It is reported that Americans spend $4.3 billion on St. Patrick’s Day. That sounds like an incomprehensible amount for one day.
In order to create $4.3 billion of revenue, many cost factors are involved. Besides product cost, labor cost is a major component. The ability to determine your level of labor costs, utilizing a permanent and contingent workforce will improve your ability to succeed.
For those of us who are in the human capital segment (i.e. staffing/contingent workers), we support these companies that produce products to create this $4.3 billion. Contingent workers are critical to the success of companies who have fluctuations in their business cycles.
When most think of the cost involved to provide contingent workers for fluctuating labor requirements, they think of an hourly rate. In actuality this is only one portion of the costs. The cost to the staffing company begins long before the individual is assigned to the client. It begins when the staffing company begins to recruit employees for such needs. Next comes the whole on-boarding process, with separate costs, such as background checking, drug testing, physicals, employment verification, interviewing and operational costs. Once the potential candidate is ready for an assignment, the staffing company has already invested dollars.
Once the candidate is assigned to a client and the hourly wage and bill rate is negotiated, additional costs are involved. Besides an employee having taxes withheld from their check, the company is also required to pay their portion of payroll taxes. Also, a potential major cost factor not realized by many, is the cost to provide workers’ compensation coverage to their employees. This cost varies by the job category along with the type of business the client is providing. Additionally, individual states treat staffing services differently from the client and may assess additional costs. Mandatory taxes and insurance are costly.
Until recently, these were the costs associated with providing a candidate to a client. But, these costs are increasing every day. Today staffing companies have additional costs for the recently enacted Affordable Care Act. Mandatory offering of insurance coverage is accompanied by a great deal of administrative costs. Additionally, individual cities and states are imposing legislation for all companies, including staffing companies, to provide Paid Sick Leave benefits to their contingent workforce.
A company’s ability to manage its permanent and contingent payroll costs is a major factor for a company to profitably survive. The percentage of contingent workers continues to grow within the U.S. economy – even with a higher hourly cost. But the key to success is finding the balance.
In order to find your Pot of Gold, find your balance between your permanent workforce and your need to utilize a contingent workforce.