With record low unemployment numbers being reached in many markets in the United States and a push by parents to guide their children into technology or professional "white-collar" jobs, it is clear that construction companies should seriously take proactive measures to become more aggressive in their recruiting strategies.
Many major cities around the country are experiencing unemployment rates between 2 percent and 4 percent, making it an employee's market. In the past year, unemployment has fallen in 80 percent of U.S. markets with more than 50,000 people on payrolls. The question for you as an employer is, do you want to hire one of the last 2 to 3 percent of people who somehow remain unemployed during a time when almost anyone can find a job? Many of these prospective hires are unemployed for a reason, including bad work ethic, negative attitude toward work or personal habits that prohibit them from having continued employment for any length of time. Think of the costs you have invested in an employee-wages, taxes, healthcare, the cost and risk associated with workers compensation and the amount of time and money it takes to interview prospective employees and finally hire. The burden is larger than you think.
If you could spend less than a dollar per hour for new hires and receive the following benefits, would you?
- Your FICA, unemployment taxes, healthcare and workers' comp costs covered and your risks minimized and even eliminated
- You employ the right employee without the long interview process and costs involved
- If the employee doesn't work out, you make one phone call and replace that employee immediately
- You have the right to convert the employee at anytime as an official company employee
- You minimize the uncertain risk of workers' comp that can impact 100 percent of your premium
With that said, if you are not willing to compromise your hiring standards for the bottom of the barrel employee, then you must develop a strategy that appeals and attracts qualified candidates from other industries or companies. One of the strategies is to partner with a staffing firm who specializes in recruiting, interviewing and providing you the right employee. Now I know what you are saying-"Staffing firms charge a mark up on the hourly rate, and I'm not willing to pay $4 extra an hour for a $10 an hour employee." But what does that $4 an hour extra do for you?
Hiring an employee on a temporary basis with the right to hire them permanently releases you from the responsibility of providing healthcare, workers' compensation, unemployment taxes, federal and social security taxes and the risks associated with those costs for that employee. The staffing firm assumes those costs and the risk until you officially hire the employee permanently. The benefit and flexibility with using a staffing firm is that you can choose to keep the person with the staffing company as long as you like until you decide to make them a permanent employee with your company.
There are two real issues you must think through when looking at your costs and risk:
- What will you actually pay for the use of staffing services?
Let's look at an example of what this means to you in dollars. Assuming you would pay a skilled worker $10 an hour and your rate to hire that person through a staffing firm is $14 an hour, you would pay the following on an annual basis based on a forty hour work week:
Option 1-Hiring and paying the employee directly @ 10/hour
Wages - $20,800
Taxes (FICA and Unemployment) - $1,664
Healthcare - $3,600
Workers' compensation - $1,830
Total cost of employee with workers' comp risk - $27,894
Option 2-Paying a staffing firm direct with minimal risk @ 14/Hour
Wages, taxes, healthcare and workers' comp - $29,120
Net amount you actually pay for staffing services over the raw cost of wages, taxes, healthcare and workers' comp - $1,225
Cost per hour to use hiring services - 59 cents
(Assumes forty hour work week for forty-two weeks)
2. The risk bad hires can be on your workers' comp program
Bad hires are a bad insurance risk. If you have two or three new hires turn up with workers' compensation claims that will significantly increase your experience modification factor on your workers' compensation program. In most states, you will pay for those bad hires for three years on your program.
Here is an example:
Member with twenty five employees, premium of $50,000 and a 1.00 experience mod factor- If this member were to have claims from new hires that resulted in an increase from 1.00 to 1.10 on their experience mod factor, their premium would increase $5,000 to $55,000 for the next three years, and the new hires may never work for them again. That is $15,000 in additional cost over the next three years, a lot of risk for people who haven't proven to be solid employees yet.
Rates and premium will differ by state.
Working with a specialized staffing firm can help you minimize your risk and give an employee an opportunity to prove himself to you before you take on the cost and risk associated with hiring a new employee.
Construction Business Owner, November 2006
