If you've ever thought that temporary workers cost less than full-time workers on a daily basis — think again. Studies show that it generally costs the same or just slightly less to hire temporary employees compared to bringing on a full-time worker. Essentially, when you use temporary workers, you're paying a premium to have help available when you need it.
The rate you pay temporary workers is composed of many elements. Your company does not assume the costs or the responsibilities of providing and coordinating the benefits program for temporary employees. All your company has to do is pay the employment agency for the services used. The temporary agency, in turn, will pay the temporary workers' wages and benefits.
While it's convenient not to have to deal with paperwork for temporary employees, you pay for that simplicity — part of the bill for a temporary worker goes to cover the temporary agency's administrative costs. The temporary employee receives only a portion of what you're charged for their services. The markup over wages paid to the temp worker depends on the assignment, job specialty, experience required, and any other special requirements stipulated by the company. Markups can range from as low as 25 percent to as high as 100 percent — or higher! For higher volumes of jobs involving lots of workers, agencies may discount their standard markup. In cases where a single, very specialized worker in high demand is needed, businesses can expect to pay a higher markup.
How much markup is too much? Every agency is a bit different. Work location can make a big difference. In large metropolitan areas, where the cost of living is higher, expect to pay higher prices for qualified workers.
To get an idea of what you're paying for (besides the temporary worker's time), take a look at the administrative and human resource costs typically assumed by a temporary agency:
- Skills testing
- Reference verification
- Payroll expenses and paperwork
- All withholding taxes
- Payroll taxes
- Unemployment insurance
- Workers' compensation insurance.
Some agencies also provide a range of benefits for their workers. The scope and size of the benefits package often depends on the level of work done, the demand for the type of work involved, and the employee's length of service. Some temporary agencies pay bonuses to good workers, ranging from cash to increased benefits, trips, and other awards.
If it seems as if you're paying a lot for temporary help, remember: the lowest prices do not always deliver the best workers. Besides price, the customer service capabilities of the temporary employment agencies in your market should be strongly considered. How they handle your orders, screen prospective workers for you, and provide feedback on each assignment will provide additional value to your company. It's also important to note how responsive the agency will be if an on-the-job problem arises. It's worth it to pay a little bit more to an agency that's well organized and always delivers the type of help you want.
Of course, the strongest factor to consider when deciding whether to pay for bringing in a temp is how much will your business suffer if the work goes undone or the position remains vacant? If the cost-benefit tradeoff is right, you should explore the temp option.
If you do decide to hire a temp, you can ensure the success of their efforts by bringing them on under a clear job description and with a clear direction for their management. Read How to Manage a Staff of Temporary Workers for additional ways to structure your temporary workforce for success.