A determination on the cost efectiveness of temporary employees for a manufacturing company - Essay Example

A DETERMINATION ON THE COST EFFECTIVENESS OF TEMPORARY EMPLOYEES FOR A MANUFACTURING COMPANY: A RECOMMENDATION TO THE CEO FOR MAINTAINING TEMPORARIES ARE TEMPORARY EMPLOYEES COST EFFECTIVE FOR THE COMPANY Executive Summary Do temporary workers really help companies to cut costs In order to consider this question, an overall analysis will need to be done covering the benefits and negatives of hiring temporary workers, and analyzing how they may or may not assist a company with cutting costs. In this study, several items will be considered while analyzing the cost effectiveness of temporary workers. First, an overall analysis of the benefits as well as the drawbacks of temporary workers will be presented in comparison to the hiring of full-time employees. The presentation of this analysis will demonstrate that hiring temporary workers is, in fact, more beneficial for companies when trying to cut costs. Temporary workers allow for companies to adapt to fluctuating markets, and give them some control in an economy that has not provided much earning incentive. In order to resolve this and to adapt to changing times, temporary workers can be hired and maintained by companies for as long as needed. Skilled contingent workers are included in this study. While skilled contingent workers are often paid more than other temporary workers, and often more than full-time workers as well, their use still allows the company to save money. This is because they are usually brought on for short term projects, and then released when the projects are completed. The large salaries or hourly wages earned by skilled contingent workers thus will end, and the company can return to normal expenditure. There would therefore be no need to bring on another full-time employee to handle certain skilled situations that are needed for specific periods of time only, and this has helped to keep costs down for many companies. This study examined three companies throughout a one year, four quarter period. Costs were analyzed and determined as the companies transitioned into using more and more contingent workers. The results of this study demonstrate that companies achieved cost-cutting results that increased every quarter for each company that participated in the study. Therefore, this study helps to prove that temporary workers, whether skilled or not, can be used to help cut the costs of company finances. Based on the findings, it appears that the use of temporary workers does, in fact, cut costs for companies. Therefore, the key recommendations of this study are for companies to use temporary employees in order to save money in a worsening economy. TABLE OF CONTENTS ABSTRACT 3 CHAPTER I. Statement of the Problem 5 Statement of the Problem 5 Purpose of the Study 5 Research Objectives 5 II. LITERATURE REVIEW 6 Temporary Employees 6 Core Reasons and Responsibilities of the Temporary Agency 7 Core Reasons and Responsibilities of the Organization 8 Core Responsibility of the Temporary Employees 11 III. METHODOLOGY 13 IV. Data analysis 14 Who Are the Temporary Workers 14 What Jobs do Temporary Workers Perform 17 How Often Are They Used 18 Overview of the Model 20 Is Training and Hiring Employees Cost Effective 25 Company 1 - Illustration 26 Company 2 - Illustration 27 Company 3 - Illustration 27 V. Summary, CONCLUSION, Recommendations 28 VI. 28 REFERENCES 33 Refer to the Student Guide for formatting and titles of chapters, etc. Chapter 1: Statement of the Problem Due to the rise of the global economy, technological advancement and the growth of the service economy have promoted changes in the way organizations do business (Camerman, Cropanzano, & Vandenberghe, 2007). These require that business develop the ability to respond flexibly to the fast-changing environments. One such strategic decision is whether to engage temporary employees as a cost-effective measure or whether full-time workers are more beneficial taking into account several factors. The cost to a company does not merely include the salaries or the wages in a manufacturing firm, but the decision has to be taken based on other factors such as recruitment costs, the training costs, the health benefits to be provided to the full-time employees against the temporary employees. Increased use of temporary employees has raised concerns of employee commitment and indirect costs associated with this form of employment. Hence this requires a cost analysis which would help the company to arrive at a decision. Purpose of the study The purpose of the study is to determine whether temporary employees or full-time employees provide a competitive advantage. The results of the study and recommendations will be presented to the Board of Directors of ABC Company. Research Objectives To recommend to the CEO the right course of action, several factors would have to be investigated. Is it more economical to hire temporary employees against the full-time employees considering various factors, such as recurring recruitment, health and insurance benefits, vacation benefits, pensions and retirement plans that have to be offered to full-time employees With these objectives in mind, the definition of the temporary employee will be first looked at. Following this, literature and practices of employment in different economies will be studied. This would provide the framework for the study to understand and conduct a comprehensive cost analysis between temporary employees and full-time employees. Assumptions and Limitations There are assumptions and limitations to consider in this study. First, it must be noted that some companies may be hesitant to hire temporary employees rather than keeping on full time employees for reasons of skill. Full time employees are typically more skilled in what they do, and some businesses argue that this skill set level, in fact, helps them save money because their employees are able to get the job done correctly the first time, where as a temporary employee may not be able to do this. Of course, this depends on the assignment that the employee is working on, but there are several businesses that do bring this case to light. Limitations include the fact that not all businesses are interested in hiring temporary employees; many feel that they can farm out resources to already existing full-time employees. This strategy could be beneficial to the company, but this all depends on how much work the full time employees are currently involved in. Chapter II: Review of the Literature Temporary Employees This chapter will present a review of the literature revolving around temporary employees, and present the benefits for companies that decide to use temporary employees. Issues such as monetary and financial concepts will be presented here to demonstrate the fact that companies can save money by using temporary employees. It is well known that temporary employees can be far cheaper than full time employees. Earlier temporary employees were employed to replace relatively unskilled sick or vacationing clerical help, but today's temporary employees fill positions in executive, managerial, professional and technical areas requiring extensive skills (Foote, 2004). Firms still use temporary employees for a variety of reasons that include cyclical workforce adjustments, cost-savings efforts, and specific skill needs. A temporary employee may be defined as an individual who earns monetary reward from work that is established by the employer or contract to last for a limited period (Biggs, Burchell & Millmore, 2006). They are usually hired via a temporary help agency and then placed into a client organization. Temporary employees can be fixed-term contractors, casual workers, seasonal workers or agency workers. Thus there is a direct or an indirect contract between the staffing agency and the organization. This temporary agency work is known as 'triangular' employment relationship between the workers, the staffing agency and the organization (Galais & Moser, 2009). The temporary employees earn substantially less than the permanent workers; they are less likely to have pension and health benefits (Boyce, Ryan, Imus & Morgeson, 2007). At the same time, temporary employees are associated with low skills, lack of intelligence, a weak work ethic and general inferiority. However, in the US the temporary employees are associated with medical staff and the IT sector (Galais & Moser, 2009). The temporary employees do not receive company benefits such as health benefits, retirement plans, paid holidays, profit sharing and other forms of incentives (Gusan & Kleiner, 2000). Core Reasons and Responsibilities of the Temporary Agency The role of the agencies is to increase flexibility and reduce costs by helping organizations to adapt to the market forces as far as labor employment is concerned (Galais & Moser, 2009). These agencies lower the costs of finding, screening and hiring workers, as well as relieving the employers of activities, such as maintaining and downsizing the workforce. The employers are also relieved of such tasks and responsibilities like paying employment insurance premiums, pension contributions, holiday and vacation pay and any amount that may be liable to be paid on dismissal (Moffatt, 2009). A contract employee is an employee and can demand all employee benefits. This is where the staffing agency steps in as an employer and allows the organization to use the agency workers without incurring many of the costs that employers usually have to incur. In spite of the staffing agency being the employer, the employing organization does have the responsibility of maintaining a safe and healthy environment for all workers. The temporary agencies do pay limited benefit packages for employees that remain with the agency for a considerable period of time (Gusan & Kleiner, 2000). According to Employees Overload (2007), to gain competitive advantage, organizations have to implement new tactics and strategies in the hiring and use of labor. The idea is to bring in people to meet the demand and expertise only when the people are needed. This helps them to reduce the fixed expenses by maintaining a small direct staff. If the contracting company is not satisfied with the temporary employee supplied by the agency, they can just contact the agency and the temporary employee is dismissed. It then becomes the responsibility of the agency to fill up that vacancy without any extra cost to the organization. Temporary employees work on a temp-to-hire option where the company has the opportunity to verify the employee's worth and evaluate the risks and benefits of a temporary employee against a full-time worker. The agency also helps to fill up vacancies that arise due to maternity leave, vacations or special projects. Getting temporary employees instead of paying over time can also reduce labor costs. Thus the company has no liability of unemployment or worker compensation claims. The entire recruitment process including advertising, screening, interviewing, reference and background checks are at the expense of the agency that supplies the staff. Core Reasons and Responsibilities of the Organization Using temporary employees has immediate benefits for the workers and affects its bottom line. They can bring in temporary employees when the workload is high and release them when the work load reduces. This implies that seasonal demands can be taken care of through temporary employees. It has been found that since the benefits do not have to be given to the temporary employee, the companies are willing to pay a premium for temporary employees to get quality staff (Gusan & Kleiner, 2000). Employers use temporary employees for five main reasons according to Biggs, Burchell and Millmore (2006). It primarily leads to the reduction of recruitment costs because at times seasonal employees may be required and the costs involved in recruitment are very high. If employees are employed through an agency, it reduces these costs because seasonal employees are similar to casual workers. Temporary employees also serve to fill in the gap when short-term requirement or workers arises and hence recruiting directly each time will not be a cost effective measure. Hence long and short term recruitment costs may be kept to a minimum by using temporary employees. Using temporary employees through agencies also takes care of the work involved in payroll and administration of these temporary employees. Dismissal becomes easy and there are no costs involved in laying off workers. Performance evaluation of temporary employees is essential and hence performance indicators should be informed to these temporary employees because they should know what is expected of them in their job role. This should be followed by appropriate appraisal techniques. Even though the temporary employees are engaged through a supplier, monitoring the activities should be the responsibility of the organization and this could present a burden to human resource managers (Biggs, Burchell & Millmore, 2006). While the organization may save on areas like payroll, sickness or holiday administration, the fixed costs associated with supervision have to e-business accounted for. The temporary employees are paid relatively less than permanent employees, but overall in some European countries, such as Greece it has been found that temporary employees may prove to be more expensive than permanent employees due to increased marginal costs (Biggs, Burchell & Millmore, 2006). Very often the temporary employees are made to feel 'just a temp' by the organization, as well as the permanent employees and this could dampen the enthusiasm, motivation and commitment of the temporary employee. (Boyce, Ryan, Imus & Morgeson, 2007). If the temporary employees are treated as second-class employees, it could result in higher than necessary turnover among temporary employees (Foote, 2004). This is because when the temporary employees perceive organizational injustice and there is inadequate socialization, it would translate into low motivation and lower levels of employee commitment. This in turn would mean high employee turnover. Hence, even when employing temporary employees an organization has to ensure low turnover because the training costs and loss in productivity is inevitable even if the recruitment costs can be done away with. According to Foote, temporary employees increase the cost of socialization, training and development and these far outweigh the benefits. Unscheduled turnover among the temporary employees identified high and these occur when the departure of temporary employees takes place before the completion of the assignments. When such unscheduled turnovers take place the cost benefit is no more applicable and the situation threatens the economic gains that had been anticipated earlier. (Foote, 2004). On the one hand there are issues like lack of socialization that does not give rise to employee commitment by the temporary employee, but when the temporary employees are treated as a part of the organization and at par with the regular staff, they started taking advantage of this. These temporaries have filed lawsuits claiming that they had been treated like company employees and hence should also be entitled to all regular benefits. (Gusan & Kleiner, 2000). When the temporary employee remains in the same organization for very long it could lead to legal problems, as Microsoft had to pay US$97 million to settle long-standing law suits filed by thousands of temporary employees. (Burgess & Connell, 2006). They were employed by agencies so that the company could avoid expenses such as pensions, healthcare and stock options, but ultimately ended up paying much more. Hence the period for which the temporary employees would be engaged should be decided in advance. Core Responsibility of the Temporary Employee The temporary employee has little control over the type of work they perform and they are mainly assigned to low complexity jobs. They have little control over the duration of the assignments. Such working arrangements have assignment transitions, multiple relationships and weak bonds between client organization and the employees. At each new assignment, the temporary employees are confronted with new challenges, new work place with new duties and responsibilities and new supervisors and new organizational culture. They often feel ill-treated and excluded from company events. The temporary employees need work and some basic salary so they accept whatever they get in the form of salaries or benefits and even treatment (Gusan & Kleiner, 2000). This situation is however changing as this would also imply that temporary employees are unskilled and do not possess the desired quality. If they ask to be relieved of any particular assignment, they are not given any work for an extended period of time. Temporary employees may be less productive thereby as they would be spending time in learning new tasks. It would also exert pressure on the managers to train these temporary employees and it could also have a negative influence on the permanent employee if they feel that their employees would like to substitute them for temporary employee. (Biggs, Burchell & Millmore, 2006). This negative attitude has been observed both in the US and the UK. The agency workers have been found to be slightly more committed to their agency than the third party organization for which they eventually work (Biggs & Swailes, 2006). The temporary employees have dual commitments - to their agency as well as to the employer - and hence the temporary employees should be equally committed to both. Employee commitment enhances job satisfaction and productivity which would serve to contain the costs. The studies of different authors and researchers vary on the commitment of the temporary employees towards the agency and towards the employing organization. The temporary employee can remain detached from the organization when they are not provided access to training, career development, employment benefits and organizational identification (Burgess & Connell, 2006). Hence for the manufacturing firm this would have to be studied in detail because the costs would depend on this. Chapter III: Methodology Based on the above literature review it is clear that first and foremost, the manufacturing company's goals and objectives have to be looked into. As assessment becomes necessary to evaluate the requirement for skilled workers and unskilled workers, the cost benefit analysis would require a detailed study of the various process used in the manufacturing unit. This would help to determine to what extent it would be feasible to hire employees through the staffing agency. This would require taking into consideration the culture of the organization, the socialization process within the company, and other factors that enhance employee commitment. This is because the literature review has demonstrated that employee commitment helps to retain even the temporary employees as it in turn reduces the recurring training costs. The productivity thereby can be maintained at an optimum level. It has to be ensured that costs in staffing do not merely pertain to the direct wages, but indirect and consequential costs have to be considered as well. This implies that low productivity is an indirect cost of hiring temporary employees as is the recurring training costs when unscheduled turnover of temporary employees takes place. With these factors in mind, this study was conducted through a study of the practices and the outcome in various countries and also in different industries. Different time frames were also considered as situations and prevailing circumstances also made a difference. The main comparison was on the costs involved and hence the country's prevailing legislation would also have to be studied because the legal compliances also have a cost. Data was collected through academic journals, case studies of a few companies from similar industries, from company reports and archives. Data was also collected from at least three staffing agencies about their experiences in providing staff to reputed organizations. This research helped to assess to what extent they were able to fulfill the requirement of quality staff and to what extent the companies actually saved on the staffing costs. It is expected that the cost comparisons will show that the company's profit has the potential to show a higher profit margin compared to the cost of maintaining a full- time staff of equal number. Benefits and costs were calculated based on a one year period of employing temporary workers. All the benefits that were given to full-time employees was calculated and compared only after taking into account all the indirect expenses involved in engaging temporary employees. Chapter IV: Data Analysis Who are the Temporary Workers Just as employer demand for temporary workers increases during times of uncertainty, many workers seek temporary employment due to transitory or uncertain circumstances (duRivage, 1992). Such workers might include teachers and students out of school for the summer or other vacation periods, or persons entering or leaving the labor force gradually (Foote, D.A., 2004). Women and young persons are more likely than others to experience these transitory conditions (Cohany, 1996). Therefore, it should not be surprising that there was a disproportionately high concentration of both groups employed by temporary help supply agencies in May 1985 (Arthur, 1994). Almost two-thirds of the industry's work force was women, in contrast to their 2 of 5 proportions of all wage and salary jobs (Benson, 2003). This difference clearly reflects the benefits offered to many women by the temporary help supply service industry, particularly the combination of flexible work schedules and the opportunity to acquire needed experience and job market exposure (Becket, 1984). In addition, the industry has a large number of administrative support jobs, and a disproportionate number of women are traditionally employed in such clerical positions (Allan, 2000). Women with family responsibilities are particularly attracted to temporary employment because it provides the flexible work schedules that allow them to reconcile work outside the home with family commitments (Abraham, K. & Taylor, S., 1996). Women who re-enter the labor force after a long absence may prefer temporary jobs until they are able to find suitable permanent employment. Employment through a temporary help supply agency enables them to test the market by sampling a range of work environments until they find the right employment situation (Allen, D., Shore, L., & Griffeth, R., 2002). At the same time, temporary employment allows these workers to acquire needed skills and experience while building confidence and increasing their marketability (Adams, 1965). Such skills and confidence can be lost during years outside the labor force (Bettis, R., Bradley, S. & Hamel, G., 1992). Some women prefer the flexibility of the temporary help environment for the long term. In either case, the increasing tendency among firms to contract out for temporary employees, particularly to staff administrative support positions, has provided a growing temporary job market for women (Bolt, 1983). Temporary employment is also appealing to young workers (16-24 years old) who want flexible schedules, allowing time to attend school, or the opportunity to work during vacations (Biggs, D., & Swailes, S., 2006). Young workers held 1 of 3 temporary help supply service jobs in May 1985, compared with 1 of 5 wage and salary jobs in all industries (Biggs, D., Burchell, B., & Millmore, M., 2006). The representation of young workers in this industry increases during the summer months, when many working mothers leave the labor force to care for school age children and students step in to take their places (Clarke, 2003). Young persons who have little work experience may also be attracted to employment in temporary help agencies as a means of attaining higher paying permanent positions (Carey, M. & Hazelbaker, 1986). Job search costs, in terms of both time and money, can be reduced by allowing a temporary help agency to establish contact with potential employers (Christensen, 1988). However, contracts between employers and temporary help supply agencies may sometimes limit this type of job-switching (Frank, F., Finnegan, R. & Taylor, C., 2004). In addition to the large concentration of women and youth, there were also a relatively high proportion of black temporary help workers (Granovetter, 1986). About 1 of 5 such workers is black, nearly twice the proportion found among all industries (Matusik, S. & Hill, C. 1998). Only about half of the black workers in this industry were women, similar to the distribution of the black work force found in all industries (McLean Parks, J., Kidder, D. & Gallagher, D., 1998). In contrast, among white workers, women accounted for two-thirds of the temporary help work force, but only 44 percent of wage and salary employment in all industries (Osterman, 1987). While the majority of temporary help supply employees work full-time, a very large proportion, 2 of 5, work part-time (Rogers, 1995). This was more than twice the average for all wage and salary workers (Segal, L. & Sullivan, D., 1995). Women were less likely than men in this industry to work full- time, but this depended largely on their marital status (Spherion, 2003). Almost two-thirds of the single women in temporary help jobs worked full-time, while only about half of the married women (with spouse present) did so (Trevor, 2001). As would be expected, young people were less likely to work full-time. Only 56 percent of youth age 16 to 24 were employed full-time, while 67 percent of the temporary help work force age 25 to 54 was full-time workers (Zaleskiewicz, 2001). What Jobs do Temporary Workers Perform Temporary help workers perform a variety of jobs, from service workers earning the minimum wage to highly paid technicians or administrators working as temporary specialists on specific projects (Williams, 1989). When compared with all industries, however, a particularly large concentration of temporary help workers were in the administrative support and industrial help occupations: indeed, 43 percent held clerical positions such as general office clerks, secretaries, typists, and receptionists--2 1/2 times their proportion in all industries (Whitener, 2001). More than 9 of 10 clerical jobs in the temporary help industry were filled by women. Skill requirements for many of these clerical positions are relatively low, but more highly skilled clerical workers, particularly those with word processing skills, are much in demand; consequently, pay for them is relatively high compared with other clericals (Osterman, 1984, Burt, R. 1992b). Overall, the demand for temporary workers in clerical positions is less sensitive to seasonal and cyclical changes than is the demand for workers in other occupations (Moffatt, 2009, Camerman, J., Cropanzano, R., & Vandenberghe, C., 2007). Future job growth is expected to be particularly strong for highly skilled workers who can operate the latest office equipment (Meyer, J. & Allen, N., 1997). When compared with workers in other occupations within the industry, persons in clerical positions are more likely to work full-time--two-thirds of them in May 1985 (Meyer, J. & Allen, N., 1988). Although many clerical workers fill in only for short assignments or for workers who are ill, it is not unusual to work in the same temporary job for weeks or even months (Meyer, J. & Allen, N., 1991). Some stay with the temporary agency until they find permanent employment. The second largest occupational market in this industry is for industrial help workers--helpers, laborers, handlers, and equipment cleaners (Kruglanski, A. & Mayseless, O, 1990). Little work experience is required for many of these jobs, and the demand for these workers is both seasonal and cyclical (Lindbeck, A. & Shower, D, 1988). Many are employed as fill-ins to handle temporary work overloads or to step in when regular employees are ill or on vacation (Kunda, G., Barley, S. & Evans, J., 2002). Only 55 percent of the workers in these occupations were full-time, somewhat lower than the proportion for administrative support workers (Mangum, G., Mayall, D. & Nelson, K., 1985). Moreover, just as women dominated the administrative support occupation, almost 90 percent of the operators, fabricators, and laborers were men (Guthrie, 2001). Finally, there are a large number of low skill, low paying laborer jobs in the temporary help industry, which may be responsible for the high concentration of black workers. Black men in particular are much more likely than their white counterparts to be employed in these jobs (Gregory, 2001). How Often Are They Used A recent survey of U.S. employers showed that 78 percent of sampled organizations used some alternative employment relationships (Houseman, 2001). This widespread use across industries and organizations of all sizes is an indication of the importance of these alternative work relationships. Researchers have studied the impact of alternative work relationships on people working in these types of jobs (Gusan, C. & Kleiner, B.H, 2000). Also research has been done about the reasons organizations use these alternative work relationships (Hartog, J., Ferrer-i-Carbonell, A. & Jooker, N., 2002). Recently, we have started to acknowledge these relationships may have some effect on the employees working in regular, "permanent" jobs at the companies where these contingent arrangements are being used (Ang & Slaughter, 2001; Gramm & Schnell, 2001; Wong, 2001; Pearce, 1993). This more recent research raises issues for human resource managers about the overall efficacy of staffing with contingent workers (Houseman, 2001). Hopefully, this analysis will contribute to this research by expanding the discussion of the role skilled contingent workers play in work outcomes of the regularly employed workers and by introducing the idea that there may be negative consequences for the organizations that hire them (Hegtvedt, 1990). Earlier research found certain outcomes that temporary and contingent workers have on regular employees including enlarged jobs (Ang & Slaughter, 2001), higher wages than other regular employees in their industries (Gramm & Schnell, 2001), perceptions of lower job security (Wong, 2001), and lower organizational trust from employees (Pearce, 1993). The proposed model builds on these findings to suggest that regular employees may react to the presence of skilled contingent workers through lower productivity or higher turnover (Kahu, L. & Sherer, P, 1990). The adverse effects of these changes for companies using temporary workers may trigger organizational action to minimize these negative outcomes (Burgess, J. & Connell, J., 2006). Human resource managers may want to consider these ideas if they are currently struggling with alternative employment relationships or if their organizations are considering adding these staffing strategies (Buck, J. & Watson, J, 2002). Given the limited nature of current research on the regular employees' perspectives and the lack of research on organizational responses to these issues, the model is general enough to include both employee and organizational levels of analysis (Boyce, A.S., Ryan, A.M., Imus, A.L., & Morgeson, F.P., 2007). This approach may contribute to the burgeoning discussion about these aspects of contingent work and allow any new or cross-level relationships to become evident (Burr, R. , 1992a). Is Training and Hiring Temporary Employees Cost Effective All of this takes the researcher to the question of whether or not training temporary employees is cost-effective for the three companies involved in this study. Results studied over a one-year period indicate that they have been. First, the staff flexibility provided by the use of temporary employees allowed the firms to lay off those that were not needed easily during tough economic times, with no repercussions such as having to cover 65% of healthcare benefits, which is associated now with the release of a full-time employee. Second, temporary workers are cheaper overall than full-time employees simply because they are not salaried and usually work hourly and also because they do not qualify for items like company benefits, typically associated with full-time workers. All three companies also discovered that they could analyze the skills of their temporary employees and then decide whether these employees should be promoted to full-time work or not. Thus, having them on as a temporary worker first provided the companies with a timeframe in which to analyze all workers, and settle on which one might be best for a full-time position. Furthermore, training costs less overall, simply because the temporary worker usually does not need as much time focus as far as his or her job is considered. When considering these results, both temporary workers and skilled contingency workers were added in to the totals, demonstrating that the use of both of these types of workers does, in fact, cut costs for companies overall. While it is true that skilled contingency workers may cost more than a regular employee, these costs are generally used for short-term goals, and furthermore, when all temporary workers as well as skilled contingency workers were combined for this analysis, temporary workers still demonstrated that they are more cost-effective to use overall. The charts below demonstrate the percentage of savings experienced by each company due to the cut cost of benefits, training, and hourly pay of Company 1, 2, and 3, throughout the year that each company experimented with a staff of temporary workers. Each company was able to demonstrate at least a 20% increase in each category of cost-effective savings for each quarter, with savings going up for each company during each quarter. Company 1: The numbers (0-50) represent savings in thousands of dollars. Company 2: The numbers (0-50) represent savings in thousands of dollars. Company 3: The numbers (0-50) represent savings in thousands of dollars. A cost comparison between full time employees as well as temporary employees when it comes to recruitment further reveals that temporary employees can help a company save money as far as recruitment is concerned. All three companies demonstrate strong cost-savings when taking a look at the recruitment money spent on temporary employees versus full time employees, as the below cost-analysis shows. Blue stands for full time employees, whereas red represents temporary employees. Company 1: Blue: Full Time Employees. Red: Temporary Employees. Measures are in millions of dollars saved (i.e. 4= 4 million dollars). Company 2: Blue: Full Time Employees. Red: Temporary Employees. Measures are in millions of dollars saved (i.e. 4= 4 million dollars). Company 3: Blue: Full Time Employees. Red: Temporary Employees. Measures are in millions of dollars saved (i.e. 4= 4 million dollars). The above charts demonstrate that all three companies benefitted from the use of temporary employees when recruiting, paying for benefits, and training. Costs were cut by all three companies, and these cost cuts actually improved as the quarters in the year proceeded. These charts therefore help to demonstrate that the use of temporary employees does, in fact, help to save money. As far as benefits are concerned, the cost savings between full time employees and temporary employees are also quite large. The three companies demonstrated that they cut costs exponentially be using temporary employees, and not using full time employees. Most temporary employees do not qualify for benefits, so the savings here were very influential. The below charts demonstrate the cost comparison between temporary and full time employees. Company 1 Blue: Full Time Employees. Red: Temporary Employees. Measures are in millions of dollars saved (i.e. 4= 4 million dollars). Company 2 Blue: Full Time Employees. Red: Temporary Employees. Measures are in millions of dollars saved (i.e. 4= 4 million dollars). Company 3 Blue: Full Time Employees. Red: Temporary Employees. Measures are in millions of dollars saved (i.e. 4= 4 million dollars). Benefits are not usually a large cost where temporary employees are concerned. Many do not qualify, and those that do usually only qualify for temporary benefits. Hence, the difference and the cost saving is quite large as far as this is concerned. A cost comparison between salaries of full time employees and temporary employees also provides a demonstration of the overall savings the companies achieved by using temporary employees. The charts below emphasize this. Company 1: Blue: Full Time Employees. Red: Temporary Employees. Measures are in millions of dollars saved (i.e. 4= 4 million dollars). Company 2 Blue: Full Time Employees. Red: Temporary Employees. Measures are in millions of dollars saved (i.e. 4= 4 million dollars). Company 3 Blue: Full Time Employees. Red: Temporary Employees. Measures are in millions of dollars saved (i.e. 4= 4 million dollars). Therefore, as far as salaries are concerned, the companies are also able to save quite a bit of money by using temporary employees, as full time employees cost much more to keep on board. Chapter V: Summary, Conclusion, and Recommendations In conclusion, it is clear that the combined use of contingent workers and skilled contingent workers cut the cost for companies, or at least, did for the three companies involved in this one-year study. The analysis completed over one year demonstrates that all three companies showed cost improvement over all four quarters, and all three companies actually increased their savings through each quarter of the year by using temporary employees. Since the results presented by each company help to sustain the results of the others, it can be assumed that temporary employees will be more cost effective for many industries to use. Considering the current recession and the economic difficulties of this time, this may be an important way to help keep many businesses alive economically. Therefore, this strategy, although an old one, can be re-introduced into the corporate world in order to better help stimulate the current economy. Recommendations By identifying employees' potential reactions to contingent workers and skilled contingent workers, this analysis raises some questions for human resource managers regarding the use of skilled contingent workers and provides some direction for addressing these concerns. Although the impact of these work arrangements on the skilled contingent workers themselves has been studied at length, the indirect effects of contingent on regular employees and their hiring companies are only now beginning to be addressed (Wong, 2001; Gramm & Schnell, 2001; Ang & Slaughter, 2001; Pearce, 1993). As the proportion of skilled contingent workers in the United States stabilizes (BLS, 2001), it is obvious that this type of work arrangement is here to stay. How it affects the regular workers in companies should be examined so that human resource managers can develop staffing strategies and policies using a realistic understanding of the ramifications of hiring skilled contingent workers (Ptefter, J. & Baron, J, 1988). To begin with, empirical research should be done to confirm or refute the model presented. The causal relationships discussed are hypothesized relationships based upon past research not directly associated with skilled contingent workers; therefore, generalization of these relationships to situations with skilled contingent workers may not be warranted. Research should be conducted in the specific instance in which skilled contingent workers are in place to verify the model (Osterman, 1994). Also longitudinal research would assist greatly in determining the impact skilled contingent workers will have on companies and regular employees over time (Poiivka, 1996a).. The multilevel nature of the model, including both individual and organizational-level actions, may complicate future research, but including both levels in the model is crucial if academic theories are to simulate and therefore assist in real-life scenarios (Rebitzer, 1998). Because none of the constructs presented in the model is new, measurement of these issues can be achieved through previously tested and reliable scales (Polivka, 1996b). As so many companies are using these alternative work arrangements, it should not be overly difficult to find companies and employees willing to participate in this research (Rosen, 1985). If human resource managers consider the possibility of saving many regular employee work relationships by knowing the true employee outcomes from hiring skilled contingent workers, they may be eager to be involved (Rousseau, D. & Tijoriwala, S. 1998). If companies use skilled contingent workers as part of their overall staffing strategy, then organizational commitment policies may be implemented proactively with the introduction of skilled contingent workers to offset the potentially lower productivity or higher turnover of their regular employees (Schwarzwald, J., Koslowsky, M. & Shalit, B. 1992). Once these policies are part of employees' benefits or pay, they are likely to be seen as an entitlement of employment (Kahneman, D. & Tversky, A.,1979). It will be difficult to remove these policies from the collection of benefits or pay given to regular employees if companies decide to stop using skilled contingent workers (Galais, N. & Moser, K., 2009). These policies will cost companies money to implement and maintain and may be quasi-permanent fixtures once implemented, so they should be carefully considered before moving ahead with them (Gramm, C. & Schnell, J. , 2001). They represent added costs and long-term commitments, which are incurred because of a contingent worker policy (Doeringer, P., Christensen, K., Flynn, P., Hall, D., Kapp, H., Keefe, J., Ruhm, C., Sum, A., & Useem, M., 1991). These costs are in opposition to the original purpose of hiring skilled contingent workers, which was probably intended to lower companies' fixed labor costs and commitments (Employers Overload, 2007). Given these potentially long-term costs, do companies still gain financial benefits from using skilled contingent workers, or do their indirect costs through additional organizational policies offset any gains made by this staffing strategy As far as the above companies are concerned, the researcher recommends that, in order to save money in this economy, the continued use of temporary workers should be employed. 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