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Hiring temp or contract workers can be a great way to quickly fill positions with skilled workers.
In the current talent market, taking advantage of these types of workers can help businesses avoid significant losses due to a short supply of candidates.
However, it is still important to approach this method of sourcing workers carefully, as there are mistakes that can be made. To help avoid issues, JobAdder outlined five common blunders that leaders make when hiring temp workers.
1. Not understanding the commercial realities of a temp business
According to JobAdder, one common misunderstanding is the cash flow that happens when hiring temp workers. Some leaders don’t understand that these people who fill temporary spots in the business will need to be paid before clients pay the business, which can create cash issues for companies.
“A lot of agency owners could not define the difference between a temp margin and a temp mark-up. So, that’s one of the big risks is a lack of understanding of the commercial realities of our business,” said recruitment adviser Greg Savage.
“You pay your temps, which you have to do by law before your clients pay you. You’ve got a hundred temps out, you might have a payroll of $150,000 that week, for example, and then the clients don’t pay for two weeks. And then one of your biggest clients doesn’t pay for six weeks. That’s very common. You’re funding that. That’s another reason why you need a strong permanent business, as it’ll help fund your temporary business.”
“A lack of understanding of the financials and cash flow is a huge issue.”
2. Not building individual relationships with your temp workers and contractors
Employers may be unaware of the significance of building relationships with temp workers.
JobAdder noted that a healthy and communication-friendly relationship between both parties could ensure repeat business and long-term collaboration, setting businesses up in case of future insecurity.
Angela Cameron, founder and chief executive of Consult Recruitment, commented: “The worst loss you can make in a temp business is to lose your contractor and have them walk down the road and turn up at one of your clients through another agency. We call that a double loss. So that’s the last thing that you want to do.”
3. Missing opportunities due to a lack of proactive business development
JobAdder said temp workers can bring business opportunities with them, as connections are plentiful in the world of temp recruitment.
“Temps will be your advocates. They will send their friends to you. They will be your insiders, your spies in the market. If they prefer to work for you, they’ll give you the first shot,” said Mr Savage.
“If you’ve got a bank of temps that you keep recycling into jobs all the time, that’s just so much more effective and profitable than having to re-recruit people, particularly in a tight talent market where you can’t find people.”
4. Ignoring compliance or other legal responsibilities in temp recruitment
Businesses should never put compliance responsibilities to the side; temp recruitment is no different.
Organisations new to the utilisation of temp workers may be unaware of the legal responsibilities that come with it, making it all the more important that those who need to be in the know are kept up to date with responsibilities.
“If something happens to them, whether it’s sexual harassment, bullying, unfair dismissal, injury or other issues, it’s your responsibility. You are their employer, so you need a wide range of insurance and processes, and you need to make sure that you’ve done your due diligence,” Mr Savage explained.
“You need to go out and inspect the client’s sites before you send temps out. If you don’t do that, and the temp chops their finger off or falls down the stairs, your company could be sued into liquidation, so there are risks that you shouldn’t be taking.”
He continued: “There are also legal obligations around tax and superannuation/pension and a diverse range of leave entitlements. Running a temp business requires resources and processes. You’re going to need better accounting, credit control, payroll and technology.”
5. Dabbling in temp recruitment without the right support and investment
JobAdder advises that companies do not just treat temp recruitment as “something that recruitment agencies can just dabble in on the side”.
As with the legalities involved, understanding how it works are getting the right support is crucial to the success of implementation.
“I love temp; I think it’s very important. It takes special skills to do it, so don’t think it’s an easy little add-on that you’ll dabble in. Don’t dabble in it. Do it seriously. Get the right advice, set up the right processes and compliance systems, then hold your nerve and really go for it once you’ve worked out that there’s a market there that you’re aiming for,” said Mr Savage.
Ms Cameron further commented: “You basically need good support around you. If you’re serious about building a temp and contract business, you do have other obligations. You’re at the coal face of people’s lives a lot more than in permanent recruitment, where it’s a bit more transactional.”
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The practice of actively seeking, locating, and employing people for a certain position or career in a corporation is known as recruitment.
Jack Campbell
Jack is the editor at HR Leader.
