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Temporary workers offer convenience
and flexibility -- for a price

Cost of temp workersWhether you need to beef up an assembly line for a short-term project, produce a customer database or just cover for a vacationing receptionist, temporary staffing allows you to expand and contract your work force with the ebb and flow of your business.

With temporary staffing, you only pay for workers when you need them and eliminate the expense of recruiting and training. But such just-in-time staffing doesn't always come cheaply.

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"Typically, depending on supply and demand, the service company markup over pay rate will run from 50 to 80 percent for a non-volume buyer," says Marc Goldman, vice president of sales and marketing for AppleOne Employment Services. The markup is not pure profit for the temp agency -- it helps cover costs of recruiting, testing, training and benefits.

Other factors that will influence your costs include location, job category, the size of your request and which company you call.

Companies that hire more than 50 temporaries at once can use exclusivity as a negotiating tool, according to Greg King, industrial services manager for Manpower's Janesville, Wis., office.

How to get the most from
your temporary employee
  • Write a detailed description of the key functions the temp will perform. Include a general overview of your operation and any necessary passwords and file locations.
  • Appoint a full-time employee as your temp's mentor to show your temp around, make introductions and answer questions. Temporary workers who feel that they are part of the office tend to be more productive.
  • Plan in advance where the temporary employee will be working. You are paying for every minute wasted finding and setting up a station for your temp.
  • Check with your temporary employee every 15 minutes during the first hour and a half of service. Investing a few extra minutes early in the day will guard against mistakes resulting from misunderstanding.

Businesses requiring 100 or more employees should find out what a staffing service will do if it cannot fill the order from its own temporary pool. Some staffing services partner with competitors to fulfill large orders. "It's always best to call a couple of services in a case like this," says Holly Lewis, president of the Florida Staffing Service Association. "That way, if one firm falls short on your order, you will have another one to help pick up the slack."

Different agencies for different jobs
Staffing services come in all shapes and sizes. Some specialize in office administration, others in technology. Still others cater to the needs of a particular professional area. Some companies are generalists offering assistance in many areas.

Consider the position you are trying to fill as you talk to representatives from different companies. Remember, the lowest hourly wage does not always result in the lowest bill. While a firm specializing in a particular profession may charge a slightly higher hourly fee for their employees, the skills and experience their people bring to your workplace may allow them to actually save you money by getting the job done faster.

Begin your search for a temporary service provider before you actually need one. This gives you time to research your decision and prevents any last-minute glitch from disrupting your business. Some companies require credit checks on new accounts, a process that may take a day or two.

Start by clearly defining your staffing needs, including training, skill levels and just how long you will need the temporary service. Talk to representatives from several companies before narrowing your choices down to one or two.

Questions to ask

  • How long has the firm been in business at this location?
  • How long have the agency manager and permanent support staff been with the firm?
  • How does the company recruit temporary employees?
  • What kinds of testing, preliminary interviewing and background checks does the company conduct?
  • How many workers specializing in your field does the company have on file?
  • What kind of benefits does the agency offer employees?
  • What kind of training is available to employees?
  • Will the staffing service compensate your company if a temporary employee is unsatisfactory or takes longer than expected to train?
  • Will an account executive be checking on the temporary worker's performance?
  • What is the billing rate?

You can find staffing agencies in the Yellow Pages and through the National Association of Temporary Staffing Services and the National Association of Personnel Services. These national organizations include published codes of ethics and searchable membership databases on their Web sites.

Are they really temporary?
From an employer's point of view, a big advantage of using temporary workers is that you don't have to pay them benefits, withhold income taxes, withhold and pay Social Security and Medicare taxes, or pay unemployment tax on wages.

But be cautious. The dividing line between temporary workers and employees is less clear than it used to be. The IRS has established a 20-point checklist that employers must review to determine who is an employee. It's an important distinction -- court cases have awarded some workers big settlements because they were wrongly excluded from benefits.

In general, the more control you take over temporary workers, the less you are able to exclude them from benefits. The IRS has published a lengthy set of rules to help employers decide whether a worker is an employee or a contract worker.

-- Updated: April 24, 2002

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See Also
Contractor or employee? A tax tip for employers
The boom in contracting employees
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