[krillbee]

I've noticed its become much more common these days for companies to simply contract IT personell for projects through staffing firms instead of hiring temporary employees directly.

Why is this so? Isn't it a waste of money for companies to employ personnel by using a 3rd party? Why not just post the temporary position in paper and online classifieds instead and interview candidates themselves?

I understand if you need someone on short notice, and for a small time period (like a couple weeks) how this could be advantageous, but for contracts that are several months or longer, I dont understand the sense in this.

[residentEvil]

because the money used to pay for the contract employee comes out of a different budget then normal wages (and benefits, etc).

[krillbee]

so basically the problem is that their employee/wages budget is too small? so they take it from a project budget?
This seems like it could be remedied over time, by putting money from one pool into another.

[turtle777]

Many companies have headcount drive their financial metrics.
(Sales per head, Ebit per head etc).

Contract personell will not be included in headcount, so on paper, you look more efficient.

-t

[residentEvil]

budgets usually are in the capital accounts; meaning they are fixed amount of $ that you get to spend for the year and this is it and are a pre calculated amount of money.

when additional work comes up and you need manpower or an expert, etc; it comes from a fund that has some money set aside (we call ours professional services). that could be a consultant for a couple weeks; it could be a contract employee for 6 months, etc.

[Sherman Homan]

Big issues with the IRS about what is an "employee". Those regulations have tightened down considerably. Better to pay a staffing agency than run the risk of your 1099's turn into W-2's.

[krillbee]

Originally Posted by what_the_heck 

Many companies have headcount drive their financial metrics.
(Sales per head, Ebit per head etc).

Contract personell will not be included in headcount, so on paper, you look more efficient.

-t

lol

Originally Posted by Sherman Homan 

Big issues with the IRS about what is an "employee". Those regulations have tightened down considerably. Better to pay a staffing agency than run the risk of your 1099's turn into W-2's.

but wouldnt the staffing agency have to deal with those risks?

[krillbee]

Originally Posted by residentEvil 

budgets usually are in the capital accounts; meaning they are fixed amount of $ that you get to spend for the year and this is it and are a pre calculated amount of money.

when additional work comes up and you need manpower or an expert, etc; it comes from a fund that has some money set aside (we call ours professional services). that could be a consultant for a couple weeks; it could be a contract employee for 6 months, etc.

If the budget is all for the same purpose I dont see why it matters what pool it comes from. I mean why couldnt they use project budget to hire an employee directly? And if it did matter what pool it came from, why cant funds be shifted from one pool to the other?

[turtle777]

Originally Posted by krillbee 

If the budget is all for the same purpose I dont see why it matters what pool it comes from. I mean why couldnt they use project budget to hire an employee directly? And if it did matter what pool it came from, why cant funds be shifted from one pool to the other?

Yeah, I told you why. But you LOLed.

Unfortunately, that's the reality in many big companies. Metrics are more important than the most cost efficient solution.

-t

[Sherman Homan]

krillbee,
I don't understand your response. Budgets are a reality, what department and how much money is available is a reality. Don't LOL about something that is absolutely true in the business world.

And yes the staffing agencies deal with that risk; here's how: you work for the staffing agency as an employee, a W-2. That is the business of the staffing agency. A company that needs an IT project done hires the staffing agency. The company then doesn't have the extra burden of dealing with a string of temporary, part-time workers.

[scotth_uk]

As someone who works for one of these evil companies, is a part owner and a billing resource.....

People come to us for some of these reasons:

Fast recruitment (In the door within 7 days)
Skilled people with experience (real, relevant experience. no training requirement)
Shared risk on projects (someone to blame when it goes wrong. financial penalties)
Company resource (resource can refer to other internal people, who've been before)
Zero administration (sign the statement of work and they arrive. simple invoicing)
Zero tolerance of personal issues (we don't ask for days off, or complain)

krillbee,

Don't forget the hidden costs of hiring. In my experience if you pay someone $100k, they actually cost you around $150k for a long list of reasons. When you consider this, consultants' rates are not as bad as you think.

Budgeting is a tricky business, with many divisions, sections, managers, responsibilities, programmes and projects. It's hard work for a lot of people. My current location has about 30,000 cost centres globally.

[Dork.]

Originally Posted by krillbee 

If the budget is all for the same purpose I dont see why it matters what pool it comes from. I mean why couldnt they use project budget to hire an employee directly? And if it did matter what pool it came from, why cant funds be shifted from one pool to the other?

In big companies, different people manage those different buckets of money, and they get managed for different purposes. So it is rather difficult to get money moved around, as you suggest. At minimum, it involves getting two managers to agree, which is a tall order. Worse yet, one manager has to agree to give up money, which is nearly impossible.

Often times, the different buckets are allocated once, at the beginning of a fiscal year or the beginning of a project. In my company, the only viable way to send money from one bucket to another is for the manager of one bucket to "give it back" to the general corporate till, then the manager of the other bucket gets to justify why he should take it. But then there are tons of other managers of other buckets who may have just as compelling a case for the money.

A common way to get around this is the "contract to hire" concept, where a contractor gets brought in on a six-to-twelve month contract, and then if the employer is happy with their work, they get brought on full-time. In the interim, the new fiscal year starts and the Employment budget gets beefed up to accept the incoming hire....