Contract-to-hire developers work as contractors first, with an agreed route to payroll. It pays when interviews can't tell you whether a mid-senior engineer fits. We'd run the trial for about three months, fix the conversion fee and terms in writing before the first invoice, and skip the trial for a senior hire who already has a permanent offer elsewhere.
Is contract-to-hire right for this hire?
It's a way to price fit risk. You pay for the trial in contract rate, and in return you stop guessing.
When the trial is worth paying for
Use it when the fit is genuinely uncertain: a new role, a new team, a remote hire you can't check with references, or a budget for contractors but no open headcount. A few interviews can't show you how someone works inside your codebase. Three months of shipping can.
When to skip it
Second Talent, a hiring vendor, advises against trials for senior leadership roles, systems that require employee status, and candidates who are currently employed. It adds that many senior developers prefer direct hire.
We agree, and we'd go further. A strong senior engineer with a permanent offer in hand will take the offer, and you've lost them by proposing a trial. Hire that person directly. Keep the trial for the candidate you'd otherwise talk yourself into or out of.
The three routes side by side:
| Route | Who employs the engineer | Fit risk | Exit |
|---|---|---|---|
| Direct hire | You, from day one | You carry it after the start | Notice and employment law |
| Contract-to-hire | The engineer contracts, then you employ | Tested before payroll | End the contract at agreed notice |
| Staff augmentation | The vendor, throughout | You see the work first; converting needs a vendor buyout | Vendor terms, buyout fee if you convert |
How long should the trial run?
Three months, with reviews at day 30 and day 60. That's long enough to see a full cycle of planning, shipping and fixing your own mistakes. Arc, a talent platform, suggests one to three months and up to six for a senior engineer.
Beyond six months you're running a permanent employee on a contractor's terms. Arc's advice is to move the person to payroll or an employer of record at that point, and employer of record versus contractor for European developers covers that step.
What does conversion cost?
The industry norm for a buyout is 20-25% of annual salary. HighCircl's is 18% of annual gross, disclosed from the start. The fee can be a flat percentage, a sliding scale that falls to zero over the trial, or built in after a minimum billing period. Take the sliding or built-in version if you can get it.
Before you sign, get three answers in writing:
- Which salary does the percentage apply to?
- Does it slide to zero over the trial?
- What do you owe if you decide not to hire at day 90?
No benchmark for how often trials convert is published, so ask the vendor for its own rate and log your first three trials.
Worked example: one senior backend engineer, three months
Take a European startup trialling one senior backend engineer at EUR 75 an hour, which sits inside HighCircl's EUR 45-105 band, for 160 hours a month. The planned permanent gross salary is EUR 72,000. The hourly rate already includes HighCircl's capped 20% margin.
| Line | Calculation | EUR |
|---|---|---|
| Trial work | 3 x 160 x 75 | 36,000 |
| Conversion fee at 18% | 18% x 72,000 | 12,960 |
| Cash out before first payroll month | Sum | 48,960 |
The EUR 36,000 is the engineer's work, not overhead. You'd have paid it for the same output on any contract. The fee is the price of the option to hire. At the 20-25% norm, the same conversion would cost EUR 14,400-18,000.
Walk away at day 90 and you pay for three months of work and no fee.
What changes legally when a contractor goes on payroll in Europe?
The trial doesn't change the engineer's employment status. In Germany and the Netherlands, what counts is how the work is actually done, not what the contract calls it. So a contractor who works set hours, on your tools, under your manager, may already be your employee, and the switch to payroll won't be a clean start. Keep the trial to deliverables, and let the contractor choose how to work.
Germany shows what's at stake. Its § 14(2) TzBfG, the fixed-term employment act, lets you give a new employee a fixed-term contract without an objective reason for up to two years, with up to three extensions. It doesn't allow that if the same employer employed the person before. Our view: if a trial is later judged to have been employment, you can't use the no-reason fixed-term contract for the conversion, because the trial counts as that earlier employment. Plan a permanent contract.
The Netherlands has its own rules; see Dutch freelance developer rules under the Wet DBA. Whichever country you hire in, ask local counsel before the trial starts, not after.
What to put in the contract before day one
Write these down before the first invoice:
- Success criteria, reviewed at 30, 60 and 90 days.
- The conversion price and the salary band it applies to.
- The start date if you convert.
- Notice on both sides.
- IP ownership for work done during the trial.
Once the engineer is working, you've lost your bargaining position on every one. For the first fortnight of the trial, see onboarding a contract developer in the first 14 days.
What this means for your hiring decision
You're choosing between a trial and a direct hire, and the cost of a wrong permanent hire is yours either way. Decide per candidate. Use a trial where fit is the open question and the candidate has no better offer. Go direct where they do.
If you run trials, set a standing rule: three months, a fee agreed up front, conversion terms signed before the first invoice. Then log the outcome of your first three. After that you'll know your own conversion rate, which no vendor can hand you.
If you're unsure which contract shape suits the wider team, compare the options in software development engagement models, and read what staff augmentation platforms charge in fees before you price a conversion.
Trial a senior engineer through HighCircl
If you want a trial before putting a senior engineer on payroll, you need a conversion price you can budget on day one. HighCircl places senior engineers only, with a buyout fixed in advance, and there's no minimum number of hours to commit to, so you can stop when the trial answers your question. You can see the engineers and the process at senior nearshore engineers.
FAQ
How long is a contract-to-hire period?
Typically one to six months. We'd run about three, with reviews at day 30 and day 60. Past six months, move the person to payroll or an employer of record.
What is a conversion fee?
The charge for moving a contractor onto your payroll. It's usually a percentage of first-year salary: flat, sliding to zero, or built in after a minimum billing period. The industry norm is 20-25%; HighCircl's is 18% of annual gross.
Is contract-to-hire cheaper than direct hire?
Not in cash. You pay a contract rate for the trial and possibly a fee afterwards. What it buys is the option to walk away at day 90 with three months of delivered work and no fee.
Will good senior engineers accept contract-to-hire?
Many won't. Second Talent notes that many senior developers prefer direct hire, and a candidate with a permanent offer will usually take it. Offer a trial to candidates whose fit you can't judge, not to your first choice.
Can a contractor become an employee in Germany or the Netherlands without legal risk?
Only if the trial really was a contract for deliverables. In Germany, a trial later judged to be employment would block a no-reason fixed-term conversion contract under § 14(2) TzBfG. The Netherlands has its own rules. Take local advice before the trial starts.
What is the difference between contract-to-hire, direct hire and staff augmentation?
Direct hire puts the engineer on your payroll from day one, so you carry the fit risk. Contract-to-hire has the engineer contract with you first, then move to payroll if you convert. In staff augmentation the engineer stays on the vendor's contract throughout; converting, if the vendor allows it, means paying a buyout fee.