While millions of jobs are being lost in the abysmal economy, a lower-profile trend involves companies — especially smaller ones — hiring temporary workers in response to the crisis.
Employers that are determined to keep fixed-staffing costs at a bare minimum may need to expand their work forces from time to time, as dictated by, say, short-term spikes that might reflect the demands of a particular client or customer. Some companies, being extra careful about full-time hiring that might not be worth the investment, find it appealing to first try employees out, with no obligation. For other firms, extraordinary human-capital needs may arise out of structural changes to their businesses or other special circumstances driven by the recession.
To be sure, there appears to be no overall surge in temporary staffing. At perhaps the biggest firm in that sector that places finance professionals, the publicly held Robert Half International, temporary staffing revenue was flat in 2008 at $3.6 billion, and declined 1 percent when removing the effects of currency fluctuations.
Still, that was a much better performance than Robert Half experienced for its permanent placement services, for which constant-currency revenue fell by 5 percent, according to the annual report the firm filed last week. Since its temporary placement business is much bigger, it has not been hurt too badly so far.
“I’ve heard some companies say they’re keeping 70 percent core permanent staff and 30 percent variable-cost labor,” said Paul McDonald, executive director of Robert Half Management Resources. “Some are saying it’s 60-40. One actually said 45 percent permanent and 55 percent variable.” The latter company previously maintained a 70-30 mix, he noted.
All Temps, All the Time
Patrick Nichols, CFO of Crystal Geyser Water, a privately held beverage maker with revenue in the $50 million to $100 million range, is one who prefers to take on temporary staff these days. “Virtually everyone who comes in is going to come through that route,” he told CFO.com.
Nichols, in fact, came through that route himself. After a temporary staffing agency placed him at Crystal Geyser as interim CFO last September, he transitioned to permanent finance chief at year-end. His controller and a cost accountant currently are temps, and Nichols recently converted his chief accountant from temporary to permanent status.
This arrangement gives Nichols comfort that he’s not going to end up making an unwise hire when he can least afford it. “As is typical of most companies these days, we don’t hire people until we absolutely need them,” he said. “If you bring them in through a temp agency, you get to try them out. And although the per-hour rate is higher, in the long term it’s much more cost effective.”
Companies with more modest needs to fill than CFO, controller, and chief accountant may hold similar views.
At sister companies Gainsborough Waste and Texas Outhouse, controller Donna Anderson said she too is using more temps these days, with full-time staff tightly controlled because “times are hard right now.” One of her biggest annual tasks comes at year-end, when all paper files must be reorganized and boxed. “I need someone who knows what they’re doing, who knows the difference between receivables and payables,” she said.
Beyond Anderson’s accounting needs, the company hires extra laborers as bigger pieces of business roll in. For example, a client that sponsored a recent Mardi Gras event ordered 100 port-o-cans, “so we needed extra drivers and other workers for just that week,” she said.
Adding to the comfort level with temps is that, because of the rampant work force reductions, the pool of qualified fill-ins is perhaps as big as it has ever been. “We’re continually looking to upgrade our people, and with the employment market what it is, there’s an opportunity to find better ones than would typically be the case,” Nichols said.
Andrew Reina, practice director for Ajilon Finance Solutions, a consulting practice whose parent company provides temporary staffing, agreed that “right now, there are so many candidates out there as a result of the downsizing and the hiring freeze, we have a tremendous pool of candidates.”
Because of the glut, anyone who is out of work and trying to find a temporary position should find a unique or creative approach to getting noticed, Reina counseled. “I’ve seen folks come in with full portfolios as their resumes, writing white papers, getting published, or using other mechanisms to stand out,” he said.
McDonald, though, observed that technically superb accounting and finance professionals — Sarbanes-Oxley consultants or CFOs with systems-installation experience, for example — are still relatively hard to find, even if it’s easier than before.
There are all kinds of other ways in which the recession is spurring the use of temps. At United Service Source Inc., a private, third-party network services and digital media provider, a downturn in revenue necessitated an acquisition so it could continue its mission to establish itself as a major player in its industry.
United Service Source hired an assistant controller and a sales-tax manager to help with the integration of the acquired company, Ascent Media, which manages network stations for NBC, Fox, MTV, and other broadcast companies. “Those needs were a necessary evil of our growth,” said CFO Chris Vataj. “The positions were needed for the acquisition to be handled properly.”
The company turned to a temp agency to find people with the least need to be trained in the specifics of the job. For example, the sales-tax person had to understand multi-jurisdictional tax applications and issues throughout the country, which was a new need for USSI.
A different situation confronted Low Income Investment Fund, a nonprofit community development financial institution dedicated to serving low-income people and communities. LIIF functions much like a bank, providing loans for real estate acquisition and construction financing. It is financed primarily by banks, which are obligated under the federal Community Reinvestment Act to provide capital to their communities. And one way to do that is to lend to groups like LIIF at favorable rates.
LIIF is expecting a big increased workload this year because of additional funding in the new economic stimulus law for the New Markets Tax Credit, a nine-year-old program that provides tax relief to investors in projects designed for low-income people. “The accounting and compliance requirements are mind-numbing,” said the lending organization’s CFO, Art Fatum.
Fatum said he had intended to hire someone full time to take on the New Markets Tax Credit responsibilities. But because of current financial issues — some of the projects receiving LIIF loans have been unable to meet scheduled repayments — those duties instead were spread around the existing staff, while temps are being brought in to handle specific ad-hoc projects. “As the CFO I’ve got pressure on everybody right now not to increase fixed costs, but there’s stuff that has to get done,” Fatum said.
For example, LIIF’s fiscal year ends June 30, so right now there is a temp who’s working on the budget, pulling together updated worksheets. That’s about a three-week assignment. And this summer Fatum expects to hire a temporary accountant to collect materials and prepare schedules for the organization’s annual audit. Temps also are used to work on loans that need special attention, such as can happen when a construction project is delayed. “If they don’t work out on the first day, you get rid of them and get somebody else,” said Fatum.
More to Come?
Meanwhile, Reina of Ajilon Finance Solutions said to watch for a big uptick this year in demand for temporary workers.
The economic stimulus package will create demand for thousands of accounting and finance professionals to do everything from handling loan workouts to dealing with new Sarbanes-Oxley-like regulations brought about by the new regulatory environment, Reina predicted.
Robert Half’s McDonald said a few of his clients are anticipating taking on new workers, both temporary and permanent, in response to bailout funding, but nothing has taken hold yet.