When there’s a strong, open partnership between an employer and its temporary staffing agency, both parties can realize profits and cost savings. The goal for both sides is to determine the right value and form a relationship that makes it more cost effective to hire a staffing firm than it would be for the employer to perform those duties, says George Thomas, senior vice president of Everstaff.
“It is our job to make sure that the client understands all of the costs, liabilities and exposure that they defer when using a staffing agency for temporary and temporary-to-permanent placement,” he says.
Smart Business spoke with Thomas about how to maximize your savings by partnering with a staffing firm.
How does the cost relationship between a business and a staffing agency work?
There’s a common misperception that a company isn’t realizing savings when paying for the services of a staffing firm. Two significant costs are along the lines of direct and indirect liabilities. These are the insurances that the staffing company covers as part of payroll, including workers’ compensation and unemployment. There are also additional liabilities and sometimes very significant costs associated with workers’ compensation and unemployment claims, which are passed directly to the staffing firm.
The employer also gains significant savings through the indirect costs of marketing and recruiting. Businesses will ultimately spend more time, money and resources when recruiting seasonal and permanent staff due to the fact that most HR departments are smaller and too busy dealing with day-to-day employee issues to focus efforts on sourcing and recruiting candidates. This is where the staffing agency can use its expertise in recruiting and placement to sort through resumes, bring people in for interviews and ensure the employer gets an employee for the job who has both the hard and soft skills necessary to be successful. In addition, recruitment is becoming more costly today, with many employers requiring background checks and drug screenings, even for low-wage jobs.
How can using a staffing agency help with employee retention?
A lot of temporary staff turnover occurs in the first two to three weeks, especially in manufacturing. When a business doesn’t use a staffing firm, it incurs the front-end costs of recruiting — bringing people on board and training them — only to end up losing many of them in the first few weeks or months. When using a staffing agency, though you will lose productivity when there is turnover, you will not lose the up front costs associated with sourcing, screening and placement.
As far as retention, a good staffing firm will know the client and be involved in proper orientation, pre-employment screening and ‘after-placement’ coaching to reduce turnover. When the staffing firm plays a key role in the coaching of the temporary work force, retention always improves.
How can employers maximize cost savings through a staffing firm?
You and your staffing firm need to have a clear understanding about what resources you require for your type of business, where your gaps are in productivity and what your short- and long-term visions are to build a strong strategic partnership.
Next, you will want to make sure that the value proposition for you and the staffing service is such that both parties are happy and that the service can provide the resources you expect to be successful. Many times a company will go with the lowest price it can possibly get and then realize after a few months that the agency has moved its resources to more profitable accounts. Make sure the price is not only fair to you and your company, but also for the staffing firm.
Once you’re in a relationship with the staffing agency, you need to continue to work with it on developing the relationship. For example, in manufacturing, a staffing company may get feedback from temporary employees that a certain line has a potential danger or it may learn that there is turnover on a certain shift because of training issues, a particular supervisor, leadership style or operation tempo. Working together to minimize potential workers’ compensation and unemployment claims will help the staffing agency with its costs and minimize your productivity loss.
How should companies set pricing when using a staffing firm?
Don’t be afraid to ask the staffing company what the insurance burdens are for a particular state, realizing that those costs vary year to year. Understand that, depending on the department and the job the temporary employee will be filling, those burdens can differ even within a facility.
It’s up to the staffing company to inform you of the direct costs and insurance burdens, as well as the costs for payroll, recruiting, recruiting support and corporate overhead. Many times a company will assume that if the state and federal insurance burdens come out to 24 percent and the staffing agency markup is 41 percent than the difference is all profit for the firm, which is never the case. When everything is completely transparent, everyone knows where they stand and can find a fair price for each party.
You should always ask for the detailed breakout of burden from the staffing company so you can see exactly what the cost savings will be for you to use temporary staffing or temporary-to-permanent staff instead of expending the resources to do it yourself.
George Thomas is a senior vice president with Everstaff. Reach him at (216) 369-2566, ext. 104, or email@example.com.
Insights Recruiting & Staffing is brought to you by Everstaff
You’ve been hearing for months that the recession is over, but like many other business owners you might be adopting a wait and see attitude. The only fact that seems undisputable is that the economy’s next move is not easy to predict.
In an uncertain environment, one solution for employers is to hire temporary employees for any downturns — or upturns — they face.
“Businesses used to have a steady flow of business throughout the year and they were able to budget for what their staffing needs would be and hire full-time,” says Scott Adamonis, director of sales for Everstaff. “Nowadays, business ebbs and flows and having a relationship with a staffing company allows companies to be able to fluctuate.”
Smart Business spoke with Adamonis about how companies can roll with a changing economy using temporary employees.
How common is the use of temporary employees?
More companies are shifting toward a flexible workforce, especially with the instability of the economy over the past five or six years. It’s very unpredictable and having a staffing company able to provide contingent labor is a great business model that many have adopted. More often than not, the decision of how many temporary employees to use is based on the business environment and is not necessarily industry specific.
Temporary or contingent employees aid companies because of their flexibility. In the past, businesses would use temporary employees to cover for vacations, maternity leaves or something along those lines. Now business is fluctuating — based on what the economy is doing — so employers need to have a flexible work staff in order to ramp up and ramp down based on their business needs.
Along with flexibility, what are some additional advantages of temporary employees?
Flexibility certainly is one of the largest advantages as it fills the widespread need for an adaptable workforce, especially for companies that experience ups and downs in their business activity with project work or seasonal swings. Employers are slowly bringing people back into their workforce but in contract or in contingent labor positions as a test of the economy. Then, if business activity decreases again, employers can — with the help of a staffing agency — respond quickly to changes.
Hiring temporary employees is also a great cost-saving tool. For example, a company will utilize contingent labor to handle unexpected increases in workload and accomplish this without the burden of hiring additional full-time employees or forcing overtime hours on their current staff.
The most expensive item on a P&L or balance sheet is labor expenses — from salary and benefits to unemployment and employee taxes. Partnering with a staffing firm can help a company ease some of these burdens by providing a flexible workforce on an as needed basis
Using supplemental staff for large projects or seasonal work increases the morale of your core full-time employees. When you, as an employer, get major orders and you already have full-time staff working 10- or 12-hour days, you don’t want to increase their workload and risk those employees burning out.
Employers also can treat these temporary employment situations as working interviews, utilizing short-term work to assess work ethics, cultural fits and skill levels.
As a business owner in an uncertain environment, how do I identify my staffing needs?
Forecasting who, what, where and when those needs are going to arise is a difficult task in today’s world and partnering with a staffing company is an excellent solution. A lot of times you think projects are coming in and can anticipate them, but other times you might not be able to do that. You don’t want to have your workforce sitting around waiting, so you can build a relationship with a staffing company and use it as an extension of your HR department. A quality staffing company will recruit and build a specific pipeline of talent so the turnaround time of implementing your workforce is seamless.
You always want to ensure your full-time employees are taken care of first. Many employers offer extra hours to their permanent staff initially, but as the year goes on they need the additional help of temporary employees. It’s an added resource that companies can utilize as needed.
What should an employer know about hiring temporary employees through a staffing agency?
The most important aspect of partnering with an outside source is to have your relationship in place with a temporary staffing agency ahead of time. The more a staffing agency knows about your company, the better the agency is going to be able to find people who fit your needs. The staffing agency does much of the groundwork before placing someone, so a strong prior relationship will enable the agency to understand the company’s culture or the background checks and screening requirements that are necessary to work at its facilities.
A close relationship between a business and the staffing agency not only alleviates turnover but also speeds the hiring process. Employers may not have any staffing needs for several months, but when they do require temporary employees they will need them quickly.
When looking for the right staffing company, don’t be afraid to review all your options. There are many specialty staffing companies that are job-type specific, others offer employees for a variety of jobs such as general labor; office and administration; accounting and finance; sales; legal; call center; information technology; and engineering. Look for an agency that can blend your staffing needs, company goals and culture with the right skill set, service, and technology to deliver the solutions necessary to help manage an ever-growing need for a flexible workforce.
In the end, there needs to be a comfortable working relationship where the hiring managers and staffing companies share the same business philosophies and practices.
Scott Adamonis is the director of sales for Everstaff. Reach him at (216) 369-2566, ext. 111, or firstname.lastname@example.org.
Insights Recruiting & Staffing is brought to you by Everstaff