There are many reasons why the “temp to hire” recruiting strategy has remained popular in all economic environments.

The ability to “try before you buy” is a compelling benefit of the temp to hire recruiting strategy that resonates with both employers and job seekers.  No one wants to make a mistake that is not only costly, but often difficult to unravel.

But there are other dollar and cents reasons why companies use the temp to hire staffing model that don’t always get articulated clearly.  Temp to Hire staffing models save employers $$$ and my guess is that if you’re reading this blog, you’re all about saving $$$. 

There are many staffing / recruiting costs that get embedded in an employer’s operating budgets – often hidden until the need for reducing staffing costs comes to a head – like now!

Our Service and Solutions team regularly helps PACE clients do the apples to apples comparison between the traditional direct hire staffing model and the temp to hire option.  What we typically uncover is that even though there are situations where an employer might elect to hire direct, when it comes time to lower operating costs, the temp to hire staffing model delivers.

Here’s a short list of ways the temp to hire (TTH) model shaves hidden costs from your operating budgets…

#1 The Temp to Hire model eliminates the high costs of sourcing, recruiting and hiring employees.

According to the Society for Human Resource Managers (SHRM) employees pay out on average just under $4k each time they hire.  These costs include the monies spent to retain the staff needed to prepare and publish job postings, review resumes, schedule and conduct screening and evaluation interviews, conduct reference checks and go thru a multi-step onboarding and compliance process.  Add to those internal costs the money paid to post jobs, initiate third party background checks and other compliance requirements, etc. and it is easy to understand the “high costs of hiring.”

Using the temp to hire recruiting model, recruiting costs are significantly reduced, in some cases completely eliminated.  Temp to Hire clients pay one bill rate for each hour worked over the duration of the “auditioning period” after which the employee is typically able to transition to the employer’s payroll for a minimal if any conversion fee. (Each agency has their own policies for transitioning one of their temps to your payroll.  Make sure you know what those costs are as part of your agency selection process)

And for those of you who think you are paying a premium for the temporary employee while they are auditioning, you might want to check out our blog on the relative costs of a “temp” compared to a core hire.  You might be surprised by which type of employee costs more.  

#2 During the Temp to Hire auditioning period, you only pay for hours actually worked …

…no paid time off, no vacation accruals, no costs if an employee is late to work or has to miss a half day for a medical appointment.  While the ability to provide full PTO benefits to an employee right out of the gate is a “nice to have” benefit offering, it can also be a costly benefit to provide if the employee doesn’t work out.  Keep in mind that your temporary staffing agency will be administrating and paying all Washington State mandated PTO benefits…. but they are managing and funding that benefit, not you.

#3 Your temporary staffing agency partner absorbs all the impact of unemployment or injury claims on your payroll tax rates – not you.

If an auditioning employee is injured at work, the costs of that injury impact your agency’s experience rating not yours.  If you decide not to hire an employee following their audition, either because they weren’t right for the job, or the business reasons for hiring dissipated, the costs of their claim for unemployment impacts your agency’s experience rating, not yours.

Many hiring managers are not that familiar with the impact that mandated state and federal payroll taxes have on total employee costs – adding anywhere from 12-18% of the employee’s pay rate to their direct costs.  Your employer’s payroll tax rates are directly related to their  “experience rating” – the number and $$$ attached to injuries or unemployment claims when filed.  When experience rates escalate, so do payroll costs which are costs  attached to your entire workforce (not just a specific employee) – no small deal.

For example, if your annual SUTA rate goes up by just a half percent, and you have a workforce that is costing you $1,000,000 a year, your annual payroll tax costs would have increased by $5000.

By outsourcing the impact of injury or unemployment claims to a temporary staffing agency, you can directly impact your employer’s overall staffing costs in very significant ways.

#4 The Temp to Hire model ensures that the time it takes for you to add talent to your organization or team – either at the time of need or when it’s time to hire – moves quickly. 

As all HR managers and recruiters know, the faster you can get talent in place when there is the need, the lower your operating costs,  The temp to hire staffing model not only reduces the amount of time it takes to get talent in place, avoiding all the steps in the direct hire staffing model,  but when its time to hire, the organization has a ready source of candidates – able to hire within days not weeks.

#5  On the converse, the time and steps it takes to reduce your talent commitments are significantly reduced…making it easy to up-size AND down-size!   

The recent situation with Covid is the perfect example. Our clients with auditioning employees in place in late February or early March (2020) were able to move quickly to eliminate those interim roles, and downsize their operating costs to match declining revenues.   While the need to downsize a workforce is never pleasant, the hard truth is that if your downsizing can be focused only on temporary employees, it can be executed quickly (without any severance requirements), plus will protect your core group from much more costly (short and long term) layoffs.

There is a reason why most enterprise level employers embrace staffing models that tend to keep a certain percentage of their workforce (ranging anywhere from 5 – 35%) working in contingent or flexible roles.  The benefit of being able to scale employee counts up or down in accordance with business needs, allows these large enterprise level companies to compete with their smaller, more nimble competitors. On a much smaller scale, small and medium sized companies can do the same.

#6 Giving both the employer and the job seeker the time to “try before you buy” – reduces hiring mistakes, improves the quality of hire, enhances employee retention.

The impact on your operational performance from these benefits alone are significant cost savers.

As we head into the Build Back period, post Covid, we think the temp to hire staffing model will provide Northwest employers with the opportunities they need to reduce their operating costs and improve their bottom line.

It is a model that is all about preserving flexibility – giving employers quick access to the talent (skills and expertise) they need to respond to volatile business needs, while delaying their fixed commitments until the timing is right – the business stabilizes.   We think this is a smart way to BUILD BACK BETTER!

Want to learn more?  Get a free consultation on the right temp to hire strategy for you?  Contact our Partner Services and Solutions team at 425-637-3312 or e mail us at partnerservices@pacestaffing.com