
  • How do you monitor and maintain the quality of your temp hires? Do you visit them on-site and check for understanding of what they are doing?
  • Have you ever lost an account (like me) because of your inability to satisfactorily meet the account’s needs? If so, please give me former client’s contact information.
  • May I see proof of insurance for workers’ compensation? Is there a clause in our agreement that specifies that under no circumstances will my company be liable for workers’ compensation claims for your temp employees working for me?
  • If I am not satisfied with your services and let you know, what happens?

You should also carefully review a copy of the agreement that will be signed by you and the temp agency that details in legal language the relationship parameters of your business interaction. Make sure that document agrees with the information you garnered by asking the questions noted above.

Bringing a Temp On Board

Assuming you agree to do business with a temp agency and hire someone on a contingent basis through them, you still need to integrate your temp employee into the flow of your business and your work environment. You might want to consider the following "punch list" when doing this temp-hire orientation.

Integrating a New Temp Hire into Your Work Place

  • Show an interest in the temp hire by spending a few minutes with them and asking them basic questions about their work history, skills, knowledge and abilities.
  • Ask if she/he has any concerns about working for you or your company. Ask the temp what they liked or didn’t like about their last temp engagement.
  • Restate/tell the temp what their role will be and how his/her work fits into your business process. Tell the temp what you expect in terms of quality and quantity of work.
  • Take the temp around the office and introduce him/her to the rest of the team, publicly stating that he/she is a temp and briefly describing what he/she will be doing.
  • As soon as possible after the temp begins their work assignment, find something to praise/recognize him/her for and publicly do so - this will solidify the importance of the temp’s role with your employees and will establish a solid bond between you and the temp.
  • If the purpose of the temp engagement is to become a permanent hire if everything works out, let the temp know that up-front and give him/her the three to five things you will be looking for from him/her to help make this decision.
  • Ask the temp if he/she has any questions, etc.