When someone first hears about on-demand labor and the concept of a labor pool, they often think they can get out of the hiring game for good. It can be confusing at first when you’re trying to balance managing your full-time workforce and building a flexible labor pool alongside it, so the temptation is to just choose one or the other. We get asked if people should stop hiring completely once they build their labor pool to a large enough size to cover all their work.
The short answer is: no, you shouldn’t stop hiring altogether if you build a labor pool. You probably thought we’d say “yes, use on-demand labor only!”, but in reality, it makes more sense to have some base level of full-time employees to keep your operation running.
At Veryable, we see clients find the most success with keeping the minimum amount of full-time employees they need and assigning the rest of the work to on-demand labor as it comes up. We help businesses build their labor pools and find the right balance between full-time workers and on-demand labor for their operation.
As companies grow using Veryable, they might actually hire a few additional full-time workers. Still, they’re hiring full-time employees much less often than they were before they used on-demand labor to build a labor pool.
How these companies get to the point of hiring less is often by posting more opportunities to on-demand labor as their own workforce shrinks from turnover, instead of replacing their employees with new hires. That way, they have clearly defined work to give to workers who are available on-demand, and they can build up a labor pool of people who aren’t on payroll full-time but are available whenever they’re needed.
In this article, you’ll learn why you shouldn’t stop hiring completely and why you should be backfilling your turnover with on-demand labor.
Why you shouldn’t stop hiring completely
Sure, in theory, you could run your operation entirely with on-demand labor. But you’d likely end up with at least a certain number of the same workers coming in every single day. These workers would likely be the people you would want to consistently show up, meaning it might not be best to use on-demand labor to make up that minimum number of workers that you need.
This is because on-demand workers are typically looking for just a few opportunities each month. These workers value the flexibility of working on-demand, so they are less likely to want to go to the same place and do the same work five days a week for months on end. The likelihood of you getting your favorite worker to agree to work full-time hours through an on-demand labor platform are slim to none. This makes on-demand labor a better fit for short-term work engagements, and full-time employees better for those core roles you will always have work for.
On-demand labor is meant to help match your labor capacity to demand in real time, not replace your entire workforce.
So you won’t be using on-demand labor to fill every role in the building all the time.
What you can do with on-demand labor, however, is hire less full-time workers than you otherwise would.
You probably have a slow season or times when demand isn’t as high. Whenever you find yourself sending people home because there isn’t enough work, take a look at the number of employees you keep on the schedule for that day. That will show you what your absolute minimum number of employees would be if you were to start using on-demand labor to handle the rest.
If you’ve identified the absolute minimum number of employees you need day after day to accomplish the constant level of demand you have, then you’re ready to assign the unpredictable share of the work to on-demand labor.
Why you should backfill your turnover with on-demand labor
We’ve written before about the growth you can unlock when you quit planning to the average demand and start planning a more agile way. It’s really powerful, and one quick way to start building your labor pool and stop hiring more employees is to backfill your employee turnover with on-demand labor.
What we mean by that is that when someone quits or leaves for whatever reason, you could wait and use on-demand labor to fill their role whenever there is enough work to justify it.
This is better than the alternative, which is to go through the hiring process to find a replacement for the employee who left. It is much quicker to pull from your labor pool as opposed to the long, drawn out process of posting to multiple job boards, reviewing applications, combing through resumes, and interviewing. Your office only has so much time to spend on finding workers, and if you don’t have a dedicated hiring manager, then you’re losing your own time that you could be spending on value-add activities.
Even when you do find a full-time hire, there’s the possibility that you won’t always have work for that person to do if they stay, so you could end up paying them to do busywork or even nothing. And you also face the high chance of that new hire turning over soon after, leaving you to start the process over again.
If you use on-demand labor instead, turnover provides a good opportunity to test out the approach of ramping down your labor capacity during slow times, then ramping up your labor capacity when demand increases. This is more efficient than trying to average production throughout the year, because your forecast will always be off by some amount. It is better to be prepared to respond than to hope you’re never wrong when predicting the future.
The ideal mix of full-time workers and on-demand labor
To find the perfect balance between full-time workers and on-demand labor in your business, first identify how much work you have during the slowest part of the year.
You should aim to have enough full-time workers to cover the lowest amount of work you see during the year. As your volume goes up and down throughout the year, use on-demand labor from your labor pool to complete any work that’s beyond what you’d see during your slowest days or weeks.
Approaching your labor force in this way allows you to assign the fixed amount of work to your fixed workforce, and the variable amount of the work to your flexible labor pool.
The ideal mix between full-time workers and on-demand labor results in your business paying only for the work that is done, meaning you’re no longer paying a full staff on days when you don’t have a full workload. You’ll always have something for workers to do, and you’ll be able to scale the flexible part of your workforce as quickly as you need to and beyond what you could achieve with regular staffing solutions.
The costs of a labor pool vs the costs of hiring
One fact that attracts many businesses to on-demand labor is its favorable cost comparison to traditional staffing or hiring full-time employees.
Although this is not the primary benefit you get from on-demand labor and your labor pool, it is a nice bonus for your business. Along the way to increasing your flexibility and agility so you can delight customers, you could also save on labor costs. In fact, in the calculation in our blog post linked below, we estimate that work being performed by on-demand labor could be up to 64% less expensive compared to the costs of hiring a full-time employee to do the same work.
Read our blog comparing the costs of hiring an employee to the costs of on-demand labor, so you can see how the two compare and decide if the flexibility and agility of on-demand labor is worth the price tag.