Organizations face a plethora of challenges when it comes to hitting yearly goals and continually striving for growth, but one of the most difficult factors in the current economic climate can be meeting workforce targets and acquiring top talent.
This is because job seekers across North America currently own the labor market. The US kick-started 2019 with the longest run of continued job growth, and, according to the latest figures from the Bureau of Labor Statistics, the US unemployment rate came in at just 3.8 percent in March 2019.
Now, you may be asking since when are low unemployment rates a problem? In theory they’re not, it means the economy is doing great. However, it does mean that talented and highly-skilled workers are in a unique position that allows them to choose the companies they work for.
This, combined with a shrinking talent pool and increasing job growth is resulting in a shortage of skilled workers.
What does a shortage in skilled workers mean for your company?
The new speed with which businesses now operate under often requires companies to change their labor needs rapidly. Couple this with a shortage in skilled workers, and there's no surprise that it can be a challenge for your company to engage with the right candidates.
This results in your organization panicking, hiring the first candidate available rather than waiting for a worker that can provide your brand with a true return on investment (ROI).
What is the true cost of a bad hire: what the stats say
Hiring the wrong candidate can have a huge financial impact on your business. Direct costs (such as administrative costs, exit costs, sick pay etc), replacement costs to find new workers (interviews, background checks, job advertising etc) and indirect costs to productivity can all affect your bottom line.
Here are just a few recent statistics that look at how a bad hire can have a serious impact on your business:
- The cost of a bad hire can reach up to 30% of the employee’s first-year earnings (US Department of Labor).
- Bad hires cost $240,000 in expenses related to hiring, compensation and retention (The Undercover Recruiter).
- 74% of companies who admit they’ve hired the wrong person for a position lost an average of $14,900 for each bad hire (CareerBuilder).
These numbers are alarming, so how can your business ensure that it deploys a strategy that gives you access to top talent, while minimizing the issues and costs associated with bad hires? Optimizing your use of the gig economy, which includes non-permanent workers such as freelancers and contractors, can help.
How can the contingent workforce help?
Employing a contingent labor workforce and implementing a proper management strategy will allow your organization to adapt to this current business environment, while at the same time helping you to reduce the risks that come with hiring the wrong workers.
Contingent labor is a growing agile workforce, making up some 30-40% of all current employment in the US, with its expertise ranging from seasonal customer service associates to skilled freelancers whose talents can be accessed for important projects.
This means you can still hire the top talent in your industry, while avoiding some of the pitfalls associated with full-time employees.
Don’t get us wrong, there are still hidden costs with any hire. However, the difference in costs for permanent workers can be much higher than contingent workers.
Permanent hires come with a variety of costs from health benefits, training, vacation time, tax contributions, and other difficult-to-quantify costs such as recruiting and productivity. Contingent workers, on the other hand, come without sick time, holidays, or benefits and that can be a huge boost for your company’s bottom line.
Is it that easy?
In theory yes, but too many organizations try to take on the complex nature of contingent workforce management without enlisting the help of an outsourced expert.
Managing a contingent workforce is complex, and it generally takes a large team of highly-skilled individuals to implement. Unfortunately, your organization is unlikely to have any employee who is specialized in the unique demands of managing an entire contractor workforce.
That’s why many businesses who have a contingent workforce find that they have fragmented management processes that result in inconsistent hiring techniques, hidden costs, wasted administration time and a lack of visibility into workers and how they’re performing.
Partnering with an outsourced managed services provider (MSP), however, such as HCMWorks, will give your business access to highly specialized experts who will transform your contingent workforce.
This will ensure your company prevents bad hires and overcomes the shortage in skilled workers - giving you a significant edge over your competitors.
Want to learn more about how our contingent workforce expertise can revolutionise your management processes? Contact our team of experts today, we would be more than happy to discuss any challenges that your company is facing.