Learn when temp workers make sense for your company and when you should be hiring permanent employees.
Productivity is key to keeping business afloat and moving forward — productivity requires talent. Unfortunately, in today’s tight applicant and worker climate, many business leaders struggle. They simply cannot find enough staff to reach minimums, much less expand. Many expected the talent shortage would wane as enhanced unemployment benefits expired, but the opposite is being seen.
Millions of Americans are choosing not to return to the workforce for various reasons. Some still worry about COVID. Others are opting to retire earlier than planned. Many are trapped by the uncertainty of potential childcare and school closings. The net result for the business is a vicious circle. The harder it is to attract talent, the harder it is to retain the overworked talent currently on the payroll. Churn begets more churn, and businesses are scrambling to keep pace.
3 million temps and contract workers are hired every week in the U.S.
For some managers, letting productivity slide is not an option. Instead, they look for creative solutions to attract workers in a challenging market. Some turn to staffing agencies for temporary workers, hoping to fill an immediate need and potentially hire a permanent worker from the temp workforce. It’s estimated U.S. business employs three million temp and contract workers every week. The temp solution is a workable workaround for some managers and business owners.
Why it works to hire temp workers
Temporary placement agencies source talent for you. Employers simply place an order with the agency, and they do the recruitment, vetting, and process payroll for the employee. Recruitment costs and resources are eliminated when using temps — you need only make a phone call.
It can be cheaper to hire temps
The temp worker is an employee of the agency, doing business at your location, not a company employee. In some cases, temp agencies provide full or partial benefits packages to their workforce. For business owners that cannot afford to pay for healthcare benefits, for example, the worker has the benefit from its employer of record — the temp agency.
If you can convert a temp to a permanent employee, you may be able to hire them at a lower salary than the market.
Many businesses find they’re unable to hire at their regular wage scale in today’s market. As a result, they’ve had to increase starting wages, even offering hiring bonuses, to attract talent. The markup for a temporary worker may be similar or even lower than the open market. Since the hourly wage for the worker is lower than the hourly wage paid to the agency, if businesses can convert the temp worker, they may be able to hire at a lower rate than market conditions require ultimately.
But the cost of a temporary worker can be high. Depending on the skills required, expect to pay an additional 12 to 50% of hourly wages in temp agency fees. The cost may be worthwhile for managers who set their budgets and can juggle costs from one area into the temp fees. For others, the markup from the hourly wage is prohibitive.
It’s easy to replace underperforming temp workers
An advantage to using temps may be the trial process. The workers have been sourced and their skills verified, so they have the necessary qualifications. With temporary employees, if the worker doesn’t make the cut, businesses simply call the agency for a replacement. There’s no need to fire them or deal with unemployment insurance benefits. Instead, the agency will place them somewhere else and send another qualified candidate.
This trial period allows the company to make sure the worker is the right fit, but it works well for the temp as well. Almost two-thirds of temp workers are looking to fill gaps in employment or help land a full-time job. If the company is satisfied with the worker and the worker agrees, moving to permanent placement is relatively easy, but it does have associated costs.
Buying out the temp worker’s contract with the agency varies by company. For some temp agencies, the longer the temp is assigned to the business, the lower the cost to buy out their contract. A flat fee is assessed for others, no matter when the temp worker converts to a permanent employee. For businesses using temp services in the hopes of converting to permanent hires, it will be essential to understand any buyout costs associated with the switch.
Why temps aren’t a great long-term solution
Don’t look at temp workers as long-term solutions — it can create problems.
As companies try to do more with fewer workers, the temptation to hire temp workers, even if it busts the budget, is high. While it may be a good short-term fix, it can create unanticipated problems in the long term. Budget line items have little wiggle room for most small- to medium-sized businesses. Something will be sacrificed when you’re borrowing from one area to fill a need in another. Over the long term, the cost of temporary workers may be justified in productivity alone. Still, other areas of your business could be suffering the fallout of incursion into their funding.
Temp workers may not be the right fit
Another problem area is hiring the right talent for your business. While temp agencies strive to make the right match, they’re not fully versed in the culture of your business. They will see the right qualifications and background and assume a good match, which may work out. When it doesn’t, you may have a revolving door of workers coming into your business, draining training resources and putting you back to square one — often repeatedly.
Temps may not want permanent work
For some temporary workers, the most attractive feature of the job is the ability to work when and if they choose — about a third really aren’t looking to convert to a permanent hire. You may find just the right fit, but if they’re not interested in joining your team, you’ll need to decide if they’re worth keeping until they decide they need a break or if you should look elsewhere.
Not enough time for training
Hiring temps for positions that require a lot of training may not be the best idea.
Training may be another issue for temporary workers. Depending on the nature of the work, training and onboarding may be extensive. If the standard training time for a role is short, temporary workers may be a great fit. They’ll be quickly brought up to speed and productive. If, on average, it takes months to train a new hire, investing in a temp who may or may not continue in the role permanently could be a waste of resources. The more difficult it is to train, the more temporary workers may be a poor choice.
Security may be an issue. Depending on the nature of the work or the job site, a temporary worker may have access to:
- Customer or employee data
- Materials and products
- Financial and other resources
Even the most effective temporary agency can miss red flags on a worker’s background check. For example, suppose you’re using a temp in areas that provide access to sensitive information or valuables. In that case, it’s crucial to assure the agency has insurance that will cover the costs of theft or even property damage.
Finally, using temp workers takes HR and management out of the hiring equation. When managers leverage a temporary service for their hiring needs, HR is frequently unaware there are new ‘staffers’ on-premises until there’s a problem. While these temps may be employees of another company, they still hold rights and protections under the law when working at your facility. Without HR in the loop, issues may arise beyond the scope of a manager’s talent. These could negatively impact the organization overall.
As managers look for solutions to keep production moving, temporary workers may be a short-term fix. As market conditions return to normal, using temps as a stop-gap measure should be examined thoroughly. If temps were a successful means to hire and train workers, consider continuing the practice. If temps caused more work than they performed, it might be time to return to traditional hiring and training.