What is a direct hire?

Direct hire means you hire an employee directly rather than working with a third party to supply staff or hiring on a contract basis. Direct hires are your permanent employees—you manage all employment tasks, such as payroll taxes, and handle compensation and benefits yourself. You can use a recruitment agency to help you find candidates for direct hire positions, but you employ them through your company.

Benefits of direct hires

Direct hiring is a traditional method of acquiring permanent, full-time employees. Some of the benefits of using this method include:

• Consistency: When you have a long-term employee on staff, you can get consistent results from someone who understands your expectations and has a solid working relationship with other employees.
• Recruitment: You could attract a deeper talent pool when you use the direct hiring method. Many employees want permanent positions with consistent paychecks and robust benefits packages.
• Team collaboration: Having a permanent team member makes it easier for employees to work together. They develop bonds and fall into a groove when they know what to expect from one another. This team collaboration can improve productivity and create a positive work environment.
• Greater sense of commitment: Employees who work directly for your organization are often more committed to your company values and goals. Temporary employees might not put as much effort into the role since they won’t be working for your company very long.
• More control: Employees who work for you directly have to adhere to your company standards and expectations. You often have more control over their working hours, duties and other aspects of their performance. Direct hires report to you or your management team, so you can build a rapport with them and have a better idea of what’s happening with your staff.

Drawbacks of direct hires

Direct hires aren’t the ideal match for every situation, and the process can come with some headaches. Drawbacks to consider include:

• Expenses: Hiring directly comes with some potentially high expenses. Recruiting costs, including advertising and salary for the hours to find employees, can add up quickly. You also have to pay for benefits and the employer portion of payroll taxes. In some cases, it’s cost-effective to use a direct hire, but you might save money with temp employees if you have a lower workload.
• Finding candidates: It can be difficult to find candidates to meet your ideal criteria. If an employee leaves, you have to start the recruiting process over again. Third parties often have plenty of candidates ready, which could be easier on you and save time.
• Extended hiring and onboarding process:Finding and hiring employees directly can take longer to fill a position and get the new employee going. Temp agencies can often send you candidates who are ready to work, and contractors and freelancers can also jump in quickly. When you hire directly, you have to complete the new-hire paperwork, train the employee and go through the onboarding process.
• Potential for a poor hire: It’s easy to replace a temp or contract employee if they aren’t a good fit or don’t produce quality work. It can be more difficult and expensive to let a direct hire go if they don’t fit your needs. Some companies prefer temp-to-hire employment as a way to test out new workers before offering them a permanent position.

When to make a direct hire

Your employment needs often dictate if a direct hire is ideal or if you might benefit from a temporary employee. Situations where a direct hire might work well include:

• Management positions: Managers and executives are typically direct hires. You want your management team to stick around to create consistency. These roles are crucial to your company’s success, so having permanent staff members can give you more control over your leadership.
• Specialized positions: You might also prefer to hire directly for specialized, highly skilled, hard-to-fill or critical roles within your organization. When you find someone who’s a good fit for those roles, you want to keep them as long as possible.
• Consistent workload: When you hire a permanent salaried employee, you pay them for full-time work whether or not you have the workload to keep them busy. If you have an inconsistent volume of work or a large but temporary project, you might consider using contractors, freelancers or temp workers to handle the short-term workload. If you have fluctuating needs, you can bring in contractors for as many hours as you need each week and only pay for the time worked.

You can choose a direct hire for any position. Some organizations prefer to keep all employment in-house instead of dealing with temp agencies or contractors. Explore all of your hiring options and choose the one that seems to match your needs the best.

5 steps in the direct hire process

When you decide to go with a direct hire, you’ll need to go through a series of hiring process steps to onboard someone for the role. This brief overview gives you an idea of what to do.

1. Evaluate your needs

If you’re creating a new position, you need a clear idea of the role, its responsibilities and your expectations for the person who fills the job. Create a job description if you don’t already have one to identify the hiring criteria. Many direct hires are full-time, salaried employees, but you can also hire part-time and hourly workers based on your needs and preferences. Make sure the scope of the job justifies hiring a permanent employee.

2. Develop a compensation package

If you currently have employees in the same or similar roles, you may already have a salary range in mind. If not, look at salaries for other positions within your company and consider how the job qualifications and duties compare to help you set the range. It’s also important to do salary research in your area, in similar industries and with your competitors to establish a fair and competitive compensation range for the position.

If you already have permanent employees, you likely have benefits in place.If this is your first direct hire, it’s a good time to establish benefits. You may also decide to offer special perks if you’re hiring for a hard-to-fill position or the role justifies doing so. For instance, you might provide a company vehicle if you’re hiring a salesperson who’ll travel frequently, or you could furnish a company-issued cell phone for employees who spend a lot of time working out of the office. Offering a remote working arrangement is another attractive benefit that might help you find the right talent for your opening.

3. Source talent

Once you clarify your needs and what you can offer, it’s time to post your job opening and start recruiting. You can handle the candidate sourcing yourself or use a recruiting agency to help you find applicants who match your criteria. These agencies can oversee as much or as little of the recruitment process as you want them to.

If you source candidates yourself, consider using a wide range of methods to get a diverse candidate pool. Some options include:

• Traditional job posting sites
• Your careers page on your website
• Social media posts
• Paid online advertising
• Job fairs
• Campus recruiting opportunities
• Professional organizations
• Reaching out to your professional network
• Employee referrals
• Hiring open houses
• Online professional groups

4. Screen and interview candidates

As the resumes come in, you need to screen them to find the ones that best match your criteria. These candidates might go through a phone screening process to narrow down the pool even more. Those top picks are the people you invite for a formal interview. Decide if you want to do a one-on-one interview or a panel interview to have multiple current employees help with the selection process.

5. Hire and onboard your new employee

You’re now ready to present an offer to your top candidate. Be prepared to negotiate on the salary and benefits. If the first offer isn’t accepted, you can offer the position to another candidate or start another round of interviews with new applicants.

After a candidate accepts the offer, you’ll need to complete the new hire paperwork and start the onboarding process. This often involves a training period, so the employee can learn about your company, its standard operating procedures and the specific skills needed for the position. It also gives your direct hire the chance to assimilate into the workplace and get to know their new colleagues.