In January of 2009, more than 560,000 U.S. jobs were slashed. Companies in nearly every industry have had to cut back on labor costs, typically their most expensive line item. But when remaining employees are stretched to their limit, it soon becomes clear to management that, even in a downsized company, the work still needs to be performed by someone with the right skill set. For many businesses, temporary employees are the answer to cutting costs without hurting the bottom line.
“During this downturn, many large companies are turning to staffing firms for temporary workers,” says Rob Wilson, president of Employco Group, a division of The Wilson Companies. “They’re supplementing their work force without the additional cost of benefits and other expenses that go along with permanent employees.”
Smart Business asked Wilson about the advantages of working with a staffing firm to bring in temporary workers in tough times.
Is now a good time to partner with a staffing firm?
Absolutely. The market has changed and so has the temporary staffing trend. For example, Carlisle Staffing, a division of The Wilson Companies, does a fair amount of temporary placement for myriad companies in the traditional sense of cyclical work; if a warehouse has an influx of goods and now needs extra employees that is a short-term fix. But what we’ve been seeing quite a bit in this economic environment are publicly traded companies and other large privately held national companies working with staffing firms after layoffs. Once they save through trimming wages and eliminating the vacation time, holiday pay, sick time, health insurance and 401(k) match expenses that go along with those employees, they often find that they have eliminated too many jobs to function efficiently. Savvy companies are turning to staffing firms to fill the gap.
Besides the reduction in benefits expenses, what are other advantages of using temporary staff?
You get a lot more flexibility with a temporary employee do you need the person 30 hours a week or 50? You couldn’t really do that with your employee base before. When working with a staffing firm, if you don’t like the person sent to you, you can just call for a replacement and continue to do so until you find the perfect match for the position.
There are many quality people in this market who are willing to work for less than their previous salary. In some cases, you many end up hiring your old employees back through the agency on a temporary basis, but this time without the added costs for vacation time or benefits. There is always the option to rehire them back as permanent employees when your company is in the financial position to do so.
How else can staffing firms save time and money?
Hiring an employee at $16 an hour from a staffing firm with a 40 percent mark-up would end up costing around $22.40 an hour or $44,800 for a 50-week year at 40 hours a week without paid holidays or vacation. If a company were to hire that same employee on its own, after adding in taxes, workers’ compensation premiums, FICA, health insurance and other employee costs, that $16 becomes $19.20, which is $44,936 a year. Even though it might appear to be more cost-effective to hire the individual on your own, consider the fact that you now also have flexibility on the number of hours worked per week. In such a competitive market the person who wanted $16 an hour might work for $15 instead temporary employees become part of a cost-effective strategy.
In addition, since the staffing firm handles all the recruiting and interviewing, those expenses can be eliminated and you are provided with multiple candidates from which you can select the most qualified. Further, if a temp doesn’t report for work, you can just call the agency for a same-day replacement, which results in minimal lost time. If you are pleased with the employee but can’t afford to hire him or her until the market recovers, chances are by then the employee has been with you through the agency long enough that the conversion fee is either waived or very minimal.
Staffing firms will also handle I-9 immigration requirements as well as all other compliance issues. Where most firms only require two forms of ID, reputable staffing firms will require three forms of ID and absorb all the costs associated with background checks and drug testing, if required by the client.
Is there a downside of using temporary employees?
Companies should make sure to check the agency’s references and make sure it provides quality employees for their job assignments. A staffing firm should test all prospective employees and, especially in this marketplace, look for workers’ comp fraud and other areas of potential fraud. In the case of the workers’ comp claim, you have to pay temp employees as if they were full-time-like employees. So you want to make sure the staffing firm has a good recruiting department, and that it has proper insurance coverage.
ROB WILSON is president of The Wilson Companies, which handles human resources outsourcing, staffing and insurance for 400 small and medium-sized Midwest companies. Reach him at (630) 286-7345 or firstname.lastname@example.org.