Contract Staffing: The Affordable Choice That Comes with a Hidden Cost

By\xa0 Robert OWUSU (FCIB)

Within the ever-evolving field of human resources (HR), utilizing contract employees has emerged as a progressively favored approach for companies to address their workforce requirements.

Moreover, owing to the increase in globalization and digitization, the organizational landscape has grown increasingly dynamic and rapid-fire.

As a result, it has become increasingly challenging for companies to attract new talent. Consequently, these difficulties have prompted organizations to reconsider their hiring strategies and workforce planning.

When examining the current landscape of business, owners tend to focus on increasing their profits and aim to use their working hours effectively to contribute to the company’s development.

There’s no question that an organization’s staff serves as its foundation, determining whether the business thrives or fails. However, at times, it becomes essential to bring aboard employees willing to contribute their efforts temporarily, specifically for brief projects.

If such temporary hiring practices are imposed on HR departments, they will not only exacerbate the strain on their already heavy key result areas (KRAs) but also disrupt efficient workflows. Therefore, there is a necessity for contract staffing agencies to assist business owners in addressing the challenges posed by short-term or contract-based employee recruitment.

WHAT IS CONTRACT STAFFING

Contract staffing involves providing employees to an organization through a third party under a contractual agreement for a specific duration. The conditions of this contract are determined by both the hiring entity and the organization itself (source: — alp consulting).

To put it differently, contract staffing involves employing workers temporarily via a contractual arrangement for a particular duration or task (Source: – Professional HR Services).

For instance, if a business owner requires an accountant for approximately three (3) months, hiring someone full-time would not only increase operational costs but could also become a burden for the company after those three months when their services may no longer be needed.

To address such situations effectively, temporary staffing is crucially significant. Hence, a contract worker is someone engaged to undertake particular duties or assignments over a specified duration based on a contractual arrangement (Source: Multiplier).

CHARACTERISTICS OF CONTRACT STAFFING

Here are the main features of contract staffing:

• This is a short-term job position aimed at meeting specific project needs.
• Specific roles or projects
• Its essence is adaptable.
• There’s no requirement for a long-term commitment.
• Third-party agencies are contracted for providing personnel.
• Cost-effective
• Includes specialized skills

THE DISTINCTION BETWEEN CONTRACT WORKERS AND FULL-TIME EMPLOYEES

It’s crucial to grasp the differences between contract workers and full-time staff across the different areas outlined below:

1. EMPLOYEE STATUS AND LEGAL ASPECTS

Temporary workers are employed for a limited period, often lasting until the end of a particular assignment or project. In contrast, permanent staff members join under the assumption they will continue working long-term. Typically, contract-based personnel fall into the category of independent contractors, affecting how labor regulations, taxes, and legal duties apply.

1. COMPENSATION AND BENEFITS

Contract workers typically get paid either per hour or for specific projects, without additional perks like health insurance, pension schemes, or paid holidays. In contrast, permanent staff members earn steady salaries or wages alongside extensive benefit packages that usually cover medical coverage, retirement funds, and multiple types of paid leaves.

1. JOB SECURITY AND STABILITY

Contract workers lack the same degree of job security as full-time staff. The continuation of their employment depends entirely on the conditions outlined in their contracts and the length or completion of assigned projects. In contrast, permanent employees typically benefit from greater stability at work, along with prospects for professional development and advancement within the company.

1. STAFF INVOLVEMENT AND COMPANY CLIMATE

Temporary staff might have restricted engagement with the company’s cultural aspects and could lack a strong bond with the organization’s ethos, principles, and strategic objectives, which can cultivate a stronger feeling of allegiance and dedication.

1. EMPLOYER/EMPLOYEE RELATIONSHIP

The contractual arrangement between employers and temporary staff usually delineates their working relationship through the stipulations detailed within the contract. In contrast, the professional bond between employers and full-time workers tends to be more structured, frequently dictated by both signed employment agreements and company protocols that oversee multiple facets of this association.

PLACES WHERE TEMPORARY EMPLOYEES ARE FREQUENTLY USED

Numerous organizations employ contract workers, typically for particular projects or to address varying needs. Below are several key industries that commonly use temporary staffing:

• CONSTRUCTION

Building companies frequently employ workers for particular tasks or stages of a construction project, including roles like electricians, plumbers, or general laborers.

• HEALTHCARE

Healthcare facilities such as hospitals and clinics might employ contract nurses, medical technicians, and administrative personnel to address short-term requirements or particular initiatives.

• TECHNOLOGY

The fields of software development, IT support, and cybersecurity frequently demand specific expertise for temporary assignments.

• FINANCE

Financial institutions such as banks, insurers, and investment firms typically employ contractual personnel to deliver frontline services.

• RETAIL AND HOSPITALITY

Businesses in these sectors may hire seasonal or temporary staff to handle peak times, such as holidays or events.

• MANUFACTURING

Manufacturers might bring on temporary staff for production lines and logistics due to seasonal fluctuations in demand.

• EDUCATION

Schools and training institutions could employ adjunct instructors or tutors on a contractual basis.

GHANAIAN LEGAL FRAMEWORK FOR CONTRACT STAFFING

The legislation concerning contract staffing can be found in sections 73 through 78 of the Labour Act 2003 (Act 651). As stated in Section 12 of the same act, under Ghanaian labour regulations, an employment agreement must be considered formal and lawful only if it includes a written document outlining all details agreed upon, which should correspond with what’s detailed in Schedule 1 of the Act.

The essential elements that should be included in an employer’s contractual agreement encompass the duration of the contract, the compensation amount, the stipulated working hours, provisions for leaves and holidays, as well as any additional allowances provided to the employee.

The system captures all employees’ information, and includes the company’s policies. Additionally, it provides instructions regarding sick leave, public holidays, overtime, and other specific occasions.

This applies except for casual laborers and temporary workers. Casual laborers receive daily assignments along with daily wages or jobs lasting as little as one week, whereas temporary workers might be employed for extended durations, although such openings occur sporadically.

Often, they are brought in to assist during busy office seasons or when there is an intensive project underway that puts strain on the existing workforce of the company.

If a temporary worker remains with the same employer without interruption for six months or longer, Ghanaian labor laws classify this individual as a permanent employee within that organization.

Even though temporary employees do not have written agreements, Sections 74-75 and Schedule 1 of the Labour Act 2003 ensure they receive at least the minimum protections afforded under this act. Therefore, these workers also qualify for benefits such as rest periods, overtime compensation, paid national holidays, and sick leave.

WHY USING CONTRACT STAFFING

The importance of contractual staffing in human resources (HR) cannot be underestimated since it acts as a key strategy for organizational personnel management. Organizations utilize contract employees primarily due to several significant factors which include:

1. COST EFFICIENCY AND FISCAL MANAGEMENT

In today’s cutthroat business environment, effectively controlling overall costs is crucial. By opting for contract staffing, companies can manage expenditures better by steering clear of the prolonged fiscal responsibilities tied to full-time employees.

Companies can allocate their resources more effectively, making sure that money flows toward sectors delivering the greatest benefit to the business.

1. REDUCE ADMINISTRATIVE BURDEN

When compared to overseeing full-time employees, organizations generally face less administrative burden with contract workers. Since these temporary staffers aren’t eligible for similar perks or rights as their permanent counterparts, this decreases the effort required for handling benefit distributions from payrolls and ensuring regulatory adherence.

1. FLEXIBILITY IN WORKFORCE MANAGEMENT

Contract staffing offers businesses the ability to adapt their workforce according to changing needs. When experiencing high demand phases, companies can swiftly bring in contracted employees to address short-term skill shortages and handle greater project requirements. On the flip side, they can reduce headcount when activity slows down to prevent excess expenses, thereby streamlining how resources are used.

1. TALENT PIPELINE DEVELOPMENT

Contract employees have the potential to become a crucial source of future permanent staffing within an organization. Companies can pinpoint top-performing contractors whose work reflects compatibility with the company’s ethos and cultural norms. Such personnel might then be evaluated for positions as full-time staffers, facilitating a smooth shift for essential talent acquisition.

1. ACCESS TO SPECIALIZED COMPETENCIES AND PROFESSIONAL KNOWLEDGE

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Some initiatives or assignments might necessitate particular abilities or information that aren’t easily accessible with the current team members. By bringing contract personnel into the mix, you can fill these skill shortages and gain critical perspectives that help tackle intricate problems more effectively.

WHAT MAKES CONTRACT STAFFING COSTLY

It should be noted that despite these aforementioned advantages which act as motivational drivers for this type of employment approach, companies encounter significant hurdles when implementing contract staff solutions.

Grasping these difficulties is crucial for the execution of contract staffing. The obstacles encompass: –

1. LACK OF LOYALTY

The title implies that contract employees aren’t long-term fixtures within the company; thus, their allegiance or dedication towards the firm might be less intense compared to those who work full time. Consequently, fostering a robust organizational culture could become challenging, which potentially diminishes involvement and output from these temporary hires.

Furthermore, these employees typically handle the reception area, offering direct customer service and engaging directly with clients.

The risk lies in unappealing contract terms leading to demotivation and lack of acknowledgment, which could push individuals towards engaging in illegal activities. Moreover, these people can be readily influenced through bribery and might disclose sensitive organizational data since they feel they have little to lose.

1. TRAINING TIME

Temporary employees are frequently brought onboard due to their specialized skills. Consequently, they might need extra training or orientation to become familiar with the company’s procedures and infrastructure.

This process can be lengthy and might lead to a short-term decrease in efficiency. Additionally, the company could find itself investing in training individuals who ultimately won’t remain part of their team.

1. POTENTIAL FOR HIGH TURNOVER

One of the key challenges for contract staffing is dealing with high employee turnover rates. The remarkably high turnover rate:

• Leads to increased costs for hiring and training.
• Reduces client satisfaction levels.
• Damages the company’s general effectiveness.

1. INTEGRATION WITH PERMANENT STAFF

Integrating contract staff presents various distinct workplace hurdles. These employees frequently experience feelings of isolation and find it challenging to grasp their expected roles. Forming connections with the permanent team can be tough. Multiple communication obstacles arise as well:

• Restricted internal resource availability
• The different communication styles of permanent versus contract employees
• Challenges in collaboration because of various time zones
• Divide communication channels among various employee groups

1. LEGAL RISK

Some legal hazards come into play when you hire contract workers. Misclassifying a contractual worker as an independent contractor instead of treating them as an actual employee can lead your company to face potential liabilities such as retroactive payments, benefits, and various other legal compensations.

Organizations should meticulously examine the conditions outlined in their agreements and confirm that contract workers are accurately categorized.

MANAGING CONTRACT WORKERS – KEY STRATEGIES

To enhance the management of contract employees, it is crucial to adopt best practices. These encompass:

1. CLEAR CONTRACT DOCUMENTATION AND CLEAR EXPECTATIONS

• Definitely spell out the terms and conditions of the contract in a written agreement.
• Outline the scope of work, specify deliverables, set timelines, and include any additional contractual terms to prevent confusion or conflicts.

1. EFFECTIVE COMMUNICATION AND COLLABORATION

• Set up consistent lines of communication to ensure contract employees are updated regarding project developments, modifications, and requirements.
• Encourage cooperation among contract staff and regular team members, promoting the exchange of information and fostering better teamwork.

1. FREQUENT EVALUATIONS AND REVIEW COMMENTS

• Periodically evaluate the performance of contract employees based on predefined metrics and objectives.
• Offer constructive criticism and acknowledgment to boost performance and foster professional development.

1. ESTABLISHING A WELCOMING WORKPLACE ENVIRONMENT

• Cultivate a welcoming workplace where every employee, such as those working under contracts, feels valued for their input and efforts.
• Promote active participation of contract employees in team activities and encourage them to share their thoughts and viewpoints.

1. ESTABLISHING ENDURING PARTNERSHIPS WITH CONTRACTORS

• Whenever suitable, establish enduring connections with top-tier contract workers who reliably produce excellent outcomes.
• Develop a group of reliable contractors you can reach out to for upcoming projects or short-term staffing requirements.

CONCLUSION

When seeking contract staffing services, ensure you choose the appropriate firm and obtain an extensive list of the services they provide. Confirm that they satisfy your needs, possess a strong reputation, and offer a guarantee regarding employee retention.

Temporary employees hold significant importance in contemporary human resources planning. Implementing the advice and principles outlined here will enable you to utilize contractual staffing as a means to enhance your team composition and meet your organizational goals efficiently.

ROBERT \xa0

He is a Fellow of the Chartered Institute of Bankers (Ghana). With extensive experience in retail banking, internal auditing, project management, and electronic banking—particularly internet banking—he stands out as an accomplished professional. Additionally, he serves as both a consultant and examiner supervisor for the Chartered Institute of Bankers (Ghana).

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