Temp-to-Hire vs Direct Hire: Which is the Better Recruitment Option?

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When it comes to hiring, employers are consistently looking for more effective alternatives. Although direct hiring is still the predominant form of recruitment, many companies are also discovering the advantages of the temp-to-hire model.

As an employer, it is important for you to understand the difference in these methods, to take informed decisions regarding your hiring policy. Let us analyse them to understand the merits and demerits of each.


The temp-to-hire route involves recruiting a person as a temporary employee for a pre-defined time period, such as three months or six months, during which they are on the payrolls of the staffing agency, followed by their absorption in the company.

The period during which they are employed as a temp allows you to evaluate the candidate’s performance, before transferring their name on to your own payroll. You also have the option of replacing the temp if you are not satisfied with their performance.

In case you are hiring through a staffing agency, you can ask them to replace the candidate with a better one who can meet your expectations. If you decide to absorb the candidate permanently, you will have to pay a contract buyout fees to the agency. There are a number of different methods how this amount is calculated, including a flat rate or a sliding fee.


Flexibility and risk reduction are two of the foremost advantages of using the temp-to-hire method. It enables you to be doubly sure that you have hired the right person for the job. If you are not satisfied with the performance of the candidate during the time s/he is temping with you, you are free to ask the staffing agency to scout for a replacement.

Since temp-to-hire allows you to observe the candidate in an actual work setting, you have the opportunity to make a detailed evaluation of their suitability for the job. You can assess the candidate on a variety of parameters including productivity, temperament, person-organizational fit etc. That is why, with temp-to-hire, you have a better chance of making the right selection.

There are times when candidates with impressive certifications and work experience do not tend to measure up in an actual work environment. Then again, there are cases when a candidate’s resume isn’t impressive enough to draw the employer’s attention, but they are highly efficient in an actual work setting. These anomalies can be addressed through a temp-to-hire arrangement.

Testing candidates as temps allows you to save on resources like time and money. The temp-to-hire arrangement provides employers with a lengthy trial period, giving them the opportunity to vet the candidate thoroughly before offering them the job.


One of the key challenges of the temp-to-hire method is that your permanent staff may not be too eager to collaborate with someone who they perceive as an outsider. To build a great team is never easy, and you have to watch if temp-to-hire employees are able to fit into your company culture and work seamlessly with your permanent workers.

Direct Hires

Employees who are taken on board for permanent positions right away after a traditional selection process, which involves shortlisting resumes, administering tests and interviews, and conducting background screening, are termed direct hires. This is the predominant hiring model that is employed by organisations worldwide when it comes to hiring permanent staff.


Direct hiring tends to attract better talent due to the absence of a prolonged trial period. Being directly placed under the company’s payrolls creates feelings of stability and security among new employees. They also have a better sense of loyalty towards their company compared to temporary workers.

To attract the best talent through direct hiring, companies generally offer attractive perks and benefits which are not available to employees working on a temp-to-hire basis.

Direct hires also tend to attract more respect from established staff and are integrated into the organisation more easily. When you recruit an employee, you want them to integrate quickly and begin working as a team, and direct hiring seems to have an advantage in this respect.


The biggest disadvantage of direct hiring is wastage of resources if you end up recruiting a person who is unfit for the job. There are instances where a person makes a very good first impression, but eventually it emerges that they are not as efficient as you thought they would be.

Direct hiring entails a long recruitment cycle which can stretch even further if you have a position requiring a complex skill set, for which multiple rounds of screening are necessary. The absence of a trial period puts you under more pressure to hire the right candidate.

Let Your Hiring Objective Determine Your Policy

Which of the above is the better hiring method for your organisation depends on multiple factors like the position for which hiring is being carried out, organisational culture, etc. It is a good idea to be flexible regarding your recruitment policy. Companies should be open to using both the models as necessary. The objective of hiring should determine your hiring policy and your recruitment plan should be created accordingly.

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