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For us I have found that if a person is worthwhile we will find this out usually within the first 90 days. Where we find the cost savings are:
1. The time saved in the screening process; phone calls, interviews etc.
2. The many that leave within the first 90 days create additional exposure to our state unemployment rate; in that we pay 4.5% on the first $9k of payroll as well as persons on our payroll that move on are able to draw unemployment on our "account".
3. Many of the minor injuries that we have experienced occur within the first 90 days thus limiting our worker's comp exposure.
These three issues are worth paying the additional markup with a staffing service. Currently our markup with the staffing service that we work with is 1.45...or 45% above the actual hourly rate. Within the 45% a staffing service must cover the employers match portion of the Social Security which is 7.65%, they must cover the employers portion of Medicare which is 1.45%, they must cover their unemployment and for that number will use mine at 4.5% (keep in mind this only up to the first $9k of payroll), they must cover the workers compensation and for that we will use my rate 5.25%, and they must cover the FUTA (federal unemployment) which is .8%. Add all these %'s together and my actual cost for an employee is 19.65%. This leaves 25.35% on the table (without factoring in general liability) that the staffing service service makes from the beginning. Let's say the staffing service is large enough they may possibly have a lower work comp rate and a lower unemployment rate. For practical purposes let's just round it to 25% that they are making on each employee.
My cost to bring someone on my payroll who is being paid $10 per hour is $11.97 per hour. 40 hour week = $478.80
My cost with the staffing service is $14.50 per hour. 40 hour week = $580
Difference = $101.20
Difference at 12 weeks = $1214.40
Essentially what I've done is paid the service $1214.40 for that employee.
If we keep them on the staffing services payroll for the next 20 weeks (our average season being 32) I've paid an additional $2024 for a grand total of $3238.40.
For us, we averaged around 10 employees last season. If I would have maintained all 10 on the staffing service payroll I would be looking at $20,240 in additional staffing service expenses. At that point it hardly seems worth it. We can handle payroll in house or hire a payroll service at a fraction of the cost.
A cost effective scenario for an employer would be a situation where you have a staffing rate for 30-60 days and then an employee leasing rate after the initial period.
I used to work for an combination staffing service and employee leasing service 10 years ago and we would negotiate deals where our staffing service would charge let's say 45% for the first 30 days to cover the costs of locating and interviewing employees for the position and then after the 30 days we would charge cost(19.65) plus 3-5% for the employee leasing aspect and then a further reduction in the rate would come into effect once limits on Suta at $9,000 (state unemployment) and futa at $7,000 (federal unemployment) have been met.
Completely different rates would apply to overtime since in Nebraska workers compensation is applied to half the amount of overtime payroll.
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