Contract Labor: It Makes Even More Sense Now

With total construction spending down 25 percent in 2009 and estimates of nearly 20 percent of construction workers currently unemployed, it's no overstatement to suggest that construction is among the top two worst hit industries in the recession.

Even with signs of the economy slowly rebounding nationally and forecasts that show total U.S. construction spending will grow 11 percent in 2010 over the previous year, it's still critical for construction management to approach business differently to prosper and even survive.
As a result, many contractors are focusing on their workforce expenditures and hiring philosophy. They are incorporating a well thought-out staffing strategy as a means to control costs and augment profit margins.

Part of that strategy is partnering with a specialized staffing service (instead of general temporary agencies or day-labor businesses that place anyone from accountants to warehouse stockers). Contractors are relying on national or regional staffing firms that concentrate strictly on the construction trades. These firms have stringent hiring practices in place. They make certain each craftworker goes through multiple interviews, is reference - and background- checked and skill-tested when possible. Some even require OSHA safety training as a hiring condition. Many national staffing services hire their employees on a permanent basis and essentially contract them out at a bill-out rate that is based on the skill level their employee brings to the table (i.e., apprentice vs. journeyman). Some companies go so far as to offer a "no-pay" labor guarantee on their craftsmen to ensure client satisfaction.

However, with a surplus of exceptional skilled craftworkers available in today's struggling marketplace, contractors are tapping into staffing firms for much more than quality workers. "There has been a monumental shift in how our service is being used," said Steve Bowker, senior vice president of operations for Tradesmen International. "Prior to 2009, there was severe shortage of skilled craftworkers in virtually all trades, and a good percentage of our clients used us primarily as a resource for the high-caliber talent they couldn't find on the streets. That's obviously changed, and these same clients are now partnering with Tradesmen because they understand outsourcing makes financial sense, helping to keep overhead costs to a minimum. Cost containment is critical for survival in today's economy."

Maintaining peak levels of workforce productivity is even more critical for contractors today as the economy sluggishly rebounds. "Most construction businesses we've consulted with in the past year have downsized 25, 40, even 60 percent," said Bowker. "They're typically down to their core employees, and instead of hiring on additional full-time workers as sales increase, they're partnering with us to supplement their core workers with our employees-and this is key-only as their work volume can keep our craftsmen productively working."

"When work slows, they simply send our guys back, which enables them to keep their own employees at higher productivity levels," said Bowker. "This does two things:

1. It optimizes every dollar expended on full-time employees.
2. It eliminates hold-over costs related to keeping unneeded, non-productive workers for a day, week or longer until the next bid closes or work increases.

Through seventeen years of in-depth consulting, we've found hold-over or overstaffing to be, hands down, the biggest drain on profitability for contractors nationally."

Optimizing workforce productivity and controlling payroll costs are not the only benefits of incorporating a staffing service into a contractor's hiring strategy. In fact, there are other equally compelling reasons why contractors should explore variable labor as a viable workforce option.