[gardengirl1105]

I've been in business for 11 years now with employees for the past 6. I go through the classified ad, application and interviewing process every spring and get few qualified candidates.

I'm currently living by myself in a not so great neighborhood and my company is ran out of my home. For me it's a security issue when I do the spring hiring thing because joe public has to come to my house to get an app. and for interviewing.

This year I decided to try hiring a staffing agency to find people for me. I have the final say and final interview,but they do the initial screening, background checks, drug testing, etc. for me and I can sit back and read the app.'s that they send me as well as view video interviews via email to screen out people before I pick out the best ones. They provide health, dental and vision insurance for every employee starting day 1. I won't be wasting my time answering phone calls from the classified ad and trying to screen people myself. If I choose someone who doesn't work out, the agency will take care of it for me if needed and replace them.

I'm hoping that using a staffing agency, I will be better able to weed out the bad candidates and focus my time on the good ones. Does anyone have any experience with going this route to find employees?

[Nebraska]

I've done this and still do it. Once you find the person at the staffing agency that you can clearly communicate the qualities of the desired individual with it will save so you much time. They stay on the staffing co's payroll for 60-90 days and then are transferred to our payroll. To transfer them to our payroll after 60-90 days is cheaper in that it shields our unemployment rate, our worker's comp rate etc. After that initial 60-90 day period the cost benefit begins to significantly decrease.

Your scenario sounds like they are more than a staffing agency...sounds like employee leasing / PEO services with a staffing department....as such worker's comp, payroll taxes, and unemployment taxes are all covered. Sounds like Aurstaff?

[gardengirl1105]

Yes, they do cover work comp., gen. liability and pay the employment taxes for me (med./soc. sec./unemployment). I'm looking forward to trying this "new" (to me) approach to hiring and hope I find some worthwhile people. I'm not sure about the cost savings you were mentioning going downhill after 60-90 days. Could you be a little more detailed about that and why it goes downhill for you and your company? Just curious if that's something I should be considering when deciding to "hire" the temp's onto my payroll or keep them on the staffing agency's payroll.

[Nebraska]

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.

[gardengirl1105]

Well, my head is spinning a bit. I tend to get a little lost in the numbers sometimes....part of why I hate doing estimating and let someone else do my accounting. ;-)

Anyway, I tried to figure out what I would be paying a $9/hour employee adding in my cost for gen. liability, work. comp., employment taxes, unemployment, advertising and then of course the time I would spend recruiting, screening, interviewing, etc.. I came up $12.50/hour.

This agency I hired also has a rate of 1.45 which brings my payout to them to $13.05 per hour for the same $9/hr emplolyee. Or at least pretty close to it. When I look at this number I know that over time I'll be adding an expense to my company. However I think (or I hope) that the benefits including the employee receiving health/dental/vision insurance and not having to lay anyone off during our off season would be worth it. And definately the effort of screening out those who will not work out.

I too have found that if someone is not going to work out they're usually gone within the first few months if not sooner. SO, I hope I can find some folks who will become more long-termers and then I can hire them onto my payroll. My company is pretty small even though it's been going for so long. I typically start out the season with 3 full time employees Plus myself. By the end of June I can usually stand to lose one of them, and by chance that usually happens as someone will flake out or I'll end up letting them go due to their poor conduct. July and August are our slower months during the season and then it picks up again.

I know I will need to be a little more diligent with watching overtime as I really don't want to end up paying overtime to the staffing agency if I can avoid it.

Another thing I question is that I was planning to start to pay MY employees for holidays this year (anyone new would have to work for 3 months before they would qualify). Do I offer to pay the "temp's" this benefit as well and end up paying the extra $ on it that the staffing agency will require, OR do I not pay any temps for holidays or offer any of my other company benefits until I decide that they are worth hiring onto my payroll? I want them to know that there are perks, and encourage the good ones to want to stick around, but where do I draw the line with my expense end of things in order to keep the good ones?

Thanks!

[Lawn Lad]

Thanks Nebraska for the break down, this is helpful.

[fakie99]

what staffing agencies are you using - are they national? i have considered this for a while. if the staffing agency provides medical, dental, etc., what happens if you end up taking the employee on direct - they will most likely be expecting that coverage to continue. and what type of cost is associated with this service - it sounds like it is an hourly surcharge.

[gardengirl1105]

As I understand it, the health, vision and dental insurance may be "taken with" the employee if I should decide to hire them direct onto my own payroll. They can choose to keep it for themselves and pay for it, or I can offer to pay for all or part of the insurance. I don't know any of the details of the insurance and what exactly it covers for the employee, but I figure some insurance is better than none at all.

The company I hired is called Excel Personnel. I am in Lincoln, NE, and I believe they are based out of Kansas City or near there so I know they at least are around in the midwest.