The Cost of Saving Money on Temporary Personnel

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You’re in a bind. You’ve reached your busy season, and you are overwhelmed with work and completely understaffed. You have deadlines to meet and it’s going to be nearly impossible to finish what needs to be done. Major business is at risk, so it’s time to bring in more help. Solution? That’s easy. On-board more employees.

Is it wise to bring on board temporary employees, or is it better to hire more full time employees? Many companies are under the illusion that temporary personnel are a better solution for their firm than permanent hires. While paying a premium to have help available when you need it is a great solution for some companies, studies show that it generally costs the same or just slightly less to hire temporary employees compared to bringing on a full-time worker.

The Temporary Staffing Trend

According to Randall Hatcher, author of The Birth of a New Workforce, “During the early days of temporary staffing in the 1960s and ’70s, most companies turned to this option on a short-term, project, or seasonal basis only. As they started to increase their number of temporary workers, the enormous cost savings caught the attention of the number crunchers. Before long, some “temporary” jobs were lasting two, three, or five years, and others would end only if the business folded.” Before long, temporary staffing became a trend.

To better understand how most staffing agencies operate, let’s take full time worker, Joe, who works for Company ABC. Joe is making $15/HR and is making full benefits though Company ABC, paid for by Company ABC. Company ABC needs more help and elects to bring on temporary help. Big Time Staffing Company comes knocking on the door, and says “Hey, Company ABC. We have access to everything you need at the tip of our fingers. Say the word, and we will do ALL of the work that you need to bring on employees and cover the hidden costs. We’ll bill you $18/HR, but we’ll cover the hidden costs of taxes, liability insurance, and other administrative fees.”

In this instance, Company ABC is paying Big Time Staffing Company $17/HR, but doesn’t have to worry about the hidden costs. It’s up to Big Time Staffing Company to determine how much they want to actually pay these temporary employees. The less they pay the employee, the more they make on markup. If they pay John Temporarius $10/HR, Big Time Staffing Company will make $7/HR for every hour that John Temporarius works, minus burden (hidden costs) of hiring.

It’s seen as a win for all, because Company ABC does not need to utilize their own resources to search for temporary employees. Their own employees can serve their time elsewhere, and Company ABC can easily replace John Temporarius he isn’t a good fit. But there are things we’re not factoring in, and that’s the actual value of a temporary employee versus a full time employee making full benefits.

According to Lorri Freifield, author of trainingmag.com article “Hidden Costs of Temporary Workers,” you’re unlikely to get the same level of productivity from a temporary employee versus a full time employee. You will typically get higher output from the $15/HR employee than John Temporarius, whom is making $10/HR. The job is less likely to mean as much to John Temporarius, who knows he is making far less than his full time counterparts.

Full Time vs. Temporary Staff

Full time employees have been observed to experience higher morale, loyalty, and tenure.Temporary employees, on the other hand, have shown to be less reliable. For many of them, there is a reason they are temporary--they have struggled to find a full time position. Additionally, temporary employees have reported lower morale, higher absenteeism, greater turnover, and less efficiency. According to author Randall Hatcher, this lack of output caused a 10-20% decrease in production, which did not account for the pennies saved per hour.

This isn’t always the case, as some professionals choose to pursue temporary roles at different points in their careers to allow them to gain more experience in a specialized field and allow them timely flexibility to move on after they have gained experience. Selecting a great candidate with a high level of motivation and skill is ideal, whether they are temporary or permanent.

“Temps can affect office bonding. Your permanent employees may be less likely to work well with temps, viewing them as, well, temporary. This can affect team spirit and energy,” Wrote Rieva Lesonsky in her glassdoor.com article, “What to Consider Before Hiring Temporary Employees.”

Finding Balance

For some businesses, the correct move is to bring on temporary help during busy seasons. For others, they may be better off bringing on more employees full time who can help them year round. The important thing is to look at all options, and not just assume temporary employees are always the best move for your specific business needs.

Works Cited

Lesonsky, Riesa. “What to Consider Before Hiring Temporary Employees.” Glassdoor for Employers, 16 Apr. 2014, http://www.glassdoor.com/employers/blog/what-to-consider-before-hiring-temporary-employees

Freifeld, Lorri. “Hidden Costs of Temporary Workers.” Training Magazine, 21 Oct. 2013, http://trainingmag.com/content/hidden-costs-temporary-workers

Hatcher, Randall W. Birth of a New Workforce: 21st Century Strategies That Will Revolutionize Your Business. Pursuit Books, 2011.