Temp-to-Hire vs. Direct Hire: Which Is Right for Your Business
Two of the most common ways to hire through an agency are temp-to-hire and direct hire. They suit different situations. This guide explains how each works and how to decide.
How temp-to-hire works
The worker starts on the agency's payroll for a trial period, then converts to your payroll if it's a good fit. It gives you a working audition before a permanent commitment, and the agency carries payroll and compliance during the temporary phase. A conversion fee may apply when the worker moves to your payroll.
How direct hire works
The agency recruits and screens a candidate whom you hire directly as a permanent employee from day one. There's no agency payroll period; the agency is paid a one-time placement fee, often with a replacement guarantee. It's common for permanent, specialized, or leadership roles.
How to choose
The right choice depends on how much certainty you have and how the role is structured:
- Choose temp-to-hire when you want to verify skills, reliability, and fit before committing — especially for high-turnover or safety-sensitive roles.
- Choose direct hire when you're confident about the role and want to attract stronger candidates with a permanent offer from day one.
- Consider the total cost: temp-to-hire bill rates plus a possible conversion fee, versus a direct-hire placement fee.
Key takeaways
- Temp-to-hire is a trial before a permanent commitment.
- Direct hire places a permanent employee from day one.
- Match the model to your certainty about the role and candidate.
Frequently asked questions
Is temp-to-hire cheaper than direct hire?
It depends. Temp-to-hire spreads cost across the bill rate during the trial and may add a conversion fee; direct hire is a one-time placement fee. Which is cheaper overall depends on the trial length, rates, and the role.
Do strong candidates prefer direct hire?
Some do, because it offers a permanent role immediately. That's one reason employers sometimes choose direct hire for competitive or specialized positions.
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