Mario, a full stack developer, started working for a tech company that partnered with the staffing firm CodersLink, and just before the 12 months contract was about to end, the same company wanted to turn the temporary employer-employee relationship into a permanent commitment.
The IT manager, who oversaw the work Mario was doing, was impressed with his performance and wanted him to be part of the in-house team. The IT manager could just keep renewing Mario’s staffing contract, but he was aware that 74 percent of staffing employees are searching for permanent positions—according to the American Staffing Association. Therefore, if Mario is offered a full-time job with permanent benefits in another company, he will most likely accept that offer, thus losing his talent and starting the interviewing process all over again.
So, the IT manager decided to direct-hire Mario and gave him all the benefits of a permanent employee since the company already knew Mario’s commitment and qualifications to do the job.
As we see in the previous case, the staffing-to-direct hire strategy allowed both the employee and the manager to see if the relationship is a good match before committing. Also, companies use the same approach to avoid costly hiring decisions. So, we see a trend where managers are recurring to staffing agencies with the sight set on permanent hiring.
There are things to keep in mind when making the transition from staffing to direct-hire, for the employer, the staffing agency, and the employee.
Before signing a contract, explain to the staffing agency the future of your project. If you suspect that the position you are opening might become permanent, it’s essential to plan ahead.
When your staffing firm understands your intentions, they will be open to negotiating the staffing-to-direct hire fees. They will also create a salary structure that is in line with your permanent employees’ compensation (I’ll explain its importance later on).
Some candidates (26%) join staffing agencies not because they are in search of a permanent position, but because they like the flexibility of a short term commitment. For that reason, employers should let the agency know in advance if the job has the potential to become permanent. By doing so, the staffing firm will be able to match candidates with the potential to become a permanent hire. For example, if you are planning to relocate a remote temp-hire in México to your HQ in the U.S., the candidate must be willing to move and go through the process of getting a work permit.
Making sure your staffing employees are qualified to take on the job is just as important as direct hirees. So, ensure that the staffing agency you partner with has an effective screening process. For example, if your company requires pre-employment tests to be applied to candidates during the hiring process, it should have the staffing firm deploy the same test.
Typically, a staffing agency will apply standardized tests to gain insights into the capabilities and traits of prospective employees to streamline the hiring process, as most hiring managers don’t have the capacity to conscientiously review every candidate’s application. So, in theory, if a staffing firm is doing its job, then you will only be interviewing candidates that meet all the requirements.
Many managers are so focused on getting somebody on the floor; they don’t think about the long-term possibility of hiring that person and forget to discuss conversion fees before the hiring process begins rather than after the fact.
How much does it cost to convert a staffing employee to a permanent one? It depends. Every situation is different. There are a lot of variables: the role of the employee, the seniority, the compensation level, etc. It’s not a standard process.
However, the rule of thumb is the fee is determined based on the candidate salary per hour. Or a staffing firm may make exceptions driven by the volume of business the agency gets from you. Companies that have an ongoing relationship with the agency may have a more substantial negotiating hand than a company that uses an agency on an intermittent basis.
If you decide to transition your staffing employees, evaluate leveling their salary to that of your permanent workers in similar positions.
If you offer a permanent contract to a staffing worker with a lower salary than your permanent employees in the same position, you may cause problems. Employees talk with each other about salary and benefits, so not giving your new hirees the same benefits for the same work will lead to abandonment.
One of the advantages of the staffing-to-direct hire approach is hiring someone you know is a good fit for the company, so the transition should be seamless. Still, there are some things you should keep in mind:
Using the staffing-to-direct hire arrangement can be a win-win situation for both the employee and the employer. But remember, even in this situation, there’s competition for tech talent. So, if you are interested in converting a staffing employee to a permanent employee, move quickly! Because when people are working temporarily, they are open to a full-time position with you or another company.
Talk with your staffing partner and build robust transition procedures before they are even necessary. If you have any questions, you can schedule a call with one of our experts or get a copy of our ebook: The Ultimate Guide to Build and Scale a Tech Team in Mexico