Temp-to-Hire vs. Direct-Hire Calculator

Which hiring path costs less under your actual staffing terms — not a generic industry average.

Staffing contracts vary a lot: agency pricing, conversion fees, and how they change over time are all specific to your agreement. This calculator only ever uses the terms you enter.

1. Temp pricing

How does your staffing agency price the temp worker?

Complete the fields above to see your result.

Worked example

A temp worker is paid $20/hr; the agency marks that up 40%, for a $28/hr bill rate at 40 hours/week. Six weeks into the assignment, the staffing agreement's flat conversion fee is $1,500. The direct-hire role pays $41,600/yr, and an external recruiter would charge 25% of that salary, plus a $500 onboarding cost.

  • Temp-to-hire cost so far$8,220 (6 weeks × $1,120/week billing, plus the $1,500 conversion fee)
  • Direct-hire cost$10,900 (25% recruiter fee on $41,600, plus $500 onboarding)
  • ResultTemp-to-hire is $2,680 cheaper

These figures are produced directly by the same calculator engine above, not hand-calculated separately.

A tiered, declining conversion fee can make the cheaper option change more than once over the life of the same assignment — see "How the answer changes over time" in your own result above once you enter a tiered schedule.

Methodology

  1. Temp billing accumulates over the assignment: weekly billing (bill rate × hours/week) × elapsed weeks so far.
  2. Conversion fees follow your contract exactly — flat, a percentage of the temp worker's own compensation, or a tiered schedule that can decline with tenure. An unknown schedule is never defaulted or estimated.
  3. Direct-hire recruiting cost is modeled separately — either the flat amount you provide, or a percentage of the direct-hire salary.
  4. Costs common to both permanent-employment paths are excluded from the comparison — this is a decision-relevant comparison of what differs between the two paths, not either option's full lifetime employment cost.
  5. Tiered conversion fees can create more than one favored window: because a schedule's fee can drop at a tenure threshold, the currently-cheaper option can flip back and forth as the assignment continues — this calculator solves for every crossing point, not just the first one.
  6. Unknown contract terms stay unknown — if you don't have your conversion-fee terms yet, the calculator tells you exactly that instead of guessing.

The "financially close" result (within about 10% either side) is a disclosed decision-presentation heuristic, not a claim that 10% is an economically meaningful threshold — it exists to flag when small assumption changes could tip the answer either way.

What this doesn't model

This calculator compares modeled costs under the terms you enter. It does not model candidate quality, probability of turnover, cultural fit, temp-worker overtime, minimum-hours guarantees, termination guarantees, replacement guarantees, or every possible staffing-contract structure. The result is scenario analysis based on your inputs, not a guarantee, and is not legal or financial advice — confirm your actual contract terms with your staffing agency before acting on this result.

Frequently asked questions

What is temp-to-hire?

An arrangement where a worker starts as a staffing-agency temp, with the option (not obligation) to convert them to your direct payroll later — typically for a conversion, buyout, or placement fee paid to the agency.

How is temp-to-hire different from direct hire?

With direct hire, you recruit and employ the person yourself from day one. With temp-to-hire, the agency employs them first, bills you for their time, and charges a separate fee if and when you convert the role to a direct employee.

What is a conversion fee?

The amount a staffing agency charges when you hire one of their temp workers directly — usually to offset the recruiting and placement work they already did. It can be a flat dollar amount, a percentage of the worker's compensation, or a schedule that declines the longer the assignment runs.

Why do I need my staffing agreement?

Agency pricing, conversion-fee structure, and how fees change over time are all specific to your contract — there's no reliable industry-average number that applies to every agreement, so this calculator only uses what you actually enter.

What if I don't know the agency markup?

If you know the bill rate the agency actually invoices, use "I know the agency bill rate" instead — you don't need the underlying wage or markup to run the comparison that way.

Can the cheaper option change over time?

Yes. With a tiered, declining conversion-fee schedule, waiting for the fee to drop at a later tenure threshold can make temp-to-hire cheaper again even after it had temporarily fallen behind direct hire — this calculator finds every crossing point, not just the first.

Why aren't employee salary and benefits included after conversion?

Once someone is a direct employee — whether they arrived by conversion or direct hire — their ongoing salary and benefits are the same cost either way. This tool only compares what actually differs between the two paths to get there.

Does this calculator predict which candidate will perform better?

No. This calculator compares modeled economics, not candidate quality or retention. It has no information about the specific person and doesn't attempt to guess at it.

Still deciding whether you need another person at all? Try the Overtime vs. New Hire Calculator to see when hiring anyone — temp or direct — actually beats paying sustained overtime.