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With planning, the conversion from temporary to permanent employee can be smooth and efficient.
Ellen O’Coin started working for the staffing firm Manpower Inc. in October 2002 and soon received her first assignment with MasterCard International Inc.—a three-month contract, which turned into a longer-term temporary assignment. Then, this past April, she was offered a permanent administrative assistant position in the debit services department where she had been working as a temporary employee for 18 months.
“There is a special atmosphere here that you can feel the moment you enter the building,” says O’Coin in Lake St. Louis, Mo., on why she accepted the permanent position. “There is no distinction between contractors, temps or regular employees. The transition from a temporary to a permanent staff member was very smooth. Everything was thoroughly planned and professionally executed”—from getting an employee security badge to setting up network access on her computer.
More than 2 million people work as contingent employees in the United States, according to the U.S. Bureau of Labor Statistics. Contingent workers include independent contractors, on-call workers and temporary workers. If you took a snapshot during any month of the year during 2003, you would find that America’s staffing companies employed 2.27 million temporary and contract workers on an average daily basis, up 10.2 percent from the previous year—a dramatic improvement after two years of decline.
Many of those temporary employees are looking for permanent positions—74 percent, according to the American Staffing Association (ASA), an Alexandria, Va.-based advocacy and trade organization for the staffing industry. Moreover, 72 percent of temporary employees obtain permanent jobs while working for a staffing company.
“Many companies use the temp-to-hire strategy during lean years to avoid costly hiring mistakes,” says Jon Zion, president of eastern U.S. operations at Robert Half International, a staffing firm in Fort Lauderdale, Fla. “Companies are becoming more focused on the temp-to-hire strategy as part of an overall hiring plan.”
The temp-to-hire strategy allows both the company and the employee to see if the relationship is a good match prior to committing. “During the past decade, American businesses have increasingly turned to staffing firms for their permanent hiring needs. These workers form a core hiring pool from which to select permanent employees,” says Richard Wahlquist, president and CEO of the ASA.
For instance, the Chrysler Group at DaimlerChrysler, an auto manufacturer with U.S. headquarters in Auburn Hills, Mich., uses a large contractual workforce. “When we transition a contractor to a direct employee, we save steps. We know the person is happy with the commute, works well in a group and understands what we expect out of our employees,” says spokesman Dave Elshoff.
However, there are things to consider when making the transition, both with the staffing agency and the employee. But, with planning and skilled implementation, HR professionals can ensure that the transition is a seamless one.
Begin with the End in Mind
If you are looking for a temp-to-hire candidate or if you suspect the position might become permanent, it’s important to plan ahead. Before signing a contract, tell the staffing firm of your intentions and negotiate the conversion fees staffing firms often charge for hiring a temporary employee for a permanent position. Also, create a salary structure that is in line with your permanent employees’ compensation.
Some job seekers join temporary agencies not because they are in search of a permanent position, but because they like the flexibility of temporary employment. “For that reason, it is advisable for customers to let us know in advance if the job has the potential to become permanent,” says Bill Tate, vice president and general manager of Manpower’s Midwest region, headquartered in Milwaukee. “We do our best to avoid situations where a company wants to embark on the temp-to-perm transition but the employee is only available to complete the duration of the original, temporary assignment.”
But just in case, make sure your temporary employees are qualified to take on the job permanently. “Companies need to ensure that their staffing company has an effective screening process in the beginning, so as to improve the conversion rate,” says Michael Miles, CEO of Staff Management, a Chicago-based vendor that provides temporary staffing on-site for the client on premise. “For example, if the company requires an employment test, it should have the staffing firm deploy the same test.”
Think about your temp strategy before you negotiate a contract with a vendor. “Many people are so focused on getting somebody in the door, they don’t think about the long-term” possibility of hiring that person, says Nancy E. Glube, executive director of HR at Customer Care Call Centers for Cingular Wireless, a telecommunications company in Atlanta.
More companies are discussing conversion fees before the hiring process begins rather than after the fact, says Zion. How much does it cost to convert an employee? It depends. “Every situation is different,” he says. “There are a lot of variables: the level of job, the compensation level, how long the employee was there on a temp basis, etc. It’s not a rote process.”
However, “the rule of thumb is the fee is waived after the employee has worked 520 hours [three months]. Prior to that, the fee would be based on a sliding scale depending on how close to the 520 [threshold] the contingent worker is. The fee may also be determined based on profit per hour, or a staffing firm may forgo the fee or make exceptions driven by other elements of the agreement such as volume, length of contract, price and limitations to conversion,” says Miles.
The fee you pay a vendor will vary based on “the volume of business the agency gets from you [and] how long the temp worked for you. The fee can and should be negotiated,” adds Glube. Companies that have established an ongoing relationship with an agency may have a stronger negotiating hand than a smaller company that uses an agency on an intermittent basis.
In addition, consider the salary of your permanent workers in similar positions when you hire any temporary worker, in case you decide to transition the worker to full time. If you contract a temporary worker at a higher salary than your permanent employees in the same position, you may cause problems. First, if permanent employees discover this inequality, they may become disgruntled, even if they receive additional compensation in the form of benefits. Second, if you decide to convert the temporary employee to permanent status, he is going to want to remain at his current salary, even though you’re probably adding benefits. If you’re forced to trim his salary, be sure to clearly communicate the dollar value of benefits added so that the employment relationship does not begin on a sour note.
“Most supervisors try to look at salary going in and try to make a good-faith effort to build in a reasonable amount of parity, so that there are no misunderstandings or wage disparity,” says Elshoff.
Because one of the advantages of the temporary-to-permanent approach is hiring someone you know will be a good fit for the company, the transition should be seamless. Still, logistical concerns HR professionals should consider include the following:
At Cingular Wireless, all jobs are posted internally up to a certain level. In some cases, a temporary worker may be the sole contender for the job, but for others, there may be internal candidates. “If it is an entry-level job, it may be a formality because nobody else is looking [at that job as a promotion],” says Glube. But there may be more competition for higher-level jobs. “You have to be careful. Sometimes the manager has worked with the temp, trained them and invested in them. They have trouble being objective about who else they might consider,” says Glube. In these cases, HR should make sure the manager gives the internal employee a fair chance by doing a formal interview and speaking with his current supervisor.
For instance, at MasterCard, O’Coin received an initial orientation as a temporary employee and then a more detailed one as a permanent employee: “We had a two-hour orientation meeting that familiarized us with MasterCard’s ideals, building security, IT [information technology] security, emergency procedures, etc.,” O’Coin says. “Then we had [new] employee orientation, which was approximately seven hours and addressed those same areas but in a more detailed manner. We also had HR presentations to discuss benefits.”
Wahlquist summarizes: “The most important thing is good communication between the HR professional and the employee that is being transitioned.”
A Successful Union
Using the temporary-to-permanent arrangement can be a win-win situation for both the employee and the employer. “Working for a staffing company is one of the best ways to find a [good] job. Working with a staffing company is one of the best ways to find [good] employees,” explains Wahlquist.
“When you’re hiring skilled professionals and you have an opportunity to evaluate their work, you have a viable and important advantage in a market where the supply is dwindling and the demand is increasing,” says Zion.
But remember that there’s competition for temporary talent. If you are interested in converting a temporary employee to a permanent employee, “move quickly,” says Zion. “In most cases, when people are working on a temporary basis, they are open to a full-time position [with you or another company]. Move sooner rather than later, or you may lose them.”
Having solid transition procedures in place before they are necessary is one of the best ways to seize talented temporary workers and convert them to permanent employees before someone else does.
Kathryn Tyler, M.A., is a freelance writer and former HR generalist and trainer in Wixom, Mich.
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