Quick answer: temp-to-perm hiring (also called temp-to-hire) lets you bring a worker on through a staffing agency, on the agency’s payroll, evaluate them on the actual job for 90 days to six months, and convert them to your permanent employee only if they prove out. During the trial you pay an hourly bill rate (the worker’s wage plus a markup of roughly 40% to 60%); when you convert, you pay a conversion fee, commonly 10% to 25% of first-year salary, that shrinks the longer the worker has been on assignment and is often waived entirely after about 1,000 to 1,500 hours. The reason employers accept those costs is simple math: a permanent hire who does not work out costs far more, often 40% to 200% of the role’s salary once lost output, cover labour and re-recruiting are counted. This guide shows exactly how the model works, breaks the costs down in dollars, and proves out the savings with worked examples.

Hiring is the most expensive decision an operations leader makes on incomplete information. You meet someone for an hour, check references, and commit to a permanent role, salary, benefits and all the legal obligations that come with it, only to find out weeks later whether they can actually do the job and will stick with it. Temp-to-perm flips the order: you watch the work first and commit second. With Canada still carrying 506,700 job vacancies in the first quarter of 2026 and every wrong hire running into five figures, more employers are using it to take the guesswork, and most of the risk, out of permanent hiring.

But temp-to-perm is often explained in vague, high-level terms, which is exactly why so many employers under-use it or negotiate it badly. This guide goes the other way. It lays out the mechanics, puts real dollar figures on the bill rate, the conversion fee and the cost of getting a permanent hire wrong, and gives you the specific terms to negotiate so the model works in your favour.

What’s in This Guide

• What Is Temp-to-Perm Hiring, Really?
• How Does Temp-to-Perm Work, Step by Step?
• What Does Temp-to-Perm Cost? The Numbers
• The Math: What Temp-to-Perm Actually Saves You
• Temp-to-Perm vs a Probationary Period: What Is the Difference?
• When Does Temp-to-Perm Make Sense?
• How to Negotiate Temp-to-Perm Terms in Your Favour
• Temp-to-Perm vs Temp vs Direct Hire
• The Bottom Line

What Is Temp-to-Perm Hiring, Really?

The agency is the employer of record until you convert. In a temp-to-perm arrangement, a staffing agency recruits and screens a worker and places them with you on the agency’s payroll. During the trial the agency is the legal employer: it pays wages, handles CPP, EI, income-tax and vacation, carries workers-compensation coverage and employer liability, and manages compliance, while the worker does your job, on your site, under your direction. You are buying labour and flexibility, not taking on an employee, until the day you decide to convert. That single fact is what makes the model different from everything else, and it is where most of the risk transfer lives.

It changes your legal exposure, not just your admin. Because the worker is the agency’s employee during the trial, the employment-standards obligations that attach to your permanent staff, notice, and in Ontario the termination and severance rules that begin to bite after three months of employment, sit with the agency, not with you, until conversion. You are evaluating the person while someone else carries the employer risk. When you convert, you take on those obligations knowingly, for a worker you have already watched perform. That is a fundamentally different risk profile from hiring a stranger onto your own payroll on day one and hoping.

How Does Temp-to-Perm Work, Step by Step?

Five steps from brief to permanent hire. The process is straightforward, and a good agency runs most of it for you. The detail that matters is in step one and step five, where the terms are set and the decision is made:

• 1. Brief the agency and set the terms. Define the role, the must-have skills, the shift and the start date, and agree the evaluation period, the conversion-fee schedule and any replacement guarantee up front. Get the fee-decline schedule in writing now; renegotiating it after you are attached to a great worker is a losing position.
• 2. The agency sources, screens and verifies. It draws from a pre-screened pool, verifies identity, eligibility, credentials and references, and presents a shortlist. Only job-ready candidates reach your floor, which is where a verification-led agency earns its markup.
• 3. The worker starts on the agency’s payroll. They do the actual job under your direction while the agency handles pay, deductions, remittances, workers-compensation and compliance. Your administrative and legal load stays light.
• 4. You evaluate on real work. Over the agreed window you judge output, reliability, safety and fit against the standard the role actually requires, on your equipment and your shifts, not against a 45-minute interview impression.
• 5. You decide. If it works, you convert the worker to your permanent payroll, paying any conversion fee due at that point on the schedule. If it does not, the assignment ends cleanly at the end of the term, with no termination process, and the agency presents a replacement.

What Does Temp-to-Perm Cost? The Numbers

First, the bill rate during the trial. While the worker is on the agency’s payroll you pay an hourly bill rate: their wage plus a markup that covers statutory costs, workers-compensation, insurance, payroll administration and the agency’s margin. In Canada that markup typically runs 40% to 60% over the wage, so a worker paid $23 an hour is billed at roughly $32 to $37. It looks like a premium until you remember what is inside it: you are offloading payroll, remittances, coverage and employer risk, and paying only for hours actually worked. Here is how a representative bill rate breaks down:

Illustrative only; markups vary by role, volume and region. Ask any agency to itemise its markup so you can see what you are paying for.

Then, the conversion fee, which is designed to shrink. When you move the worker to your own payroll, most agencies charge a conversion fee expressed as a percentage of the worker’s first-year salary. The important and often-missed detail is that a well-structured fee declines as the worker logs hours through the agency, because the agency has already earned margin on those hours, and it usually reaches zero after a set threshold. Negotiate this schedule up front. On a $48,000 role, an illustrative schedule looks like this:

Illustrative schedule; actual thresholds and percentages vary by contract. The pattern, a fee that falls with tenure and is waived after roughly 1,000 to 1,500 hours, is common across Canadian agencies.

The trap to avoid. Some contracts keep the conversion fee flat, or set a very high threshold before it waives. That is the clause to catch before you sign, because it quietly penalises you for doing exactly what temp-to-perm is for, converting a proven worker. A declining, clearly-scheduled fee aligns the agency’s interest with yours: you both win when a good worker becomes permanent.

The Math: What Temp-to-Perm Actually Saves You

Judge the cost against the alternative, not against zero. Temp-to-perm looks more expensive than posting a job yourself, right up until a direct hire does not work out. The U.S. Department of Labor puts a bad hire at up to 30% of first-year earnings, and Gallup at one-half to two times salary, while SHRM benchmarks recruiting alone near US$4,700 and 44 days to fill. Put those into one worked example, a $48,000 role where a direct hire is let go at six weeks, and the comparison is stark:

Illustrative figures for one $48,000 role, drawn from SHRM, Gallup and Statistics Canada benchmarks; your numbers depend on wage, role and operation. See our full breakdown in the cost of a bad hire analysis.

Read the bottom row twice. In this example temp-to-perm costs about $7,200 all-in for a worker you keep, against roughly $26,000 lost on a direct hire who does not work out, a swing of nearly $19,000 on a single seat. And that is the pessimistic case for temp-to-perm, where you convert and pay the fee. If the trial reveals a poor fit, you release the worker for the cost of the hours worked and none of the bad-hire losses at all. The markup and the fee are not really costs; they are the price of turning a five-figure gamble into a decision you make with evidence in hand. Multiply the swing by the number of hires you make in a year, and the case makes itself.

Temp-to-Perm vs a Probationary Period: What Is the Difference?

They both trial a worker, but the risk sits in very different places. On a probationary period, the worker is your employee from day one. You run their payroll, you carry the employer obligations, and letting them go is rarely as clean or as cost-free as employers assume, because in Ontario employment-standards notice can apply once someone passes three months of employment. You are trialling the person, but you already own the risk of the hire, the payroll, and the exit.

Temp-to-perm keeps that risk with the agency until you convert. During a temp-to-perm trial the worker is the agency’s employee, not yours. The agency runs payroll, remits deductions, carries workers-compensation coverage and manages compliance, and if the fit is wrong the assignment simply ends without you triggering a termination, owing severance or facing an unemployment claim. You take on the employer obligations only at conversion, the point at which you already know the person can do the job. Probation asks you to hire first and hope; temp-to-perm lets you evaluate first and hire second. For any role where you are not yet certain, that difference is the whole point, and it is why many Canadian employers now prefer a temp-to-perm trial to a probationary hire for hard-to-assess positions.

When Does Temp-to-Perm Make Sense?

It shines in a few clear situations. Temp-to-perm is the right call more often than most employers realise, and especially when:

• The role is hard to assess on paper. For hands-on light-industrial, warehouse, production and support roles, reliability, pace and work ethic matter more than a resume, and those only show up on the job. Temp-to-perm lets you see them before you commit.
• Demand is uncertain. If you are ramping a new line, testing a shift pattern or unsure whether a role is truly permanent, temp-to-perm gives you a permanent option without locking in headcount before you are sure the work is there to stay.
• The cost of a wrong hire is high. In shift-critical or safety-sensitive roles, a bad permanent hire is expensive and disruptive, and can put others at risk. Trialling the fit first is cheap insurance against an outcome that is anything but cheap.
• You are hiring at volume. When you need many workers, temp-to-perm lets you convert your strongest performers and release the rest cleanly, so you build a permanent team from proven people instead of gambling on every offer. This is how most warehouse and manufacturing employers staff a ramp.

When it is less ideal. Temp-to-perm is a weaker fit for the most senior or specialised permanent roles, where the pool is small and candidates expect a direct permanent offer, and for cases where you are already highly confident and simply need a permanent hire fast. In those situations a direct hire is usually cleaner. For almost everything else in light industrial and support work, the trial period pays for itself, and the small premium you pay for that flexibility is far cheaper than unwinding a permanent hire that never should have been made.

How to Negotiate Temp-to-Perm Terms in Your Favour

The model is only as good as the contract. Most of the value in temp-to-perm is won or lost in the terms you agree before the first shift. Five points are worth pushing on:

• A declining, written conversion-fee schedule. Insist on a fee that falls with hours worked and waives after a defined threshold (commonly 1,000 to 1,500 hours). Avoid flat fees and vague timelines.
• Tenure credit. Make sure the hours a worker logs on assignment count toward the fee decline, so a long, successful trial lowers, not resets, what you pay to convert.
• A replacement guarantee. Agree that if a placement does not work out inside the evaluation period, the agency supplies a replacement quickly at no extra recruiting cost, so a vacancy is measured in days, not weeks.
• Clear evaluation criteria and a defined window. Write down what the worker is being judged on and the length of the trial, so the convert-or-release decision is objective and on time, not left to drift.
• Verification standards in writing. Specify what the agency verifies before placement, identity, eligibility, credentials, references and background, so you know exactly what screening the markup is buying.

Temp-to-Perm vs Temp vs Direct Hire

Costs and terms vary by agency and contract. Always confirm the evaluation period, the conversion-fee schedule and any replacement guarantee before you sign.

Want to try before you commit, with verified workers? Trimax Employment, a Canadian staffing and workforce management company (Ontario THA licence THA-0000002854), offers temp-to-hire across warehouse, production, light-industrial and support roles in major Canadian cities. Every worker is verified across identity, eligibility, credentials and references through Trimax Verify before placement, you evaluate them on the real job, and a pre-screened backup bench means a role never sits empty while you decide. It handles single hires and high-volume ramps the same way, with transparent pricing and a clear conversion schedule. Talk to our team to set up a temp-to-hire trial, and compare the options in our guide to using a staffing agency versus hiring in-house.

The Bottom Line

Temp-to-perm hiring is the closest thing to a test drive for a permanent role. You bring a worker on through an agency, pay a bill rate that is roughly 1.4 times their wage while the agency carries payroll and employer risk, watch them do the actual job for 90 days to six months, and convert them only if they earn it, paying a conversion fee that shrinks with tenure and often waives after about 1,000 to 1,500 hours. On the numbers, that costs a fraction of a permanent hire who does not work out, which can run from 40% of salary to two times salary once lost output, cover labour and re-recruiting are counted. Nail down a declining fee schedule, a replacement guarantee and clear evaluation criteria before the first shift, work with a partner that verifies every worker before placement, and you get the flexibility of temp with the outcome of a permanent hire, minus most of the risk. Used well, it is less a hiring tactic than a discipline: never make a permanent commitment until the work itself has told you it is the right one.

Frequently Asked Questions

What is temp-to-perm hiring?

Temp-to-perm, also called temp-to-hire, is a staffing model where a worker joins you through an agency on the agency’s payroll, does the actual job for an evaluation period (usually 90 days to six months), and is then converted to your permanent employee if the fit is right. It lets you assess skills, reliability and fit through real work before making a permanent commitment, and end the assignment cleanly if it does not work out.

How much does temp-to-perm cost?

Two parts. During the trial you pay an hourly bill rate, the worker’s wage plus a markup of roughly 40% to 60% that covers statutory costs, workers-compensation, insurance, payroll and margin, so a $23 wage is billed near $33. When you convert, you pay a conversion fee, commonly 10% to 25% of first-year salary, that declines with hours worked and is often waived after about 1,000 to 1,500 hours. Both are small next to the cost of a bad permanent hire.

What is a temp-to-perm conversion fee, and can it be waived?

It is the fee an agency charges when you move a worker they placed onto your own payroll, usually a percentage of first-year salary. A well-structured fee falls as the worker logs hours through the agency and is typically waived once they pass a set threshold, often around 1,000 to 1,500 hours. Always get the decline schedule and the waiver point in writing before you start, and make sure logged hours credit toward it.

How long is the temp-to-perm evaluation period?

Most run from about 90 days to six months, long enough to judge real performance, reliability and fit on the job. The window is set out in your contract along with the conversion terms and the criteria the worker is being evaluated against.

Is temp-to-perm cheaper than hiring directly?

Compared against posting a job yourself it can look more expensive, but the right comparison is against the cost of a bad hire. In a worked example on a $48,000 role, temp-to-perm costs roughly $7,200 all-in for a worker you keep, against about $26,000 lost on a direct hire who fails at six weeks, once lost output, cover labour and re-recruiting are counted. For hard-to-assess and shift-critical roles it usually saves money overall.

What happens if the temp-to-perm worker does not work out?

The assignment ends at the end of the agreed term. Because the worker was the agency’s employee during the trial, there is no termination process, no severance and no unemployment claim against your account, and a good agency will present a replacement quickly. That clean exit is a core reason temp-to-perm lowers hiring risk.

Does temp-to-perm work for high-volume hiring?

Yes, and it is especially useful at volume. You bring on a group through the agency, evaluate everyone on the real job, convert your strongest performers and release the rest cleanly, so you build a permanent team from proven people. Many warehouse and manufacturing employers staff a ramp this way. See our ranking of manufacturing staffing agencies for partners that offer it.