Contract-to-hire and temp-to-hire let you watch someone work before you commit. Direct hire puts them on your payroll from the first day. Each model fits some roles, and each one changes who is willing to apply. Here is a plain comparison for employers, including why separating service members and drilling National Guard and Reserve members weigh a firm start date and day-one benefits. LockLeed places direct hire only, so read the trade-offs with that in mind.
| Factor | Contract-to-Hire or Temp-to-Hire | Direct Hire (LockLeed) |
|---|---|---|
| Employer at the start | The staffing firm | You, from day one |
| How you pay | An hourly bill rate (worker pay plus the firm's markup) for every hour worked | A one-time recruiting fee and no hourly markup; at LockLeed, a Search Engagement Fee credited in full toward the placement fee |
| Moving to your payroll | A second decision at the end of the term; check the agreement for a conversion fee | Not needed: the person starts as your employee |
| Benefits | The staffing firm's plans, if any, until conversion | Your plans, on your normal eligibility schedule |
| Trial period | Built in: you can end the assignment | Structured interview and references up front, plus the placement guarantee in your agreement |
| Who applies | People available now and open to a term assignment | Also reaches people who are employed or leaving the military on a set date |
| Best for | Uncertain headcount, project work, fast hourly coverage | Permanent roles you already know you need |
Three models, one question: who is the employer?
The labels get used loosely, so start with who employs the worker. In a direct hire, the person joins your payroll on day one: your wages, your policies, and your benefits plans on your normal eligibility schedule. In contract-to-hire, a staffing firm employs the worker and assigns them to you for a set term. The firm runs payroll, withholds taxes and bills you for the hours worked, and at the end of the term you decide whether to hire the person onto your own payroll. Temp-to-hire uses the same structure. In practice the label mostly signals the kind of role: temp-to-hire for hourly, shorter-cycle jobs such as production, warehouse or administrative work, and contract-to-hire for professional and technical roles.
How the money works in each model
With contract-to-hire or temp-to-hire, you pay the staffing firm an hourly bill rate for every hour worked. That rate covers the worker's pay, the employer taxes and insurance the firm carries, and the firm's margin, so the total depends on how long the assignment runs. If you then hire the worker, read the agreement for a conversion fee: some agreements charge one, and some reduce it after a set number of hours. With direct hire there is no hourly markup. You pay the new employee's wages yourself, plus a one-time recruiting fee. Across the industry that fee is usually structured as contingency (paid when a hire is made) or retained search (paid in stages as the search runs), which our guide to contingency vs. retained search explains. The fair comparison is the total cost of getting to a permanent employee, not the first invoice.
What contract-to-hire and temp-to-hire do well
They lower the cost of a wrong guess. You see real work before you make an offer, and if the fit is wrong you end the assignment through the staffing firm. They also help when headcount is not yet approved, when the need may be temporary, or when you need someone working before a full hiring process could finish. For roles where skill is hard to judge in an interview and plenty of qualified people are between jobs, a trial period can be the right tool.
What the trial period costs you in candidates
The trial period has a price that never shows up on an invoice: it shrinks the pool. A person with a steady job, benefits and seniority rarely gives all of that up for an assignment that could end when the term does. People who need certainty about income and health coverage tend to decline, or keep looking while they work, and the strongest of them may accept a permanent offer elsewhere before your conversion date arrives. For a role where the best candidates are employed, or are leaving the military on a set date, a trial period can screen out exactly the people you most want to reach.
Why separating service members weigh a firm start date and day-one benefits
A service member leaving active duty separates on a set date, and military pay and active-duty TRICARE coverage end with it. As of September 2026, some qualify for 180 days of premium-free transitional coverage under the Transitional Assistance Management Program, but only in the separation categories TRICARE lists. Others bridge the gap with the Continued Health Care Benefit Program, which is premium-based. With that clock running, and possibly a move to plan around it, a written offer with a start date and the employer's own benefits is something a person can build a separation plan on. A contract assignment adds a second uncertain date, the conversion decision, after the first one has already passed, with a staffing firm's benefits, if any, until then. Our military separation checklist covers the coverage rules in more detail.
Why drilling Guard and Reserve members weigh it too
National Guard and Reserve members build a civilian career around drill weekends, annual training and orders they do not control. The Uniformed Services Employment and Reemployment Rights Act (USERRA) protects them in all three models. Its regulations say USERRA rights are not diminished because a job is temporary, part-time, probationary or seasonal (20 CFR 1002.41), and that an assigning firm and the worksite employer can both be the employer and share responsibility for compliance (20 CFR 1002.37). Section 1002.41 has one exception: an employer need not reemploy someone whose job was for a brief, nonrecurrent period with no reasonable expectation that it would continue indefinitely or for a significant period, and the employer has to prove that. A permanent role does not fit that description, and it puts one employer in the picture instead of a staffing firm and a worksite to keep informed of upcoming service. USERRA also reaches hiring itself: denying initial employment, or withdrawing an offer, because of a Guard or Reserve obligation is covered (20 CFR 1002.40).
When each model is the right call
Use temp-to-hire for hourly roles with a deep, available labor pool, where speed matters and a short trial tells you most of what you need to know. Use contract-to-hire when the need may be temporary, headcount is uncertain, or you truly cannot judge the skill without seeing the work, and the people you want are open to a term assignment. Use direct hire when the role is permanent, the strongest candidates are employed elsewhere or leaving the service on a set date, and you want commitment on both sides from the first day. Plenty of employers use more than one: a staffing partner for seasonal or surge coverage, and a direct-hire search for the roles they intend to keep.
Where LockLeed stands
LockLeed places direct hire only. We do not run contract, temp or temp-to-hire assignments, and we do not act as anyone's employer of record. Every candidate we introduce is someone you hire onto your own payroll, with your benefits, from a firm start date. A Search Engagement Fee starts the search and is credited in full toward the placement fee, which is invoiced when your candidate accepts the offer. We walk you through every fee before anything is signed, and the placement guarantee is written into your agreement. If a contract or temp arrangement truly fits your role better, we will tell you so. For candidates, LockLeed is always free.