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High-Tech Hiring
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Companies
have lots of reasons to hire contingent employees.
By William Poe
The hiring hall is back. But this is not a room filled with carpenters,
electricians, and other men and women skilled with their hands.
Rather, here are engineers, IT and telecommunications professionals,
financial experts, manufacturing, and biotechnology professionals—people
who work with their knowledge. Knowledge workers, if you will.
And employers throughout the region are turning to the hall for
skilled professionals to fill important positions within their companies,
and in doing so, have spawned a new service business to meet their
needs.
Depending on the industry they serve, these workers may be called
different names: consultants, contract employees, or contingent
workers, to name a few. There is one thing they are not: traditional
employees. And they represent a growing trend here and overseas.
Increasingly, those doing company work are not company employees.
“Some management people advise companies not to have more than 70
percent of their workforce as permanent employees,” says David Avakian,
president of the Varsity Group, a local human resource management
company. “The idea is to keep 30 percent as contingent employees,
so you can better staff up and staff down with business cycles.
I’m not sure those numbers make sense, but that’s the trend.”
Frank Ehlers, president of Envision LLC, which provides IT staffing
for companies in St. Louis and the southwest U.S., says many of
his clients use consultants for 15 percent of relevant staff positions,
which include project management, software engineering, systems
architecture, and applications development.
Avakian, who serves on the board of the National Association for
Alternative Staffing, says that eight to 10 million contingent workers
are placed in company jobs each day and that the temp industry is
growing by 15 to 30 percent each year. And Professional Employer
Organizations (PEOs), which assume the human resources functions
for client companies, are the fastest-growing business service in
the U.S., he adds.
The Varsity Group, which is both a PEO and a contract staffing company,
is growing at 30 percent or more a year, says Avakian who founded
the company in 1990. And, except for some flat months after the
Sept. 11 terrorist attacks and the recent recession, Envision has
been growing at 20 to 30 percent annually, Ehlers says.
One of the oldest contract staffing firms in St. Louis is H.L. Yoh
Co., a Philadelphia-based company, which opened an office here 35
years ago. Except for the recent economic downturn, Yoh has registered
consistent growth, says Steve Boell, district manager. Last year,
the local office had a workforce of 350 engineers, IT consultants
and other knowledge employees on its payroll, Boell says.
Most of those employees, in turn, were working at clients such as
the Boeing Company, where they work full time on projects averaging
18 months in duration. Boell says his engineers are indistinguishable
from client company engineers, except they get paid by Yoh, not
by the client. Client companies instead pay Yoh an hourly rate for
the services of each engineer.
Factors driving the exploding contingent workforce are varied, but
include the desire for staffing flexibility, the high cost of employee
recruitment and retention, and the need for highly specialized personnel.
“Much of our demand is driven by the fact that clients don’t have
the particular talent needed to meet the scope of the work,” Boell
says.
Similarly, a chronic shortage of IT personnel has helped fuel the
growth of Envision, Ehlers says. “Many times, clients want to develop
new technology but don’t have the expertise in-house. A lot of these
technology specialists are consultants, and hiring a consultant
is the only way to go.”
Cost is nearly always a factor, Avakian says. “The total general
administrative cost of an employee is three times wages and includes
non-wage costs such as recruitment, benefits and pensions, employment
taxes, unemployment insurance claims in case of layoffs, legal expenses,
and more. That means an employee has to provide value that is three
times the wages you are paying him.”
A consultant or contingent employee, then, becomes what some refer
to as a “nonemployee.” They are just as productive and knowledgeable
as a regular employee—maybe more so—but cost less even when the
cost of a temp is substantially higher than the wages and benefits
of a full-time, formal employee. Avakian notes that companies usually
pay on an hourly rate basis a markup equal to 50 to 60 percent of
the consultant’s salary. That gross margin, Ehlers says, is how
contingent staffing firms make their money.
Cost factors, though, should not determine when a company hires
a permanent employee or a contingent employee, says Avakian, a 25-year
veteran of human resources for Ralston Purina and Metropolitan Life
Insurance Company. “The focus should be on growth, not cost, and
whether a particular function is core to the business. If a company
is not going to even consider promoting a person to the next level,
hire temporary.”
Ehlers adds: “It’s easy. You pay just an hourly rate. You get experienced
people. You get flexibility. What could be better?”
For their part, most consultants like being consultants. “I have
several people who have been working 20 years on a contingent basis,”
Boell says.
“We offer training, career development, flexibility, and access
to new technologies,” Ehlers adds. “We really compete with corporate
America for workers, and our benefits rival our client companies.”
William V. Poe is principal of Poe Communications, a St. Louis
advertising and marketing communications firm.
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