What Is Direct Hire vs. Temp-to-Hire?
Direct hire explained—fees (15–25%), timelines, guarantee periods, and when to choose it vs temp‑to‑hire.
What Is Direct Hire?
You need to fill a position. The recruiter asks: “Direct hire or temp-to-hire?” And you’re not entirely sure what the difference is or why it matters.
Direct hire means the person starts as your permanent employee from day one—full benefits, no trial period, on your payroll immediately. You’re committing to each other before you’ve really worked together.
The alternative (temp-to-hire or contract-to-hire) lets you test the relationship first. So why would anyone skip the trial period?
Because good candidates don’t wait. Per SHRM, the best talent often won’t consider temporary arrangements—they want stability. Direct hire signals you’re serious.
Direct Hire vs Other Options
This is the question everyone asks:
| Hiring Method | How It Works | Best For | Risk Level |
|---|---|---|---|
| Direct hire | Permanent from day one, full benefits | Core roles, competitive talent markets | Medium (no trial) |
| Temp-to-hire | Trial period (3–6 months), then convert | Uncertain fit, budget constraints | Low (try before buying) |
| Temporary | Short-term, no conversion expected | Seasonal, project-based, coverage | Low |
| Contractor | Own taxes, defined deliverables | Specialized projects, flexibility | Medium (misclassification risk) |
The DOL provides guidance on worker classification—getting this wrong can be expensive.
When to Use Direct Hire
Use direct hire when:
- The role is core to operations — You can’t afford turnover
- Knowledge retention matters — Technical or specialized roles where ramp-up time is significant
- Candidates have options — Top talent won’t wait around for a temp contract to maybe convert
- You’re building a team — Not filling a gap, but growing capacity
Skip direct hire when:
- You’re uncertain about long-term need — Temp-to-hire lets you test first
- Budget is tight — Agency fees (15–25% of salary) add up fast
- The role is project-based — Temporary or contract makes more sense
Direct Hire Cost Breakdown
Let’s do the math on a $60,000/year position:
| Cost | Direct Hire | Temp-to-Hire |
|---|---|---|
| Agency fee | $9,000–$15,000 (one-time) | Markup built into hourly rate |
| Benefits | Start day one | Start after conversion |
| Payroll taxes | You pay immediately | Agency pays during trial |
| Time to fill | 4–8 weeks typically | Days to weeks |
Direct hire is more expensive upfront but often cheaper long-term—no markup on hours worked, better retention, and the employee is fully invested from the start.
Direct Hire Recruiter Fees
Most people don’t realize how much recruiters cost:
| Fee Structure | How It Works | When It’s Used |
|---|---|---|
| Contingency | 15–25% of salary, paid only if hired | Most positions |
| Retained | Partial upfront (often 1/3), rest on hire | Executive searches |
| Flat fee | Fixed amount regardless of salary | High-volume, entry-level |
The guarantee period (30–90 days): If the hire doesn’t work out, the agency finds a replacement free or refunds a portion. Always confirm this before signing—it’s your protection against bad fits.
Frequently Asked Questions
How long does direct hire recruiting typically take? Entry to mid-level: 4–8 weeks. Executive searches: 3–6 months. The more specialized the role, the longer it takes.
What happens if a direct hire doesn’t work out? Most employment is at-will—either party can end it. If you’re within the agency’s guarantee period (30–90 days), they’ll find a replacement or refund fees. After that, it’s on you.
Do job seekers pay recruiter fees? Never. Employers pay. If a recruiter asks you for money, that’s a scam.
Is direct hire better than contract-to-hire? Depends on your risk tolerance. Direct hire attracts better candidates and shows commitment. Contract-to-hire lets you test fit first. Neither is universally better.
