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In today’s evolving job market, contract employment is becoming an increasingly popular work arrangement.
In fact, nearly one-third of the entire workforce is involved in contract work management—whether as an employer or as an independent contractor. That number is only expected to increase over the next decade.
Why the shift? There's a myriad of reasons, and they range from diminished job security to the desire for a flexible work arrangement. In fact, a 2025 survey from MyPerfectResume found that 81% of US workers are worried about losing their jobs in 2025.
Suddenly, we're not so sure that our coveted full-time roles are all that secure (pardon the rhyme.)
Enter the contract to hire employee. This arrangement describes an employment scenario where both the employee and employer are "trying each other out" before potentially entering into a full-time, salaried partnership.
Whether you’re an employer looking to hire contract workers or a professional considering contract-based opportunities, you likely have questions about how it all works.
Below, we’ll answer the most pertinent questions about contract and contract to hire employees, dispel some of the myths and misconceptions, and share everything you might want to know before entering into a contract to hire relationship.
A contract employee is a worker hired for a specific period or project rather than as a permanent employee. Contract employees go by many names, including:
While some of these names are not all entirely accurate, the main difference between a contract worker and a traditional employee is important, so pay attention!
Unlike a full-time employee, contract employees typically operate under a contract that outlines the scope of work, duration, and compensation. Contract workers do not have a long-term commitment to the employer and often work with multiple clients at once.
In most cases, contract employees do not receive traditional employer-provided benefits such as health insurance, retirement plans, or paid leave.
Since they are not classified as full-time employees, they are usually responsible for securing their own health coverage, retirement savings, and other benefits. However, some staffing agencies or large contracting firms may offer limited benefits to contractors under their umbrella.
There are several reasons why companies opt for contract employees over full-time hires. Here are a few reasons:
It seems that everybody likes to look down on contract employees. They're not "real employees", they aren't getting the same benefits, and they lack the job security of full-time employees.
Myth: Contractors make less money than full-time employees.
Reality: While contractors don’t receive benefits, they often earn higher pay rates and can take on multiple clients.
Myth: Contracting is only for tech professionals.
Reality: Many industries, including healthcare, marketing, and finance, hire contractors.
Myth: Contractors have no job stability.
Reality: While contracts are temporary, skilled contractors can secure ongoing work with multiple clients.
Myth: Employers don’t have to worry about legal issues with contractors.
Reality: Misclassifying workers can result in fines and penalties for businesses.
Myth: Contractors don’t need to worry about taxes.
Reality: Contractors must handle their own taxes, including estimated quarterly payments
Contract-to-hire is an employment arrangement where an individual is initially hired on a contract basis, with the possibility of transitioning to a full-time role after a specified period.
This approach allows employers to evaluate a worker’s performance before making a permanent commitment while providing employees with an opportunity to assess the company and role. This approach also allows an employee to familiarize themselves with the organization.
There are many misconceptions about a contract-to-hire employment arrangement, especially when it comes to how it serves the employee.
However, many of these misconceptions exist on the assumption that employment is a one-way street. In these scenarios, full-time employment is the only "winning" solution. For folks who believe that getting a job—any job— is the finish line, look at all the full-time employees who hate their jobs. Seriously, head over to Reddit.
Here are more misconceptions about contract-to-hire arrangements:
Whether contract-to-hire is the right choice for your business depends on your unique needs, but many companies find it to be a flexible, cost-effective solution.
Here’s why:
Many companies face budgeting constraints that make direct hiring challenging, while funds for contract services are more accessible. Contract-to-hire employees allow you to bring in talent quickly without navigating the complexities of full-time hiring.
When it comes to "make the case" to hire an employee, there is already a compelling case for their place on the team. It's a win-win!
Working with a staffing partner means the time-consuming tasks—like sourcing, screening, and interviewing—are handled for you. Your HR team can focus on other priorities, and you get qualified candidates faster.
Hiring the wrong employee is costly. In fact, a "bad hire" can cost an organization around 30 percent of the employee's annual salary.
With contract-to-hire, you can evaluate a candidate’s skills, cultural fit, and work ethic before making a long-term commitment. If it’s not the right match, there’s no lengthy offboarding process—just a clean break.
Contract-to-hire employees typically don’t receive benefits, reducing overhead costs. Plus, since they’re only paid for hours worked, you have greater flexibility if a project wraps up early or workload fluctuates. This approach lets you maintain productivity while planning for future full-time hires.
For businesses looking to scale efficiently, contract-to-hire provides the perfect balance between flexibility and long-term growth. Thinking of hiring this way?
HireArt can help you find the right talent—fast.
Contract-to-hire employment can be a strategic solution for both businesses and job seekers. Understanding its nuances, along with potential advantages and challenges, helps both parties make informed decisions about their career paths and hiring practices.
