Most economists are now saying the economic recovery has begun and the recession may even be over. At my staffing firm, Professional Staffing Group, we have seen a noticeable uptick in hiring of temporary employees by our clients over the past couple of months, and even more hiring is forecasted by clients. Historically in past economic recoveries, hiring of temporary employees precedes general hiring, and temp hiring is often viewed as a leading indicator of the overall employment market.
Here's why this pattern has proven true over past decades and recession/recovery cycles:
1. Flexibility: Companies are not 100% sure that they need to hire a person permanently. During the recession many companies cut staff back to the bone, so they need help handling the workload when business increases. But because the company is uncertain if business will stay at the higher levels, they do not want to commit to a permanent staff. Hiring a temporary employee allows them to get the work done while maintaining flexibility.
2. Lack of Human Resource Department Resources: Many Human Resource departments were cut back during the recession, so when hiring needs arise, the HR departments just don't have the capacity to handle it.
3. Speed: For routine needs, staffing firms can deliver workers for daily, seasonal, or project assignments in a timely manner. Since their only business is hiring, a staffing firm is inherently more efficient than the traditional approach: advertising a position, wading through stacks of résumés, running background checks (if necessary), and then having to wait two weeks or more for new hires to start.
4. Try before you buy - Temp-to-perm: Temp-to-perm is short-hand term for hiring a temporary employee with the option of offering the job to that employee on a permanent basis after a trial period. While this practice can make sense in any type of employment market, it is especially attractive when the economy is emerging from a recession. In a hot employment market, certain highly qualified candidates might not consider temp-to-perm assignments, whereas these same people might be open to this approach in a more difficult employment market.
In addition to providing temporary employees, staffing firms offer other services to clients to help them with their employment needs coming out of a recession:
* Contingency Search: If you are seeking to hire someone for an open position, you may choose to perform a contingency search with a staffing firm. Staffing firms are paid only for successful searches; payment is typically a percentage of the candidate's starting salary. You should expect a refund of the fee or a replacement if the candidate does not last for a specified period of time at your company; this is a motivating factor for companies that are budgeting carefully as we emerge from the recession.
* Retained Search: This type of search is similar to a contingency search except that you "retain" the staffing firm by paying some or all of the fee before the agency begins looking for candidates. In general this service is more prevalent when recruiting higher-level candidates (e.g., executive positions). The advantage of retained search over contingency searches is that the staffing firm is more committed to the search, which makes sense for companies that are low on human resources staff and really need the extra outside focus. The disadvantage is that you must pay before the agency begins searching and you will not likely receive a refund if you find a candidate on your own.
* Recruitment Process Outsourcing (RPO): RPO means that the entire process of recruiting for a particular skill level is performed by a staffing firm. For instance, a company might outsource the recruiting for support staff while continuing to recruit in-house for managerial and core staff members. This allows the company's managers and human resources staff to focus their efforts on the company's core business while also ensuring a supply of high-quality staff members for all positions; another good option for companies that are rebuilding their HR or other departments and may not have a lot of available resources.
* On-site management: This refers to an arrangement where one or more of the staffing firm's internal employees will work at the client's office. The staffing firm may provide temporary staffing, contingency search, or any number of other services. This type of arrangement is desirable in situations where the client company has a high volume of recurring staffing needs and in situations where a large amount of coordination with company hiring managers is desired.
* Human Resource Consulting: A staffing firm advises clients on a broad range of work force solutions, including strategies and services for optimizing staff and skill levels, employee productivity, training, and recruitment and retention. These professionals can help you think about how your strategy in each of these categories has changed, or needs to change, as a result of the recession.
* Offshore Outsourcing: This is also called "offshoring." When using this type of staffing, the organization outsources certain jobs or tasks to overseas companies. This type of staffing is attractive because it offers a cost savings of up to 50% as compared with salaries in the United States, and it will also save you significant amounts of management and training time you would need to invest in a new in-house employee. Offshore outsourcing offers employers a greater availability of candidates who have in-demand skills.
* Managed Services: In a managed services arrangement, a staffing firm assumes full responsibility for operating a specific client function (e.g. call center) on a continuing basis. This could be a solution for companies that have cut back staff so far that they need to rebuild from scratch.
* Outplacement: Outplacement services are often necessary during a recession due to layoffs; this is when a staffing firm provides career transition services, including career counseling, testing, training, interview coaching, and referrals, to assist a client's separating employees.
* Professional Employer Organization (PEO or Employee Leasing): PEO means that a business places all or most of its work force on the payroll of a staffing firm, and the staffing firm assumes responsibility for payroll, benefits, and other human resource functions; a catch-all solution for companies that have cut back on payroll or other HR staff.
* Payrolling: Another time and money saver for companies is when a staffing firm places employees recruited or hired by the client on its payroll. Payrolling is distinguished from PEO arrangements in that the employees generally are on temporary assignments and make up a small portion of the client's work force.
The challenges that face companies at this turning point are plentiful. As the economy emerges from a recession, utilizing staffing firms to supplement your workforce can produce many benefits for your business, allowing a smoother rebuilding process and a better foundation for future growth.
Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions . He is also the Treasurer of the American Staffing Association. He can be reached at Aaron.Green@psgstaffing.com or (617) 250-1000.
About HR Columns
Featuring human resources advice and columns from The Boston Globe's On Staffing and Hire Authority writers.