Employing a staffing service at your warehouse
Tuesday, January 27, 2015
Using staffing-service employees is one way to hedge the risk that warehouse employers will be sanctioned for noncompliance with government regulations regarding employment.
For this reason, the use of staffing services in warehousing will experience steady growth in the coming decade. Regardless of politics, it seems likely that governments will expand their role in defining and limiting the use of human resources.
It is no accident that European employers are far more likely to use staffing services than Americans. In some parts of Europe, it is nearly impossible to release an employee once he or she is hired. When the cost of employment becomes prohibitive, the staffing service provides a way to outsource the process.
Our first consideration is quality. Consider the ways in which quality is appraised and monitored. Price is also an issue, and we will examine billing practices, as well as price and markup.
Quality and productivity
In choosing a staffing service, quality is far more important than price, and this opinion is universally held.
One component of staffing quality is fill rate. If the staffing service promises 30 workers reporting for duty tomorrow morning, how many people will actually show up?
Closely related are retention and turnover. If 30 people are requested for a two-week special project, how many of them will stay for the duration? A 70 percent retention rate is a stretch goal for one respondent.
Quality of the people who are sent to work for you is obviously of great importance. How far does the staffing agency go in completing background checks? Do these examinations cover all 50 states, or just the community where you are located? To what extent are applicants tested for the presence of illegal drugs?
Productivity is also a concern. Most users expect part-timers to reach a productivity level that is nearly equal to that achieved by full-time employees. An accuracy rate of 99.8 percent may be expected, and that is virtually the same as the accuracy goal for full-time employees. In other words, you should have every reason to expect that the staffing-service employee will work just as effectively and perform just as accurately as the people on your full-time staff.
Higher-volume users of staffing ask the provider to have a representative on site. That is not necessarily a full-time position, but when there is a sizable crew of people, the onsite representative is there to supervise the process of integrating the new workers into the operation.
Timekeeping may be an issue. Does the staffing service use a time clock, or is there a way to use an existing clock at your workplace? Timekeeping obviously affects the accuracy of invoicing, and the buyer may ask what the staffing service does to be sure that billings are accurate and capable of being audited.
References are another means of testing quality. Will the staffing service provide an ample number of current clients who are willing to be interviewed about their experience in using temporary employees?
The culture match is particularly critical for buyers who pursue a "temp to hire" strategy. Will the temporary worker understand the environment, including expectations for safety and quality?
Testing is important, not only for drug use, honesty and health conditions, but also for a decent match of talent and culture. One user asks vendors to provide detailed descriptions of pre-employment testing.
Temp to hire
The phrase used to be "temp to perm," but the staffing industry soon recognized that this was a dangerous influence on expectations, since no job is guaranteed to be permanent. Some users seek to enlarge their full-time staff by promoting temporary workers into permanent positions.
In any case, use of staffing-service workers provides a chance to "test drive" without taking the risk of hiring of unknown people as full-time employees.
The temp-to-hire strategy has advantages for both buyer and seller. If you work for a staffing service, you might be attracted to the temp-to-hire program because it offers a path to full-time employment. At the same time, that path is available to only the best workers, which means that every temporary worker must provide outstanding performance in order to be considered for promotion to the full-time staff.
The best buyers are trying to build a lasting relationship. They hope to find a staffing service that collaborates effectively with both operations managers and human resources people. They communicate their expectations and share their standards with the vendor. This means that they reveal the internal units per hour (UPH) standard in the expectation that the vendor provides people who can reach the same standard.
The peak season issue
Perhaps the most common reason for using staffing services is the need to meet temporary requirements during the most active production or shipping season. If full-time employees are retained to meet the peaks, layoffs are a regular occurrence. The result is avoidable hiring and training expense, as well as the morale factor of repeated layoffs.
When you know that your operation will have substantial peaks and valleys, procurement of temporary workers from a staffing service may provide the best answer.
If you work for a staffing service, you might be attracted to a seasonal job because you really do not want a full-time position. Some workers enjoy the independence and the variety of staffing duties. Some may choose to only accept an assignment for certain seasons of the year, reserving other seasons for different activities.
The external risks
There are two significant external risks:
- Benefit costs, primarily healthcare, are increasing, and the rate of increase is likely to accelerate.
- The executive branch of the federal government is a strong ally of labor unions. Union pressure on the warehousing industry will increase.
In addressing the first risk, the buyer of staffing services should ask what types of coverage are offered to staffing-service employees. On those that are mandatory, determine whether the staffing company can buy the services at a lower cost than you can.
Because the staffing service has a larger number of employees than most warehouses, economies of scale may create a purchasing advantage for the staffing service provider.
In its attack on the industry, here is some of the language used in a labor-oriented white paper:
While port truckers have emerged as the face of the new economy, warehouse workers in the Inland Empire have been largely invisible. Packing and unpacking goods for the biggest retailers in the world, they work in the shadows of the subcontracted economy.
Routine wage and hour violations are hard enough to prevent in a traditional workplace. In these warehouses, the third-party logistics company in charge of worksite operation relies on shifting layers of subcontractors, including temporary staffing agencies and professional employer organizations (PEOs) to minimize responsibility for basic labor standards.
A recent lawsuit brought by warehouse workers alleges that the employer "systematically stole wages from workers for years with confusing and deceitful payment schemes" ... As one study noted, a decade ago, these warehouses had 80 percent direct employees and 20 percent temps. Today, it is just the opposite. Working conditions like these undermine standards throughout the industry.
Organized labor will use these and similar issues in its campaign to increase membership. The warehousing and staffing industries are an obvious target.
While price is less important than quality, some buyers insist that the staffing service describe the markup. In other words, if the selling price is $15 per hour, how much of that $15 is paid directly to the employee? One buyer of staffing services reports that the typical markup ranges from 25 percent to 60 percent.
Accuracy and clarity in invoicing is important. Are the vendor's bills presented in a timely and accurate fashion, and are they easy to analyze and understand?
Both buyer and seller
There are a few logistics service providers who have diversified by entering the staffing business. In this role, they may be both a buyer and a seller. They provide workers for their own use, and they also sell such services to other companies. When they fill both roles, they attain a distinct understanding of the issues involved in providing staffing services.
Because the logistics service provider has ample experience in hiring warehouse workers, that experience represents a differential advantage over the generalist staffing service. Furthermore, because the providers are in a similar business, they are more likely to be successful in providing a good culture match for their outside clients.
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