New Employees: Try Before You Buy

The consensus is that the economy is picking up and will continue to do so.  History tells us that small and midsize businesses lead the way in an economic recovery, particularly when it comes to hiring.  So whether your company is “leading the way” or you need to replace a former employee, consider trying before you buy – with employees.

Interviews, background checks, and references are all necessary steps when hiring.  But despite your best efforts, you never know how the employee is going to perform until he is on the job.  The costs of making the wrong hire include lost productivity, irate customers, and disillusioned staff.  Some of these costs and issues could be avoided if you had the opportunity to see the prospect in action before extending an offer for a long-term position.

The idea is quite simple; instead of hiring for a long-term position, you hire the candidate for either project work or on a temporary basis.  The benefits of “trying before you buy” include:

• Seeing the employee in action before making a long-term commitment
• Setting the expectations of your current staff
• Easier to part ways if the fit is not there
• Hedge your bet that an increase in sales will last

Keep in mind that this is concept likely to work in the following situations:

• The candidate is not currently employed (employed applicants are unlikely to want to leave a permanent job for a temporary one).
• There is not a lot of training involved for the position.  If the position requires more training, you should strongly consider hiring someone on a long-term basis.
• Non-managerial positions – although a project-based manager could be a good fit in certain situations.

Try before you buy works both ways.  Believe it or not, some candidates (usually the better ones) will like the possibility of trying your company out before making a commitment.  There are some candidates that have had jobs where there was not a good cultural fit between the employee and the company and the candidate will not want to go through that again.

If you are considering a “try before you buy” option, there are some important things you need to consider:

• Be upfront
• Don’t assume that because you are hiring someone without a permanent commitment that he or she is an independent contractor for tax purposes.  Proper tax classification has less to do with permanent vs. temporary as it does with how much control the company has over the worker.
• As always, give the worker what he/she needs to get the job done.  That is the only way you are going to see what the candidate is capable of accomplishing.
• Set expectations and goals so both you and the candidate have a basis to make future employment decisions.

You have two choices if you feel that the "temp-to-hire" concept is right for your company.  You can either find the candidates on your own (see How to Find Employees) or you could use a recruitment agency.

Using a Recruitment Agency
A staffing services provider should be extremely accustomed to the “try before you buy” or “rent to own” concept.  In their lingo, staffing service providers refer to this as temp-to-hire placements.  The concept is fairly straightforward.

In temp-to-hire situations, the worker almost always starts out as an employee of the staffing service provider.  At this juncture, the staffing provider bills your firm for each hour worked at a mutually pre-determined rate.  The provider handles all of the payroll, benefits, and human resources-related processes (paycheck preparation, distribution, tax withholding and filing, benefits administration, etc.) for the duration the worker is considered a temp employee. 

At a later point in time, you may determine that you would like to convert the temp worker to a full-time or direct hire status with your firm.  At that point, you should contact the staffing provider first to ensure a smooth transition.  The staffing provider may have a right to a conversion fee which is usually a percentage of the employee’s annual salary.  The percentage can vary based on the duration the worker was temping on assignment as well as certain market conditions (skill set of employee, for instance).

As with most business transactions, it is best to negotiate the terms of a temp-to-hire scenario at the start of the temp assignment with the agency.  By specifying that the assignment is temp-to-hire in nature, the staffing provider can conduct a more suitable search for the appropriate worker.  Some workers are only interested in temp-to-hire opportunities while others may not want to be considered for a long-term opportunity. 

The more details that can be provided at the onset of the assignment, the higher the likelihood that a placement will be mutually beneficial for all involved.  In addition, be sure to address fees upfront.  Many agencies will reduce the placement fee for a long-term hire if the employee worked on a temporary basis for several weeks prior.

Benefits of using an agency include:

• The agency will often handle the recruiting, interviewing, skills testing, background checking/drug testing aspects of the hiring process.
• The agency will process the payroll, benefits, administration, etc. 
• If the temp doesn’t work out and is eligible for state unemployment benefits (SUTA), they won’t be charged against the client’s “account."
• Ability to get employees quicker.  Further, the agency could arrange for you to try five different people over a 5 week period.

Disadvantages of using an agency