Updated November 6, 2020:

Generally, temp contracts, full-time, and temp-to-perm are each different types of employment contracts. Temp contracts are extremely important because they set out the rules for the relationship between an employer and a temporary employee. A proper contract protects the business from liability and from paying unemployment benefits when the employees' contract is complete. 

The three employment contract types are temporary, permanent, and independent contractors. Your employment status gives employees some protection. However, it also protects the employer. Permanent and direct hires are employees who work on a permanent regular basis with a business. 

Permanent employees are on a fixed-term contract. For employees, this means you are contracted by your employer's pay. Full-time permanent employees enjoy health, paid-time-off (PTO), retirement, long-term job security, sick days, unemployment benefits, and paid vacation days. 

During recruiting, staffing agencies help businesses with the hiring process and the employees are paid on a temp contract that usually turns to a permanent employment contract when the company hires the employee full-time as a direct hire. Businesses usually take longer to hire full-time employees because they are more careful when they make a longer-term decision. Candidates who are apprehensive about committing to a long-term work contract. 

What is Temporary Employment?

The term "temp" gives the impression of a low-paid, lower-quality employee provided by staffing agencies. However, temps play an important role in the workforce. More and more companies require the services of flexible temps with quality backgrounds in an array of industries. Temporary employees are employed for a set time or to handle an increasing workload. Often temps are used to cover maternity or paternity leave. 

When a company wants to increase production for a short period of time temps are a good option. Contractors and temps are two terms used interchangeably. However, they are not the same as 1099 employees or independent contractors. 

What is Contract Employment? 

If you have worked with a recruiter recently you have probably heard the term. Companies are using staffing agencies more and more. A lot of companies like working with staffing agencies instead of paying for their own recruiters and internal employees it is often easier and less expensive to hire an outside agency. 

Companies enjoy the benefits of less paperwork, benefits, firing employees, hiring qualified individuals, and other burdensome tasks instead fall on the staffing agency, not the company. Contract-to-hire is another popular employment term. Companies use the term for an employment offer that is contingent on a positive initial trial period. 

It is a combination of direct-hire and temporary employment terms. It is great for companies who want to try the business relationship before committing to long-term employment contracts, giving benefits like paid-time-off and health insurance. Employees also have the ability to show employers their skills while trying out the companies culture. 

The process is usually a quick and fairly easy process. As a client, you need to stay in communication with the recruiting firm. Contractors, unlike temps, who are typically more entry-level or blue-collar workers, are available in almost every industry including executives. As an employee, the recruiting company acts like an umbrella company. You work for the umbrella company through an employment contract. 

3 Distinct Possibilities for Contractual Employees

Converting to permanent employment is easier than you may think. If you do a great job, the employer will be super excited to bring you on as a full-time employee. You'll then make a change from an hourly rate to your permanent contracted rate. It is usually higher and the process is actually pretty streamlined. When you switch, the change is usually made on the Monday following your last day as a contract employee. 

Your employer may extend your contract. Sometimes, the company you work for may not be able to extend your contract. This happens when a company needs you, but cannot afford you. Hiring freezes are also a reason. Companies want these employees to stay, but the members of the company already decided not to hire employees due to difficult economies, and thus, the manager is not allowed to hire anyone full-time. 

Staying on a long-term temp contract is not ideal. You end up with none of the benefits like health, paid time off (PTO), and other benefits that regular employees receive. Plus, on days when the business is closed, you do not receive pay for days you are not at work. This is especially difficult around major holidays. 

So, if you need help with your temp contracts, post your legal need on UpCounsel's marketplace. It is easy and UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.