contract recruitment 101

What Is Contract Recruitment and How Does It Work?

Discover what contract recruitment is, how it works, and how engaging talent in this flexible way can benefit your business.

What Is Contract Recruitment and How Does It Work?

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One of the biggest benefits of hiring remote talent is the versatility that comes with it. Not only can you access a wider pool of specialized talent, but you can also employ different recruitment methods to suit your needs. 

There are generally two types of recruitment for remote talent: permanent and contract. The former involves hiring an employee for your company full-time or part-time on an ongoing basis, while the latter engages a remote worker for a specified time period or project. 

Before hiring a remote worker, you need to know which approach is more suitable for you and the needs of your business. In this article, we’ll examine contract recruitment, its benefits, and how it works.

What Is Contract Recruitment?

Contract recruiting, also referred to as temporary staffing, is the act of recruiting talent under a fixed-term contract. This arrangement means that the worker isn’t hired as a direct employee but instead engaged as an independent contractor who isn’t tied to you as their single employer. 

You typically use contract recruiting if you need to fill roles only for a specified time period or for a specific project. When the project or contract has run its course, you are under no obligation to retain the talent as an employee. 

And because you are hiring the services of an independent contractor rather than hiring an employee, you don’t need to pay employee benefits, such as holiday time, sick leave, or provide insurance and pension plans. When it comes to taxes, the contractor will handle all of those on their own. 

These factors make working with talent on a contract basis attractive for US companies. 

For this setup, the contract recruiting process will be slightly different from hiring full-time workers. You need to specifically indicate that the role is contract only and find suitable candidates that are willing to work under this arrangement. Contract workers usually work remotely and have flexible hours, depending on your agreement. 

The task of contract recruiting is often outsourced to a staffing agency or recruiter. They will find you a candidate that suits your requirements, handle the entire recruitment process, and then have the talent sign a contract with you for a fixed term. In exchange, you pay your contract recruiting agency a client fee, which is usually the worker’s base salary plus the recruiter’s fee. 

Employer and employee shaking hands to confirm their contract agreement

What Are the Benefits of Contract Recruitment vs. Permanent Employment?

Contract recruitment can be beneficial for your organization, depending on your needs and requirements. Here are some advantages of this type of recruitment compared to hiring a permanent employee. 

Flexibility

If you only need talent to fill a particular role for a definitive period of time, then hiring contractual talent is the way to go. You may need additional hands on deck for a particular project, a particularly busy season, or to compensate temporarily for workforce shortages. This flexible approach allows you to customize the relationship according to your objectives and requirements. 

And after the contract ends, you have complete control over how you wish to proceed. You can either keep your contract hire in your company and engage them as a permanent employee. Or you can opt to go your separate ways. Regardless, you have the flexibility to adjust your workforce according to your needs. 

Cost savings

Contract recruiting reduces overheads because you’re not hiring full or part-time employees and taking on all of the responsibilities that involves. This setup will help yield significant cost savings since you don’t have to pay for taxes, holidays, pensions, or other benefits typically granted to permanent employees. 

In addition, if you work with a contract recruiter or staffing agency, your costs may be cut further since they will take care of many of the HR functions for you. You reduce admin work for your organization, which translates to fewer expenses for hiring the talent you need. 

Expertise

Because you will be hiring talent for specific projects, you will naturally search for the particular expertise needed for the role and only contract with them if they have it. You won’t need to worry about investing in training as they would have all the necessary fundamentals to carry out the tasks you require—which chalks up another cost savings element of contract hiring. 

Contract workers also typically work remotely, which means you can hire outside your locality, allowing you to access specialized skills unavailable locally. 

And if you are hiring remotely, you can expand your talent search abroad— further widening your potential candidate pool and making it likely you can partner with workers that charge a fee lower than US-based remote workers. (Hiring on a contract basis allows you to hire from countries where you do not have a legal entity because of the nature of the employment arrangement.) 

Incidentally, if you work with a contract recruiter, they will work to fill your open positions with qualified candidates with the expertise you need. They can do this thanks to their market knowledge and access to diverse pools of candidates.

Reduced risk

Hiring a permanent employee comes with legal requirements that you have to meet. This aspect of the hiring process can be complex and confusing, especially considering all the labor laws you must abide by. The same, however, cannot be said for contract recruitment. 

Contract recruitment exposes you to reduced risks of litigation and HR disputes simply because the contractors are not your employees. By the nature of your working arrangement, they are not entitled to the same legal protections and benefits as full-time permanent employees. (This, of course, only applies if the position genuinely constitutes contract work and you are not knowingly misclassifying someone that should be an employee. For more on this, see our article on employee and independent contractor misclassification.) 

Trial period

Contract recruitment can be a path toward full-time employment for the candidate, depending, of course, on whether your company sees fit to onboard them as permanent employees. The contract period can be your opportunity to test your talent.

During this trial period, you can see what they can do and how they integrate into your organization before committing to hiring them full-time. 

Candidate applying to a job is smiling at the employer who is holding his resume

How Does Contract Recruitment Work?

Just like hiring employees, you will have a better chance of success if you use effective hiring practices. Before hiring someone for contract work, you must be well aware of the process to ensure a smooth relationship. We advise following the steps below. 

1. Need identification

The contract recruitment process starts with you pinpointing a need in your organization. This involves identifying which positions would best be suited for contract workers. 

2. Job description creation

Once you’ve identified what positions you need to fill, it’s time to create a job description. This should be very specific about the nature of the role and clearly state that you are only looking to hire on a contractual basis. 

3. Candidate sourcing

Next is sourcing your talented candidates. For this, you can choose to DIY it or work with a professional contract recruitment agency. The latter will make the process much easier because you won’t have to worry about most of the hiring process: sourcing, interviewing, and recruiting talent. An experienced recruiter will handle everything for you and recommend top-quality candidates for the role—usually from their pre-screened database of candidates. 

If you choose to source qualified candidates yourself, you will need to advertise the job opening on channels like job boards and social media. 

4. Candidate screening

If you choose to engage in the contract recruitment process without the help of an agency, then you will need to undertake candidate screening. This step is where you review all the candidates' digital resumes and applications you receive and determine which applicants are suitable for the role you’re looking to fill. 

Your screening criteria can be based on skills, experience, and suitability for the role, among others. Ultimately, find the person who meets all your requirements and who you see as the most capable of satisfying the demands of the position. After this process, you should have a short list of candidates you would like to talk to about the role. 

5. Candidate interviews

Next, schedule interviews with your shortlist of candidates. This is where you can learn more about them and ask questions about their professional experience, skills, and capabilities. Use this opportunity to assess how well they can integrate into your company. Look for someone who is a great fit for both the role and your company culture. 

6. Contract negotiation

After the interview process, you should already have a pretty good idea of who you want to hire for the position. Now, it’s time to negotiate with them and discuss contract terms. Ensure you cover their working hours, salary, and any benefits you are willing to offer them (of course, as we stated earlier, you don’t have to offer benefits to contract workers, but you may want to in order to attract top talent). 

7. Onboarding

When you and your contract worker have agreed on the contract terms, you can proceed to signing the contract. Then, you should kickstart the onboarding process

This is where you provide your contract worker with more information about the role and their daily tasks. You should also use this opportunity to set expectations, introduce them to other team members, and make them feel welcome. 

8. Performance monitoring

The process doesn’t end when your contract worker starts going about their role. You need to monitor their performance and provide feedback and support where necessary. 

This procedure will ensure that they fulfill their tasks effectively and can help you build a good working relationship that will benefit you if you decide to take them in as full-time permanent employees in the long run. 

9. Contract termination

Finally, when the contract period ends, you can take some time to assess and evaluate the performance of your contract worker. At this point, you must decide whether to extend the contract as an independent contractor, onboard them as a permanent employee, or terminate the arrangement and go your separate ways. 

Final Thoughts

Contract recruiting is a very flexible way to engage talent without the commitment of hiring a permanent full-time employee. This type of arrangement might be just what your company needs to cut costs while still working with highly skilled talent. 

If you are looking to hire a contract worker, Near has proven sourcing, vetting, and hiring processes that can get you the talent you need in under 21 days. We specialize in sourcing the top talent in Latin America to work remotely for US companies.

Start interviewing candidates from Latin America for free today. You don’t pay a fee until you make a hire.

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