Hiring Temporary Employees
DebraB
1 Post
We are an electronics component manufacturing company with 118 employees in the United States. Our warehouse has approximately 21 employees with 5-7 temps. With the intention of minimizing costs, I was wondering what the pros and cons would be of payrolling our temporary employees ourselves rather than going through outside companies to handle this for us. Our warehouse is located in California.
Comments
Please let me preface by saying that your being in CA means pretty much all bets are off because I'm not that familiar with your laws (esp. work comp and etc.) My experience is that I prefer to hire on my own and call it a temporary position rather than using an agency. I hate paying the multiplier, and thankfully we don't have many work comp injuries, on temps or otherwise. One very, very big difference is that Nebraska is at-will, so I can tell them I think the job will last ten weeks but if they're awful, I can show them the door. I'm not sure you have that luxury in your great state.
Also, my temp agencies all say they "screen" applicants and just send me the ones who are "really interested" in working for us but in all honesty, they don't get any better people than I can on my own. I suppose one really big work comp claim on my ticket (instead of the temp agency's ticket) would change my tune.
>One very, very big difference is that Nebraska is at-will, so I can tell them I think the job will last ten weeks but if they're awful, I can show them the door.
>Also, my temp agencies all say they "screen"
>applicants and just send me the ones who are
>"really interested" in working for us but in all honesty, they don't get any better people than I can on my own. I suppose one really big work comp claim on my ticket (instead of the temp agency's ticket) would change my tune.
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DebraB, Welcome! And thanks to Calico for her response.
Sorry for my long post. Please read request at the end.
Pros of hiring Temps:
1. No taxes (Medicare, Social Security,
Unemployment, etc.). At-will doesn't
remove Unemployment Comnpensation
requirements.
2. No advertising expense for recruiting.
3. Much less time in sorting through
applications and no need to keep all
those received applications on file.
4. Much less time devoted to interviews.
There are so many Temp agencies in our
area that they really do have to do a
good job of screening applicants for
our specific requirements. When they
send someone over, I know the initial
screening is accomplished. If you don't
trust your Temp Agency, then I would
agree with Calico that she can do just
as well on her own. The Temp Agencies
that we use all take a tour of our
facilities and have a working knowledge
of our requirements. We do run all
Temps through our basic orientation
program.
5. Much less threat of workers comp
problems, though there still is the
issue of a company providing a safe
environment. Using a temp doesn't
totally remove the threat of workers
comp and/or an injury lawsuit.
6. You can take as long as you want to
decide if the Temp is the right fit
without incurring any Benefits expense.
Cons of hiring Temps:
1. As Calico mentioned, the multiplier.
In this area it runs about 1.5.
2. Often locked into a 60-90 day temp-to-
perm period unless you want to pay a
(usually) very high buyout.
This is actually an on-going issue in our company. Many of the supervisors and senior management don't like paying the multiplier. I have shown them that the multiplier cost is basically eqivalent to the savings noted above and we have the option of terminating at any time without having to worry about unemployment benefits and in most cases any threat of wrongful termination. Also in DebraB's case (a warehouse environment), I would think there is more of a possibility of long term workers comp issues, i.e., pulled muscles, strained backs(real or imagined), etc. This would be especially true during the first few weeks on the job. You could save a lot of long term workers comp expense by using a Temp initially.
A REQUEST: I have always wanted to get the opinions of other Forumites on the issue of using Temp Agencies for positions that are expected to be permanent in the long run. There's no question that they are better for short term "burst of energy" type projects. Thanks to DebraB and Calico for getting this thread going. CAN FELLOW FORUMITES VOICE THEIR OPINIONS??
I have a very biased opinion about temps, mainly because our company owns a temp agency and my opinion falls on "this side of the fence"
I have also been on the client side as well, and have used temps extensively. Let me say, I beleive wholeheartedly in the concept. As you have already pointed out many of the positive aspects of using temps, I can honestly say that the concept of using a "flexible workforce" has substantially more positives over negatives. The workers comp savings alone and the reduced exposure to heavy losses is often enough to justify temp useage. Couple that with avoiding claims against your unemployment experience and the ability to adjust your headcount wihtout having to cut into your "core" employees through layoffs is a significant benefit. The added benefit of being able to eventuually hire temps onto your payroll through a "try before you buy" or temp-to-perm arrangement, in of itself, allows for a more thorough evaluation of an employees performance, attitude, attendance and promotability than you could ever glean by hiring on your own using the conventional methods of interviewing and screening. The cost and effort it takes to hire employees on your own, factoring in the time it takes to recruit (i.e. place ads, job fairs, on-line methods, flyers, etc), screen through the applications, set up interviews with your dept. and the hirng supervisor, referrence checks and background screens (if applicable), pre-employment drug screens (if required), and all other associated tasks, muliply that by how many openings you have, and you suddenly realize how much time is spent on something that can be performed by an outside service that has a much more efficient system of producing candidates/employees. You, in turn, and your supervisors, can then focus on other aspects of your business that produces revenue. I give it two thumbs up!!
I concur with everything already posted on your item of interest. I, too, have used and am using today a Facilities Mechanic from a temp company. The cost is stiff because the going rate is $12.00 plus overtime. The overtime is what kills us and the cost is about $1000.00+ a week. If you can not control overtime payments the cost would be to high and a regular employment status would after the fact tell us we made a bad decision. However, even with the O/T if this new employee had hurt his person while working, then even with O/T the arrangement would have been a savings.
When we roll him over because it appears that he is worth the expense, we will realize a successful recruitment through the temp agency that we could not find through our normal methods.
PORK
We hire temps for long term assignments (up to 6 months) ourselves. For short term (a few weeks or so) we use an agency. If we are expecting to hire permanently, we just hire.
I used to work for a firm that had a good arrangement with a temp agency. The agency would send along a worker who had no idea that the job could become permanent. They were just told it would last 2 weeks and possibly more. If the employer liked the temp, the person got hired. The employee would be on trial without knowing it. Once hired, they went through an initial period. This way the company got twice the time to evaluate the employee. This was in Calif. and worked very well for the company.
Last year we had an employee off to give birth. We hired a temp from an agency. The employee didn't come back, and the temp was working out so well we hired her. We had to pay more, but it was good to get someone you already know you can count on (thus getting savings in the long run).
Good luck!
Nae
>is cost. It runs 50 to 55% if I don't have a
>negotiated contract based on high volume. Cost
>for benefits is only 30 to 40%. It's cheaper to
>hire direct and give bennies than to hire
>through an agency.
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I agree that the normal cost of doing business with a Temp Agency is approximately a 1.5 markup, but what about the employer's savings: Social Security, Medicare, Unemployment, Workers' Comp (both cost of insurance and cost of claims), etc? In most companies common benefits (medical, dental, vision, holidays, vacation, etc.) don't kick in until after a waiting period of 60-90 days or more. I believe if you add all the real cost savings of hiring a temp, it becomes at worse a wash and at best an extremely good deal for the employer.
Just my thoughts.
Thanks to Ray and all for continuing this thread.
Yes, the temp agency is the one responsible for the unemployment claim, which is a great advantage to the client, especially if you have business cycles that require you to add and remove employees throughout the year. One bad year where you have high unemployment payouts typically stays on your experience record for 2-3 years, depending on the state you're in, so you in essence have increased SUTA taxes for years, until your unemployment payments decline. Temp agencies can avoid the unemployment "hit" by re-assigning their temps to other positions. If you hire the employee directly, even as a temp, you will incur at least a pro-rated portion of the unemployment charge (assuming the employee has enough wages earned from jobs at your company and previous jobs)
We are ISO/TS 16949 registered and we have an internal company policy of "Constant improvement". To always move in this direction, we need to hire quality people that meet certain criteria. We require applicants to take a cognitive reading and math skills test and pass with at least 85%. Our staffing agency does all of the testing for us.
The Temp agency also drug tests each new hire and bears the cost.
We have excellant benefits such as free health insurance, 100% std if employed 10 yrs or more, profit sharing, etc. Hourly pay rate is higher than the industrial ave. in this area. There is a waiting list to get in here. Using the temp agency also protects us from discrimination in our hiring methods. Years ago, when I hired directly, I had an applicant who accused me of not hiring him because he was Dyslexic. We're better off hiring all hourly employees through the temp agency. I tell everyone who has a referral, that I don't make the decision, the agency does the screening and sends over who is next on the list. This way I can never be accused of favoritism or discrimination in hiring.
This is how easy it is - My Prod Mgr tells me we need to increase manning by 3 for 2nd shift. I email my contact at the staff agency and tell them we need 3 temps for Barycast detailing. The staffing agency already has our job descriptions, so knows exactly what we are looking for. I get a return email from the agency that same afternoon with the names of 3 new starts for the very next day. It's that simple!