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 firstname.lastname@example.org.
Insights Recruiting & Staffing is brought to you by Everstaff
If you think your business may need to use a staffing firm at some point in the future, you should start doing something about it now.
Waiting until you actually need those services could prove to be a huge mistake, says George Thomas, senior vice president at EverStaff.
“Obviously, it’s always best to think about it before you need it,” says Thomas. “Often, by the time you have a need, it’s already too late. Planning ahead by establishing a relationship with a staffing agency can ensure that you have a partner that will be properly prepared to fulfill your staffing and placement needs when they arise.”
Smart Business spoke with Thomas about how to develop a relationship with a staffing firm so it can stay ahead of your needs.
Where should a business owner start when considering a partnership with a staffing firm?
Before you begin, recognize that there could very well be a disconnect between your operations, human resources and finance departments. In many cases, the finance department is going to look at staffing (as they should) based on a cost savings proposition focusing on liability, overall exposure of work force and the staffing company markup. The HR and operations departments will also be looking at cost and exposure, but will be more focused on the quality/reliability of candidates and the impact on production. As the CEO, you want to align all three departments and ensure that you are taking into account the full impact of what the service offers, focusing on the total value proposition. This means getting HR, finance and operations all in one room together to figure out what your company expects to gain from the use of a contingent labor work force. Second, it is key to determine a healthy percentage of contingent work force to permanent work force. Once you have determined this, you are now prepared to consult with a contingent staffing service to best determine how you will move forward.
How do you determine the right firm for your needs?
If your company has any chance of using a staffing firm, your HR employees probably hear from staffing services several times a week so there is no need to look in a phone book. Start by asking them what they know about the local services, as they should know who is out there and have an opinion.
An important consideration when choosing a firm is determining whether the company is merely happy to be a subordinate vendor and order taker to you, or if it wants to be a trusted partner. It’s not a question you can ask directly, but you can ask about relationships and the expectation of those relationships during fact-finding meetings. Also, listen to the questions the recruiter asks. If the staffing firm wants to be a trusted partner with you, the recruiter is going to try to learn about your business and get into your operating reality. He or she will use effective questioning to get to the root of your needs and learn everything he or she can about your facility and specific operating style. Then the recruiter will use that information to form a proposal about how the staffing firm can improve your operations with contingent staff.
It’s a matching process, not just order filling, and a staffing firm can’t make a proper match unless it can get into your operating reality and understand your company’s culture. It is very easy to find candidates with the proper hard skills, but much more challenging to find someone who is going to fit in with your company culture and be a long-term match. The difference between a good and great staffing company is that the great ones can make the match.
If a prospect staffing company simply walks in with a pricing sheet without first doing a proper analysis and says, ‘Whoever you’re doing business with, I can do it cheaper,’ that’s a good indication that that company has no interest in being a partner and is happy to be a vendor. That relationship never lasts long.
How can developing a partnership benefit a business?
Too many CEOs look at the staffing industry as a necessary evil, because they can’t carry all of the liability that comes with hiring and their HR departments are normally too small to recruit all positions internally. Because of that, they see staffing firms as disposable, something they can replace tomorrow if need be. As a result, they often throw out a job to several firms, and the first one to find a worker wins.
You can do that, but it’s not doing you any good because you’re not developing a key partner relationship. You need to think of your staffing firm as the third arm of your HR department, as an external recruiting department. Have them at your meetings so they understand your business from an operational standpoint. Keep them engaged to keep them out in front of your needs.
How can partnering with a staffing firm help with retention?
Statistics show approximately 60 to 70 percent of turnover occurs in the first two to three weeks at a new manufacturing job. People are experiencing many different things and moving in ways they’re not used to, so they may be sore, or not used to specific odors, environment, etc. If there is someone coaching them through those weeks and letting them know that it’s going to get better, there is a higher likelihood that they will stay and your retention will improve.
Proper orientation is a key to retention in contingent staffing and you need to ensure that you work with your staffing partner on orientation. Improper orientation always leads to misunderstandings. In the staffing industry, much of our turnover is based on misunderstanding. For example, if someone shows up on day one and doesn’t know where to go, doesn’t have a proper orientation, or took a break in the wrong space and is disciplined, then they are likely to not return the next day. By partnering with a trusted staffing firm, you get more than just warm bodies on the job. You get the correct candidate and the right match, which is critical to your company’s operating success.
George Thomas is senior vice president at EverStaff. Reach him at (216) 369-2599 or email@example.com.
Insights Recruiting & Staffing is brought to you by EverStaff