Managing without regular employees

We’re a three-year-old family business. Outside of family members, our 65 workers are all temps, casual employees, part-timers and project workers. We rely much on manpower agencies and third-party service providers to handle our operations. Is it possible for us to continue with this arrangement without necessarily hiring full-time, regular workers? What are the adverse implications, if we keep operating with non-regular workers? — Cheap Skate.

Sooner or later, you’ll be in legal trouble with labor authorities, who may receive complaints from “employees” working under your roof. This is possible when your management team ignores the so-called “four-fold test” of establishing the existence of an employer-employee relationship.

The four criteria of the test are as follows: One, selection and engagement of employees. Two, payment of their wages and benefits. Three, the power of dismissal. And four, the power to control the employee’s conduct.

Even if you have a decent number of regular workers but they’re outnumbered by atypical workers like those provided by manpower agencies and cooperatives, it could raise possible issues in the near future. That’s why you should exercise extreme caution in maintaining a workforce composed of non-regular employees.

If I were to have my way, I’d aim for a ratio of 80-20 (regular workforce vs. temps), which will likely be sufficient to persuade labor authorities, tripartite bodies or industry labor-management councils that you’re not abusing the temp system.

WASTAGE INDEX
Any organization fully relying on temps does not understand employee motivation. Who would want to continue working for a manpower agency or a cooperative for only the most basic wages and benefits and limited career opportunities?

You must consider the experience accumulated by temps that is wasted if and when they decide to move to some other employer who can give them much better compensation and career opportunities. This will be made clear when you compute the company’s wastage index, a measure of how well you maintain temps and other contractual workers.

Let’s say you have 500 temps at the start of the year. By Dec. 31, 60 temps have resigned voluntarily and have been honorably discharged, for various reasons. This translates to a 12% turnover rate, sometimes called the wastage index — representing the loss of experienced and talented people.

Why do we consider it wastage? Take the issue of training.  How can your work teams function effectively if the temps continually come and go? Imagine the hassle. This may not be a big issue in the case of simple manual operations in organizations like fast food restaurants and department stores.

But then, how about other businesses like high-technology manufacturing or service jobs requiring special skills for customer relations?

Imagine the investment in training that you had to make. This problem is magnified with the continued inflow of new temps requiring fresh training, even if you classify this as an employment cost and not an investment. Double check whether the cost does not in any way wipe out the advantages of hiring temps.

Another reason to be dubious about an all-temp company is that customer service is no simple task that can be left to workers whose continued presence is dependent on your contract with the service provider. Another issue is their motivation to perform their duties when their minds are focused on finding better employment.

Therefore, your best approach is to periodically assess your options when relying on temps.

LABOR SUPPLY
Unemployment in this country is high even in normal economic situations. That means an abundance of people looking for jobs. Many are eager to be employed full time but only a handful are chosen because the majority lack the skills required for the tasks at hand.

Looking for the best person for the job is a difficult challenge for many organizations. This can be easily demonstrated by thousands of job ads posted on social and print media every day.

Even if you’re focused on maintaining only temps for your organization, there will come a time that you’ll need the right number of people who would want to be hired directly  rather than by manpower agencies, cooperatives or other third-party service providers. If that happens, what would you do?

Bring Rey Elbo’s leadership program on “Superior Subordinate Supervision” to your management team. Or chat your workplace issues via Facebook, LinkedIn, X (Twitter) or e-mail elbonomics@gmail.com or via https://reyelbo.com