If your company follows the general trend, temporary workers have probably become commonplace by now. According to Deloitte, 77 million people in Europe, India and the US officially report freelance work, and half of employers surveyed confirmed that contract workers make up a significant proportion of their workforce. McKinsey estimates that a total of 162 million people do some kind of freelance work or so-called “gig working”. Staffing Industry Analysts estimate that Human Cloud revenue increased 65% in 2017.
The proportion of temporary workers is clearly growing faster than that of permanent employees. This creates new opportunities for companies to make their resource strategy more agile, as they now have access to an increasing talent pool and can save significant costs. The increased use of temporary employees has many advantages, but also presents some employers with new challenges and increasing complexity.
Keep an eye on the overview of personnel costs
Depending on the number of temporary employees, the costs for temporary staff represent only a small or a significant portion of the company's budget. Many companies fail to reduce expenses accordingly, capitalize on economies of scale, manage their supply chain correctly, and optimize recruiting processes. This means that the great potential for cost savings and increased efficiency is not being fully exploited, even though temporary employees account for an increasingly larger share of your personnel costs.
When analyzing the costs your business incurs from temporary workers, you should first list all direct and indirect costs.
Direct costs
These are easy to spot. The costs incurred by using a temporary employee correspond to the hours worked within a certain period of time (per day/week/month). Decisions about candidate lists are often made solely on the basis of hourly rates, whereby the costs incurred should correspond to the lowest hourly rate, provided there are no other differences. However, most HR managers realize that workforce quality cannot be overlooked as it has a major impact on factors such as production time, training costs and morale. Further direct costs may arise from internal employees directly responsible for managing temporary employees, technological solutions such as supplier management systems, as well as absenteeism, training, human resources management and digital investments.
Indirect costs
Often, expenses that are difficult to track make up a significant portion of the total cost of temporary workers. Single-task managers can easily account for their time, but what about the time that supervisors, recruiting, legal, and other functions spend hiring temporary workers? Security checks, unexpectedly long hiring times, high turnover and informal training can all result in significant costs. Other indirect costs such as personnel administration, shift planning and positions that take a long time to fill should also be taken into account.
Fulfillment of legal requirements
An important and very resource-intensive point is the fulfillment of legal requirements. Regardless of whether checking the regional and national legal compliance of the recruitment process is carried out internally or externally, you should not underestimate the time and knowledge involved, especially given the increasing regulation of the employment of freelancers. Compliance with legal requirements should also be discussed in detail with suppliers if you hire additional temporary employees.
Companies that examine these expenses in detail are more able to identify gaps and inconsistencies in workforce management, saving costs and boosting production. However, do they have the expertise internally to do this effectively? Can these analyzes be carried out continuously to enable a sustainable program?
Companies that invest the necessary resources can do this. However, it requires commitment, change management and support from management. Many companies build up an excellent pool of temporary workers on their own, but this requires an enormous amount of internal resources.
Bring external partners on board
Alternatively, you can look for an external partner to provide you with the expertise, process excellence and technological guidance you need. With ready-to-use solutions, companies can quickly achieve their goals and adjust their spending methodology accordingly to ensure legally compliant employment of temporary employees and save costs. In addition, external partners have extensive experience with companies like yours and therefore know exactly which approaches lead to success. This will help you achieve exactly what you were aiming for.
If you choose an external solution, you should first establish a baseline against which to compare the costs of your temporary workforce. This allows you to develop clear metrics that serve as the basis for a continuous improvement process that not only saves costs, but also improves the time spent filling positions, the quality of applicants, and the overall result.
Find the right solution
Which model is best for your company? There are several options: in-house service providers, managed service programs or payroll services. To determine which solution best suits your needs, you'll need to analyze your situation yourself, but many providers are happy to help you. The most important thing is that you don't forget to carefully examine and compare all the solutions to find the one that suits you best.