The American economy has been relatively stable in recent years, and many businesses remain interested in contract to hire (CTH) arrangements when looking to fill their staffing needs. With contracts to hire, employers utilize a contractual agreement to try out potential employees without committing fully to standard hiring practices. While contract to hire arrangements can provide advantages to both employers and their prospective hires, there is an abundance of legal considerations for Chicago businesses to be aware of moving forward.

When it comes to contract to hire arrangements, the employer is able to avoid the standard formalities of hiring an employee. This includes everything from avoiding benefits, tax withholding, and even avoiding paying into some of the employee shared taxes. However, with this convenience comes a longer process, as employers now approach contracts to hire as they would any other contract. This means that the employer must have consideration for things like authorizations, applications, or even the duration of the contract period.

Contract to hire arrangements, however, must also take into consideration local law if the employer is based out of Chicago. In Illinois, employers must be aware of the law such as the Illinois Human Rights Act, Illinois Worker Adjustment and Retraining Notification Act, Illinois Workers’ Compensation Act and the Illinois Wage Payment and Collection Act. Employers must also employee and terminate the prospective hires under the same human resource practices as regular employees. Many employers choose to secure legal advice on these matters before entering contract to hire.

One of the main features of contract to hire is that the employer does not have the same financial responsibilities they would when hiring a full-time employee (FTE). Therefore, employers often enter into contractual agreements that use consultants or freelancers instead of regular employees. It is important for Chicago employers to remember that definite contracts between the consultant and employer should be drafted that define the services, fees, and relationship between the two parties. Employers must also be aware of fringe benefits when entering into the arrangement. Generally speaking, contracts to hire do not require employers to provide fringe benefits, however it is important to ensure that all relevant law is taken into consideration when drafting the agreement.

Additionally, when an FTE is needed by an employer in Chicago, they may convert the contract to hire position to an FTE position through the same procedure they used to hire the contractor in the first place. The employer should complete all relevant paperwork and provide the benefits, pay, and other standard situations that follow with regular employment.

When looking to pursue contract hire in Chicago, it is important for employers to seek legal advice. UpCounsel’s network of experienced lawyers can help employers with all aspects related to the contract to hire process. With access to high quality attorneys on demand, UpCounsel is ideal for small businesses to the Fortune 1000. Plus, all profiles of the online attorneys display client ratings and reviews of recent work to give maximum confidence to potential employers.


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