Many businesses discover that securing workers through either a temporary help or leasing service is desirable because of the maneuverability it provides in human resources costs. In effect, the vendor becomes your human resources department. If you fill a certain percentage of positions with temporaries, you not only receive the benefits of an instant workforce, but you also have the flexibility to reduce staff without necessarily affecting your permanent payroll.

Caution: Under federal law, certain leased workers who work for an organization on a full-time basis for one or more years or who work 1,000 hours in a year are required to be treated as employees for certain pension-related eligibility and vesting requirements. Also, if an employer leases more than 20 percent of its workforce, all leased workers are subject to pension-coverage rules.

No-Hassle Hiring

How many job-seekers, hired by a busy manager after a single interview and a cursory inspection of a resume, live up to their claims? The chances of success can be far greater if the contact is with a professional interviewing and hiring expert. The vendor, rather than the client, assumes responsibility for the otherwise time-intensive and expensive process of recruiting, screening applications (including checking references), interviewing, and hiring. The vendor can quickly tap into its already established pool or network of qualified, skilled workers (a pool that might otherwise be inaccessible to the client), resulting in a speedy placement for a job that it might take the employer weeks to fill, if it can be filled at all. This service can take much of the guesswork and the headaches out of the traditional hiring process.

Many companies, particularly smaller businesses, may not have adequate expertise in the areas of attracting, screening, or training workers. In contrast, an established staff vendor should have a well-developed rapport with the workers that it dispatches to the work site, including a full understanding of their skill levels, making for a more successful and faster placement. Turnaround times between request and placement of just one or two days aren't uncommon. Many companies also enjoy the benefits of hiring temporary workers for positions that ultimately become permanent. Then they can actually evaluate the person in the role before making a commitment to hire full-time.

Paperwork Reduction

Since the staff vendor, not the client, is the “real” employer—i.e., the employer of record—the vendor handles payroll preparation, tax withholding, Social Security, workers' compensation and unemployment insurance deductions, health insurance, and other provided fringe benefits, if any. The vendor also prepares all required tax reports, distributes W-2s to workers, and does all the other paper-shuffling tasks imposed on employers by government. Temporary workers are a “self-dissolving” group rather than a component of permanent overhead, which also eliminates unpleasant and often demoralizing layoffs. Unemployment compensation payments the erstwhile employer would otherwise have to pay in the wake of terminations or layoffs also are eliminated.

Minimal Legal Entanglements

Because of increased regulatory oversight and exposure to various forms of legal liability, hiring and firing can often become a quagmire for the unwary employer. Attracting the wrong employees can be an expensive mistake, given the high cost of acquiring and training new workers and the increasing likelihood of being sued for discrimination or wrongful discharge.

Although the employment-at-will doctrine still prevails in the private sector, a succession of wrongful discharge lawsuits and the resulting encroachment on an employer's dismissal rights have made bringing full-time and/or permanent employees onboard far less attractive than it once was. Since temporary workers have no direct employment relationship with the client, at least theoretically, the likelihood of employment-related litigation is reduced.

Caution: A temporary or leased workforce is not a complete panacea for business. In some instances, federal or state government agencies or courts have leveled charges of “joint employment” against the client, resulting in the assessment of back taxes and the sharing of other legal obligations and penalties.

A major advantage of using staff-vending firms is that it allows you to concentrate more on the moneymaking part of your business and less on time-consuming administration, and even training. If it happens that a temporary worker's skills prove incompatible with the job, it is usually a relatively simple matter to ask the vendor to reassign that person and find a suitable replacement. Some leasing firms provide on-site management for the client company when the client leases a group of workers to take over complete responsibility for certain company functions. And vendors that want to get a leg up on the competition generally train (and in some cases retrain) their workforce to ensure a good match, including custom-training for special client needs.

Keep in mind, too, that you have to pay the agency only for hours actually worked (no holidays or other costs of absenteeism). Also, through a temporary workforce, you can meet production goals, shipping schedules, and other contingencies during busy weeks, without having to pay overtime to your core employees. On a behavioral level, temps in some cases may be more productive than full-time employees, in that they spend less time socializing and are far less concerned with office politics.

Agency Temporaries and Leased Workers

Temporary work is by all accounts one of the fastest-growing sectors of the employment marketplace; about 90 percent of U.S. businesses use temporary employees in some capacity, either hired directly and paid from the company payroll or, more likely, obtained through temporary help firms. On any given day, some 2 million people work as temporary employees.

In the face of contemporary business realities, including fluctuating workloads and regulatory red tape, companies often find it cost-prohibitive to maintain a large full-time staff. Temporary agencies offer a qualified interim workforce on demand at a lower cost and with reduced attendant paperwork. These firms in some respects also perform the role of talent broker for client and worker, ready and able to provide labor when a company needs an occasional stand-in to fill a slot that's become open because of an emergency or personal leave, or more likely, a surge in the business cycle or for a long-term project. Many vendors also assume responsibility for training workers to handle certain specialized tasks required by clients.

Distinguishing Temporary and Leased Workers

Basically, there are two types of staffing service vendors: firms that supply individual workers on a temporary basis (a day, a week, or more) and those that lease groups of workers indefinitely. Thus, the distinction between temporary firms and leasing firms generally involves the size and scope of the commitment.

“Temps”—workers employed through a temporary help agency—are the most traditional type of temporary worker and the most likely to be used as a staffing alternative. They tend to be used in clerical, secretarial, nursing, accounting, word processing, or light industrial duties, to fill in for employees on leave, to handle excess or special workloads, or to perform short-term assignments. Under the laws of virtually all the states, the worker is considered an employee of the temporary help agency, which is responsible for wages, tax withholding, employee benefits, and workers' compensation and unemployment compensation premiums.

Hiring temps reduces the benefits, personnel, and payroll responsibilities of the employer, as the temporary agency itself assumes the burden of personnel administration. However, the employer that hires temps relinquishes much of the control typically associated with selecting and employing personnel and does little to foster job security and company loyalty.

Leased employees work for a vendor that, for a set fee, will provide either temporary or permanent employees and is responsible for their wages and benefits. The leasing company generally leases all or a substantial number of full-time workers to a client on an ongoing, long-term, continuing basis with no particular time limit.

A leasing company can supply a single employee, a “crew” of employees (i.e., security guards), or an entire staff (catering/cafeteria service) and takes full responsibility for payroll, benefits, and personnel functions. It may also do advertising, supervision, recordkeeping, and general office management. Small employers—who sometimes lack the resources to offer attractive fringe benefits to employees—are increasingly turning to leasing companies for employees because the leasing firms have the purchasing power to offer workers an array of benefits. In some instances, employers have “fired” their entire workforce and then leased back the whole group from the leasing company.

In short, the difference is that leasing agencies generally provide workers on an open-ended basis, while temporary agencies usually supply individual workers on a short-term basis. Either way, the agency—not the client—functions as the primary employer. It is the agency that handles payroll and provides the benefits package.

You, as the client, pay a fee to the agency, and in turn, the staffing firms do the hiring, put together the payroll, and send workers to your job site.

What's in it for the Temporary Worker?

Some contingent workers prefer the constant variety of going from job to job as “permanent” temporaries. Others—probably the majority—are hoping to hook up with a client in a full-time, permanent role along the way. Contingent workers thus tend to be a highly enthusiastic group, because many of them are eager to get a foot in the door. They also welcome the chance to build or showcase unique skills. In turn, employers can use this as an opportunity to “size up” someone for a possible permanent slot, the one they're doing now or another job in the company that might open up. In this way, the staffing vendor performs double duty as an interface between employer and worker—with each one evaluating the other as a prospective hire or employer if the chemistry is right.

Tip: Make sure that your agreement with the staffing vendor allows for a temp-to-hire process and that any fee involved will be reasonable. See

Attitude survey. According to the results of a Society for Human Resource Management random attitude survey of persons working for temporary help firms (as published in the May 1996 issue of HR Magazine), factors identified as very important include:

• Income source while job hunting (69 percent);
• Making contact with potential full-time employers (51 percent);
• Experience and skill building (44.6 percent); and
• Flexible schedules (42.3 percent).