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    Recruiting strategies | 6 min read

    The pros and cons of temp-to-hire agencies

    Do you find yourself spending too much time on the hiring process? Perhaps you're looking into a temp-to-hire agency, which may help in reducing the time and cost of hiring. Discover the meaning of temp-to-hire agencies, their pros and cons, and whether this is the best solution for your organization. 

    What is temp-to-hire?

    Temp-to-hire means a job opportunity that is initially temporary but is used to help the employer determine if the temporary worker can eventually be a long-term fit with the company. This is in contrast to a temporary job with a predetermined start and end date or a direct hire which is a permanent position. 

    Temp-to-hire agencies help in the initial recruiting process, from advertising for the position on job boards to conducting interviews, accepting applicants, and running background checks. With agency assistance, the hiring manager can spend more time on other strategic initiatives rather than devoting most of their time to fulfilling hiring needs. 

    Which industries rely on temp-to-hire? 

    16 million temporary employees are hired every year across different industries. 64% work these positions to fill gaps between jobs. Temp-to-hire employees can be found in nearly all occupations but are mainly found in multinational corporations (MNCs), especially in the retail and food and beverage (F&B) industries. 

    Retailers tend to look into temp-to-hire workers due to fluctuating seasonal demands. During peak periods, retail businesses often experience a greater strain on their workforce due to an influx of customers. In times like these, businesses might feel pressured to bring on more help. Unlike true temporary workers, temp-to-hire employees offer businesses the opportunity to build up their workforce beyond just the busy season, which can set them up to withstand the inevitable turnover in these industries. 

    Similarly, the F&B industry gravitates towards temp-to-hire employees due to seasonal peaks or last-minute absences. These employees help to keep their businesses running smoothly even with a manpower crunch or increased demands. 

    Other industries include construction, hospitality (due to fluctuating staffing needs), and even medical (clinics, nursing homes, and assisted living facilities). 

    The pros of temp-to-hire agencies 

    Many organizations have introduced temp-to-hire to their hiring strategy and have seen great success. If you're still evaluating if you should adopt this strategy too, here are some factors you can consider. 

    Speed and efficiency 

    Having an agency onboard optimizes the hiring process because your hiring team can offload a lot of the sourcing and screening. You can focus on hiring quality candidates by interviewing those shortlisted by the agency. This also allows you more time for day-to-day operational work and other critical tasks. 

    Reduced risk

    Temp-to-hire agencies assume the legal responsibilities of being an employer, from taxes to health insurance coverage and even payroll. They can also help you to avoid unnecessary paperwork. Imagine spending time to enroll these employees for health insurance and other programs and having to terminate the employee or have them quit a few weeks in. 

    With temp-to-hire employees, you can include them in your systems only when you're confident of the hire. Your hiring team can then focus on only managing the permanent employees. 

    Increased flexibility

    When an employee is temp-to-hire, you have the luxury of taking time to determine if they're the right fit for the role and company. It acts as a trial period. If it works out, they can be converted to a permanent role. But if it doesn't, the relationship can be easily terminated without the hassle of sorting out employee paperwork, payroll, and benefits. 

    Ensuring that they're a good fit reduces hiring costs and also increases retention. Furthermore, the first 90 days of employment are crucial for every new hire, as it allows them to learn, meet their coworkers, and become familiar with your organization. Ensuring that your employee is a good fit with the team during their first 90 days will be effective in reducing turnovers. 

    Increased motivation

    With the knowledge that they could be converted to a permanent employee, these temp-to-hire employees may be more motivated to prove their capabilities. This could be in the form of contributing more to the team, speaking out, and raising new ideas to earn themselves a permanent place. 

    Boost employee morale 

    Experiencing an especially hectic season? Having additional temp-to-hire employees to lighten the load will be greatly appreciated by the team and will reduce employee burnout. This will create a less-stressed and more confident environment. If temp-to-hire employees prove that they can contribute effectively to the team, they can be offered a chance for conversion. 

    Furthermore, these employees will also have the chance to build relationships with the permanent employees they’re working with. This saves time in retraining and building new connections as opposed to re-hiring a completely new person for the job should you be using temporary employees. 

    The cons of temp-to-hire employees

    Temp-to-hire isn't the right strategy for everyone. Rather than continuously testing out employees to varying degrees of success, some businesses employ an always-on hiring strategy instead, meaning when they always hire qualified applicants whether or not they have a position open. This helps combat turnover concerns and enables you to build up your bench of high-quality workers. Some other concerns to consider with temp-to-hire agencies are: 

    Higher costs 

    Should you find a worker you love, there may be a buyout fee involved when hiring through an agency, and this can be as high as 20 to 25% of the worker’s salary. Additionally, the base salary for a temp-to-hire worker may also be higher since they’re not able to enjoy the full benefits of being a permanent staff member.

    Less loyalty

    There is a possibility that temp-to-hire employees are less loyal to the company. Since the job is not guaranteed, nor is it always aligned with their passions, these employees might not be as invested as their permanent peers. They may not see the point in building relationships with coworkers or going above and beyond basic responsibilities. 

    Lack of teamwork

    Full-time staff may hesitate to train a temp-to-hire worker knowing they could be gone soon. Temp-to-hire workers might not be able to fully bond with their teammates, as they could be brought on to help with a seasonal project and are thus only working closely with a small portion of the team.

    Legal risks

    Like every other employee, managing temp-to-hire employees comes with legal risks. With laws on worker statuses and eligibility, contracts have to be well drafted. Some legal risks include having illegal workers who may not be eligible to work in your country, or others with poor work records who may pose a risk of danger to your organization (be it due to theft or unsafe work). 

    In the event of an audit, you need to ensure the agency remits the necessary paperwork to the appropriate government agencies. This is particularly important when it comes to health and safety, where temp-to-hire agencies must follow all labor regulations to prevent them from implicating your organization's reputation if found otherwise. 

    Temp-to-hire workers should also still be treated with respect and without discrimination to prevent lawsuits. You should always investigate an agency’s treatment of employees before signing on to work with them. 

    Reputation issues 

    When you manage hiring internally, you control all steps of the recruitment process. However, by depending on the staffing agency, you're relying on their professionalism and recruiting methods. Should an applicant have an unpleasant recruitment experience with the agency, it may reflect poorly on the reputation of your business.

    Culture gap

    The agency is unlikely to have a full understanding of your company's culture. This means that shortlisted applicants may possess the right skills and experiences, but may not be the right fit for the rest of your team in other aspects. The good news is that this can be resolved easily, by implementing an internal screening process in addition to the agency's recruitment procedure. 

    Limited applicant pool 

    With perceived lower job security and reduced employment benefits (paid vacation time, health insurance, etc.), applicants are less incentivized to apply for temp-to-hire openings. As a result, your agency may be working with a more limited candidate pool, which may affect the quality of your candidates. 

    Should you go ahead with a temp-to-hire agency? 

    With the rise of temp-to-hire strategies across many industries, this may be a tempting solution to your hiring woes. Evaluate the pros and cons, as well as the current structure of your company's recruitment process, to determine if it's a right fit for your organization's hiring strategy. 

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    Recruiting strategies


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