Contract placement models: From traditional temp-to-hire to innovative offshore remote contracting, learn how each staffing model operates.
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I founded my company in 2001 and have worked in contract placement ever since. My team has grown significantly over the years (it now numbers 160 people), and my company, Bluebird International, has gained a high profile. We have received numerous requests from our clients since the beginning, necessitating the development of new and unique services.
The following describes the most common service constructions used so far.
Contract Staffing
The first type of contact placement is the traditional contract staffing, where the process is straightforward and involves the following key steps:
- 1Recruitment and candidate selection: A recruiter receives a contract job order and identifies potential candidates through various sourcing methods, such as job boards, social media, or existing databases. For instance, a company might need a software developer for a six-month project to develop a new application.
- 2Client selection and rate negotiation: Once candidates are presented, the client interviews and selects their preferred candidate. The recruiter then negotiates the pay rates with both the client and the candidate to ensure a fair agreement is met. For example, negotiating a $50 per hour rate for the candidate and marking it up to $60 per hour for the client. Using outsourcing models these rates could be lower while the trustworthiness remains the same. Check out our Hungary outsourcing guide.
- 3Employment setup: The selected contractor becomes an employee of the staffing firm or a contract staffing back-office, which handles all employment-related responsibilities such as payroll and benefits. This allows the client to focus solely on project execution without the complexities of employment administration.
Project-Based Staffing
This model assembles specialized teams for specific client projects:
- 1Team assembly: Tailored teams are built to address unique project requirements, often featuring specific skill sets.
- 2Project execution and disassembly: Allows flexibility in staffing according to project timelines and goals. For instance, deploying a team of cybersecurity experts for a three-month security overhaul.
With our IT Staff Augmentation service, it is common for our tech talent to continue working on another project after the first is completed. For the same client or a different one. It simply depends on whether our client needs them for more projects, or not.
Contingent Staffing
Flexible, demand-responsive contract placement model:
- 1On-demand employment: Quickly addresses short-term or fluctuating needs in staffing.
- 2Flexible deployment: Consultants are used on an as-needed basis, suitable for project spikes or temporary expansions, like supplementing a team during a product launch.
Temp-to-Hire Conversions
This model is designed to mitigate hiring risks by allowing a trial period before full employment:
- 1Contract placement: A contractor is initially placed under a contract, typically lasting between 6-12 months, with the intention of converting them to a full-time employee if they meet the company's standards.
- 2Evaluation and conversion: This "try-before-you-buy" setup lets the client assess the contractor's fit with the company culture and performance before committing to a direct hire. If the contractor excels, the recruiter facilitates the conversion and may receive a conversion fee. An example might be a project manager who starts on contract and transitions to a full-time role after successfully leading a critical project.
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Retained Staffing
Another contract placement type, that engages consultants on an extended, indefinite basis:
- 1Continuous support: Provides ongoing expertise without a fixed end date, adapting to evolving client needs.
- 2Deep integration: Consultants develop deep insights into the client’s operations, becoming integral to their long-term strategies. For example, IT strategy consultants may be retained to continuously align IT with business changes.
Payrolling for Non-recruited Candidates
For clients who have already identified a candidate but want to avoid the administrative burden:
- 1Employment outsourcing: The client outsources employment responsibilities like payroll, taxes, and benefits to a staffing firm. This arrangement is particularly useful for short-term needs ranging from 3-12 months.
- 2Simplified process: Since the recruiter is not involved in sourcing the candidate, the workload is reduced, though the hourly profit may also be lower. For example, a company might find a consultant for a 3-month training program and use a staffing firm to handle the payroll.
1099 Independent Contractor to W-2 Employee Conversions
With increasing scrutiny from tax authorities, this model addresses compliance issues:
- 1Compliance and education: Recruiters guide clients on proper classification between independent contractors (1099) and employees (W-2) to avoid penalties from misclassification.
- 2Conversion services: If a client has misclassified workers, the recruiter can assist in converting these individuals to W-2 employees, managed by the staffing firm. An example is converting a freelance IT specialist to a W-2 employee to ensure compliance with labor laws.
Retiree Re-staffing
Leveraging the expertise of retirees without the commitment of permanent employment:
- 1Consultative engagement: Retired professionals are hired on a contract basis, allowing them to contribute their expertise while enjoying the flexibility of contract work.
- 2Benefits to retirees: These positions can offer retirees supplemental income and the opportunity to stay active in their field without the demands of full-time employment.
Internships
Providing practical experience to students or recent graduates:
- 1Contract-based internships: Students work as contractors through a staffing firm, which alleviates the client from managing payroll and employment issues for short-term roles.
- 2Alternative to unpaid internships: This model provides students with real-world experience and financial compensation, making it a more ethical and beneficial alternative to unpaid internships.
Bonus: Offshore Remote Contracting Model
This contract placement model utilizes global talent for remote projects:
- 1Talent access: Companies engage with skilled professionals from around the world or from specific country to work on specific projects remotely.
- 2Cost-effective solutions: Often used to optimize budget allocations by hiring from regions with lower labor costs, enhancing profitability without compromising on expertise. An example might be software development projects outsourced to Eastern Europe (Hungary) or Southeast Asia, benefiting from lower costs and a broad talent pool.
How much does offshore contracting cost?
Hungary | LATAM | India | Poland | |
|---|---|---|---|---|
.NET developer | $50 | $43 | $25 | $55 |
C/C++ developer | $46 | $38 | $22 | $51 |
Javascript developer | $53 | $44 | $23 | $55 |
Mobile developer | $50 | $39 | $24 | $54 |
Java developer | $54 | $49 | $26 | $53 |
PHP developer | $46 | $38 | $20 | $49 |
PL/SQL developer | $43 | $33 | $18 | $45 |
Python developer | $53 | $48 | $22 | $55 |
Full stack developer | $53 | $48 | $25 | $55 |
Trustworthiness | ***** | *** | ** | ***** |
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FAQ Section for "Types of Contract Placements"
Q: What is contract placement?
A: Contract placement involves hiring skilled professionals on a temporary basis to fulfill specific business needs. This model offers flexibility and cost-effectiveness across various industries.
Q: How does temp-to-hire placement work?
A: Temp-to-hire placements allow companies to assess a contractor’s performance and fit within their organization before making a commitment to hire them permanently, reducing the risks associated with direct hiring.
Q: What are the benefits of offshore remote contracting?
A: Offshore remote contracting provides access to a global talent pool, enabling cost savings and the ability to tap into specialized skills not available locally.
Q: Can contract placement help with short-term projects?
A: Yes, contract placement is ideal for short-term projects as it allows companies to hire professionals for a specific duration, ensuring flexibility and efficiency without the long-term overhead of full-time hires.
Q: What should companies consider when choosing a contract placement model?
A: Companies should consider the project scope, budget, duration, and specific skills required when choosing a contract placement model to ensure alignment with their strategic goals.
About the Author
Balazs Refi
Founder of Bluebird International
He became involved in information technology when he was 12 years old. Engineer and economist; founder of Bluebird International; father of four children. His primary interests include software development, IT staff augmentation, IT staffing, and international staffing.
Currently the CEO of Bluebird Global Inc. (Miami, FL).