Employment BS

So in my conversation with my now Ex-Employer I found out something interesting:

Most companies use third party HR Staffing firms to find Contractor and Contractor-to-Perm employees. The idea is that HR personnel don’t want to spend time and energy hiring people and they want to make sure they people they do hire are good long term fits.

Here’s what I found out today: Of the amount of money a company spends on an employee hired through a contracting firm, the employee only sees 52% of that money as gross pay and the agency keeps 47%.

There’s probably more to the numbers than that, but it sort of confirms that there are a lot of skilled industries where people are being paid half as much because they can.

If you think about it, that’s an incredible disconnect especially between generations. The older, more successful generation have enough capital/credit to start their own small business, while the younger generations are dealing with the gig economy.

I’ve faced that as well.

From a certain perspective though, that percentage is a large part of overhead that would have been going into that employee anyway. Who was paying for the insurance benefits, the employer or the staffing firm? Who was paying the HR and recruiting people you were interacting with?

At the company I worked for through such a firm, pretty-much all hourly employees went through the staffing firm, only some salaried engineering and office staff were directly employed by the company.
We were paid by the staffing firm, they covered all of our benefits and everything else.

So, not all, but a chunk, of that 47% is what the employer would have been paying out of their pockets to cover those same expenses. Of course there’s a margin for the staffing firm, plus all of that extra overhead, but that all comes down to the convenience fee the company pays to have a lot of the headache of hiring hourly and temp employees taken out of their workflow.

Now say we socialize a lot of the benefits and so-on then many of the cost margins would go away or shift some, but some of it would not. Essentially someone has to get compensated to cover the effort of finding and managing people somewhere along the line. And depending on how much effort it takes to manage each individual worker it probably ends up costing someone a lot.

Last company I worked for was a direct hire, but it was a massive company with some 6,000 or more employees in our area. The HR department was massive and had its own multi-floor building in the heart of the campus. They ran daily on-boarding sessions. So clearly it’s a lot of overhead and I can see where a small or medium size company will want to avoid the costs of maintaining such a staff while also having access to the quality of service that a large HR team could bring.

Still, knowing how much the staffing company made, while I was mostly happy with my wages, I just felt like we were all getting ripped off.

I don’t know if I fully share that sentiment now, but I still don’t like the idea of going thru an intermediary hiring agency.

Yeap.

I was working at a temp agency at RIT making like $9/hour. They were billing $20/hour to the firms that used me. I only even found out because a caterer guy called me directly and tried to get me to gig on the side.

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