Hiring During a Recession? Adapt with Contract Employees
Author: Tom Kenaley
Historically, high inflation and low unemployment are both strong predictors of future economic downturn. Today, inflation is at 7.1% and unemployment is at 3.5%, suggesting a recession is on its way. As a leader in your organization, you benefit from preparing for continued uncertainty regardless. You can never truly predict the nature and course of market slumps and credit crunches, so it’s wise to stay vigilant for potential signs and listen to expert economists.
Whether or not a full-blown recession materializes, now is the time to be proactive and devise new strategies for any potential slowing of productivity. Thankfully, there is a way to insulate your company if and when the economy takes a turn for the worse in the near-term—by hiring contract employees.
Benefits of Hiring Contractors in an Economic Downturn
In any economy, contract workers provide companies with a myriad of benefits. But in a recession, these three are key:
- Reduced cost. To take care of the bare minimum requirements of employing full-time workers, you’ll need expert accounting and HR resources, creating greater overhead expenses for your company. And in an economy that requires keeping as much revenue flowing into your business as possible, contractors are much more cost-effective—especially for projects with a short timeline, tasks that don’t require strict supervision, and anything else requiring a skillset not integral to your business in the long run.Your company will save money in the long run, since contractors—or the staffing firm supplying them— handle their own taxes, withholdings, and benefits. Not to mention, there are no severance or separation packages to deal with in the event you have to let go of team members to cut costs.For example, after Twitter cut nearly half of their workforce, employees were offered 3 months of severance pay, likely exceeding $100 million in total payouts. And when other tech giants like Coinbase, Stripe, and Shopify cut large chunks of their workforces, those who exited received around 15 weeks of severance plus additional weeks based on length of tenure at the company.
- Decreased risk. Full-time employees simply require more investment from your business. From tax requirements to workers compensation and ACA-mandated healthcare insurance (if you have more than 50 employees), you’re obligated to foot the bill for these expenses—unless you want the Department of Labor on your doorstep.With contractors, not only do these requirements disappear, but you’re able to scale your team down to weather economic turbulence. Also, when hiring contractors through a staffing firm, your own HR team will be freed from spending time and resources on payroll, taxes, benefits, and other employee management responsibilities. Your staffing partner will handle all of this, ultimately deferring those risks to the contractors themselves or to a recruiting agency like KORE1.With a staffing firm, there’s always someone proactively looking for the candidates you need. This additional layer of accountability allows your business to be proactive as opposed to reactive with your hiring. If for some reason a contractor leaves a project prematurely, the time it takes to replace them will be minimal.
- Increased flexibility. This combination of decreased risk and reduced cost results in greater overall resilience when it comes to building your most effective team. When the economy is shaky, you’ll want the ability to scale your workforce up and down depending on your business needs.Employing contractors enables you to complete projects efficiently without the burden of hiring and managing full-time employees. And once you’re ready to hire full-time again, you can quickly transition top performing contractors to permanent team members.
Stay Competitive— Even During a Recession— with Contractors
While many businesses look to shed workers during economic uncertainty, you don’t necessarily need to cut a massive piece of your workforce to be successful. Instead, hold onto your most talented team members, and, if you need additional talent, turn to contractors. In times of economic strife, it’s easy to put retention on the backburner, assuming most employees will want to hold onto their current jobs.
Yet, studies show companies that prioritize retention during a recession actually outperform the market. Not to mention, a quality staffing partner will also have their eyes on those companies making sweeping layoffs, ensuring they’re ready to scoop up top talent in need of a new role.
As a leader in your organization, maintain a growth mindset during this period of uncertainty. Utilizing contractors may be the creative solution you need to come out on top when the economy eventually recovers. By hiring contactors, especially through a staffing firm, you can avoid all the HR headaches that come with full-time employees. And in a recession when you have bigger fish to fry, it’s nice to be able to give the burden of hiring to someone else.
As an expert in contract workforce management and recruitment, a staffing partner like KORE1 will handle quality control, proactively searching for contract candidates who align with your needs, allowing you to focus on your business.