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Temporary to Hire: What is It Worth?

Copyright © 1998, 2000 by David E. Ross

[I originally wrote this in 1998 for the Web magazine Disgruntled, which is now defunct. Having retained the copyright, I now post this on my Web site with some updates noted — as this is — indented in brackets.]

Temporary employment has been discussed quite thoroughly in Disgruntled and elsewhere. I currently work with a contract employee (a term often used for temporary professionals) who prefers the added cash income over fringe benefits. Other temps dislike their status. However, they all know that temporary employment is their permanent situation until they change their career direction.

[My former office-mate got married. With new obligations and responsibilities, he decided that regular (non-temp, non-contract) employment is necessary.]

Temporary-to-hire is quite a different situation. This involves an employee whose immediate goal is regular employment (permanent no longer being a realistic term) but who has to accept temporary employment in order to reach that goal. These workers likely have a reasonable appraisal of their worth as regular employees, but they have a problem evaluating an hourly rate offered in conjunction with a temporary-to-hire position. I know this happened to me when I was unemployed in 1997 and received several approaches from employers and agencies for temporary-to-hire positions.

I took a long look at the differences between a truly temporary position and my goal of regular employment. I had already learned twice in two years that regular employment could end with a layoff; it can be as temporary as an explicitly temporary position. However, I also learned that regular employment includes certain benefits (not just the customary fringe benefits) that are unavailable to temps. In exchange, temps often receive a higher cash wage than regular employees. The question I had to resolve was: How much higher should I be paid during the temp portion of a temporary-to-hire situation?

I finally developed the following analysis, from which I determined the hourly rate that I should receive as a temp while trying to become a regular employee. Note that the percentages below represent my own evaluations of what these factors are worth to me; other individuals might develop different valuations. But the concept should be valid for all.

These points are summarized below for someone who values his or her services as a regular employee at $40,000 per year and who might be hired after serving a six-month temporary position. Note that an annual salary of $40,000 paid over 52 weeks for 40 hours a week is $19.23 per hour.

Salary $40,000 annual rate
Total compensation $48,000 120% of salary, excludes paid leaves

hourly rates

Base rate $25.86 $48,000 / 1856 hours per year
Use of vacation for severance $1.03 4% of base rate
Taxation of total compensation $1.81 28% of added compensation*
One-way commitment $1.29 5% of base rate
Lack of longevity $0.78 0.5% per month for 6 months = 3% of base rate
Total hourly rate $30.78
* Added compensation is 30% of $40,000 / 1856 hours = $6.47

The recruiter at one agency gagged when I told her my hourly temporary rate would be close to 150% of my expected regular salary. I told her that the employer could save some money by merely hiring me, which was my goal.

[Today, it is not unusual for temporary workers in technical positions to receive 150% of what regular employees would earn. Why should an employer be allowed to pay someone at the rate of a regular employee but otherwise treat that person as a temporary employee? That would not only abuse the temporary-to-hire employee but would also undercut actual temporary employees (in pay) and regular employees (in job security).

Most states have "employment at will" laws, allowing an employee to be terminated (not laid off) at any time and without cause. A new employee can be eliminated even more easily than he or she was hired, especially if the employer decides that hiring the employee was a mistake. Thus, the only real reason for temporary-to-hire would indeed be abusive. Either the employer wants to underpay temporary employees, or else the employer wants some way to evade his own employment policies that confer benefits on employees after they achieve some duration of employment.]

No, I never received a firm offer for a temporary-to-hire position. While at least one agency was negotiating on my behalf for such a position, another employer offered me the regular position that I wanted. Perhaps, I asked too much for the temporary portion of temporary-to-hire. But I did not want to be a temporary employee. And the employer who offered me a regular position proved that I was not over-pricing myself; when I indicated how much salary I wanted, that employer offered me more. Of course, I accepted the offer; and I am still working there.

4 January 1998
Updated 13 August 2000

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