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March 2009~Contingent Workers


Maximizing Temporary Talent in Challenging Times

The use of contingent workers has increased rapidly over the last couple of decades. Twenty-five years ago, temporary employees represented less than 0.5% of non-farm employment. In 2008, the staffing industry employed more than 2.0% of the non-farm workforce. On any given day in the United States, close to three million people are employed as temporary/contract workers.

To succeed, today’s businesses must be able to manage both permanent and temporary workers. The types of contingent workers, rationale for use, and the affect on human resources vary greatly. In addition, reliance on contingent workers raises different issues of culture, productivity, interpersonal relations, equity, and job satisfaction. Although they may perform similar job duties, core workers and contingent workers are very different. Ensuring that both sets of workers perform together at their best is a continuous challenge for any company. Approaching the use of contingent workers with an understanding of these issues will maximize the productivity your company sees from this investment.

Kinds of Contingent Workers

There are numerous categories of contingent workers. These categories include temporary workers, interns, contract workers, temp-to-perm workers, and those individuals who share jobs. In this article, we use as our example Advantec client Company Z, a business that regularly relies upon contingent help from these five categories. Company Z utilizes an internship program in which an intern works for three years, but spends one year at each of the company’s three locations. The same client also retains the services of a contract graphic designer to assist its marketing department. In addition to these specialized contingent workers, Company Z regularly has between 10 and 15 temps assigned to the company’s production department. Company Z occasionally fills some of its permanent positions by converting a temporary worker into a direct hire.

Rationale for Use

Contingent workers are valuable to companies for several reasons. Many businesses have a seasonal need for extra help during their busiest times. The benefit of using contingent workers to meet this need is that when the pace slows, temporary workers can be easily dismissed with fewer complications than laying-off members of a regular workforce.

Temporary workers can also be obtained at a moment’s notice without the long recruitment process required to hire a regular employee. If a regular employee departs on FMLA leave, for example, a temporary worker can start the next day and perform those duties for the duration of the leave. If a department lacks the resources to handle a short-term project, a temporary worker may be the best way to get the project completed.

Contingent workers are often available at lower rates and do not receive benefits, so it is almost always much less expensive labor, because companies only pay for the hours the temporary works, and do not have to worry about paying for sick days, vacation days, health benefits, payroll taxes or workers compensation and other insurance. Hiring a temporary worker does not require the commitment or investment of a permanent employee and it gives an organization the opportunity to assess skills and performance in the work environment before offering a full-time position. Contingent workers can be found by calling a staffing agency or going online to Advantec’s partner, HireMeNow.com, which offers discounted rates, free job postings, and dedicated customer service.

Impact on your HR Department

It is important that an HR department manage any contingent workers very carefully to ensure proper compliance with federal and state labor laws. For example, the number of hours worked by a minor must meet these government standards and the contingent worker’s employer is responsible for maintaining this level of compliance.

Companies employing contingent workers must also be mindful of potential employment classification issues. The most salient example of this is the well-know case involving Microsoft Corporation and a group of independent contractors. Microsoft Corporation employed a specific group of contingent workers for several years. When a court determined that, because the job responsibilities of those workers and the latitude they were given in meeting those responsibilities was identical to that of a regular employee, Microsoft had misclassified those workers as independent contractors vs. regular employees. Our client, Company Z, follows the best practices Advantec has provided in reviewing the role of its graphic design contractor within in the marketing department to ensure that this person is properly classified.

If your company finds and hires contingent workers through an outside third party, your HR department should still ensure that appropriate background checks and drug tests are conducted on the workers provided. Your HR department should strive to bring in the best contingent workers available and provide any necessary training to enable them to be as productive as possible. At Company Z, when the corporate intern transitions from one location to another, each specific location provides an in-depth orientation and training to better enable the intern to get up to speed quickly at their new location. This is done even though the intern has already had one or two years’ experience working for Company Z.

Impact on your Corporate Culture

Finally, your HR department must also be mindful of the effect of contingent workers on the rest of the workforce. Company Z has a positive culture that is particularly amenable to contingent workers. There is a diverse group of associates and all individuals are seen as being part of the company team. Everyone is encouraged to bring forward ideas on improving the company. Each worker is shown appreciation for a job well done. The contingent workers at Company Z are invited to company parties and participate in several employee activities. Your company should consider what type of culture it wants contingent workers to experience as a distinct element of its corporate culture.

Maximizing Productivity from your Contingent Workforce

Company Z finds that its contingent workers experience the same learning curve as a regular new hire, but experience greater pressure to achieve results sooner due to the contingent and often short-term nature of their positions. Regular employees working in tandem with contingent workers may also experience a drop in productivity due to time spent helping the new person adjust and acclimate to the department. While there can be a perception that contingent workers are not as committed to their responsibilities or to the organization, most studies on contingent workers demonstrate that they often meet or even exceed productivity expectations. If there is the potential to be converted from a temporary employee to a direct hire, that can serve to motivate the contingent workers as well.

Interpersonal Relations and Equity

Relations between core workers and contingent workers can be negatively impacted by disparities in pay, even if they are paid by two different employers. When Company Z hires temporary workers for its production department, they are never paid more than the rate of a regular employee with the same job function. Company Z also takes steps to ensure that regular employees have an understanding of the fact that temps do not receive the same benefits – insurance, 401K, paid time off, etc. While Company Z’s culture is to include contingent workers at company sponsored events like holiday parties, Company Z does not offer contingent workers access to employee incentives like tickets to shows and sporting events.

Company Z avoids further conflict by not placing temporary workers in positions of authority over regular employees. Often temporary workers have fewer interpersonal issues as they tend to avoid becoming involved in office politics.

Job Satisfaction

Company Z follows Advantec recommended best practices and surveys employees regarding job satisfaction. Most of the associates at Company Z report very high job satisfaction and the corporate culture and structure are intended to encourage all employees to participate in the success of the company. Associates feel comfortable offering their own ideas on how to improve productivity. Company Z extends this open feedback to include suggestions from contingent workers, who are seen as having the opportunity to look at a situation or process with "fresh eyes".

At Company Z, contingent workers enjoy working at the company and believe that their contribution is appreciated and valued although they are not core employees. The longer they stay, the better their performance and job satisfaction in their tasks. Contingent workers seeking to become full-time employees already possess high job satisfaction which furthers their desire to continue with the company.

Conclusion

With continuously changing business requirements, organizations need to maintain flexible workforces. Some would relate “workers on demand” to the practice of “just in time” inventory. And implementing the practice of “try before you buy” – hiring on a temp-to-perm basis to make sure an employee has the skills and cultural fit before committing to adding them to your payroll – can be a smart way to fill open positions and help motivate contingent workers.

Ensuring that both sets of workers are performing together at their best is a continuous challenge for your HR department. Following the examples given by Advantec client Company Z, your company can move beyond issues of employment classification to maximize productivity from all employees.

Smart business should mirror the same consumer savvy practices used by individuals. Hiring practices can benefit from this logic. In today’s unpredictable economy, many companies are implementing the practice of “trying before they buy” – hiring on a temp-to-perm basis to make sure an employee has the skills and cultural fit for their organization’s needs before committing to adding them to the payroll. This is a smart way to fill open positions and help motivate contingent workers.

Is hiring a temporary employee as simple as picking up the phone and calling the agency? Bringing contingent workers into your workplace, where your employees spend the majority of their day, requires some careful consideration and planning to protect your business, maintain your corporate culture and maximize your investment in the entire workforce

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Advantec is now an Oasis Outsourcing company.  Oasis Outsourcing is one of the nation's largest PEOs, servicing more than 4,000 clients nationwide. We provide HR administration, employee benefits, payroll services, workers’ compensation and much more. Our HR-related products and services allow small and medium-sized businesses to compete with those offered by Fortune 500 companies.

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