You’ve just gotten a 10% increase in orders, 1 employee is out on a scheduled vacation, and another two have called off for the day. Now you find your operations team is short and you’re scrambling to make sure you can fulfill orders. What are your options?
You could place a call to the local staffing agency to source five people for the next day. The problem with traditional staffing agencies though is that you have no visibility to who might show up and what type of performance you can expect.
Or you can utilize an on-demand labor platform to meet your operational labor needs. These online platforms connect businesses to the local labor supply and typically allow the business to select people and confirm through a web site.
Here at Veryable, we connect businesses and individual operators daily through our on-demand labor platform to give businesses the opportunity to schedule labor to the work.
We want you to make an informed decision on where you source operational labor. After reading this article, you can make an informed decision on whether traditional staffing or on-demand labor is right for your operational labor needs.
We’ll discuss how staffing agencies and on-demand labor platforms compare in the following areas:
- Labor Selection: Resume review vs unknown and unverified work experience
- Labor Quality: rated via the marketplace
- Operator Management
- Administrative work: productivity, attendance, and ratings
- Alignment to your Goals
Labor selection: staffing vs on-demand labor
To fulfill a labor order, a staffing agency begins with evaluating their roster of available people they can assign to your business. Depending on the agency, the firm could send you a list of people to review or may send you people at the appointed time to arrive at your facility to work.
If you are seeking labor for a higher-skilled position, then these types of roles come with more vetting and ability to document capability through certifications and work experience. Typically, staffing agency customers have limited input on selection and visibility to the candidates who will arrive at your facility tomorrow.
When accessing the local labor pool via an on-demand labor platform, you will have the ability to review the operator’s resume before accepting the operator. You have the ability to curate who has an opportunity to work at your facility. You will be able to review the operator’s rating and previous work history to validate the fit for your needs.
Labor quality: staffing vs on-demand labor
Judging the capabilities of local staffing agency candidates can be a challenge at times, as it really depends on the information that the staffing agency provides to its clients. At times, the staffing agency will have a great resume on file for someone, and other times have limited knowledge of the skill set and capability of a candidate.
Staffing agencies typically do not require labor performance ratings or share those ratings with businesses, as agencies typically only operate on a local scale with a limited internet presence.
When connecting with a local labor pool via an online platform, you will typically find performance ratings attached to each individual operator. This serves as an indicator of the type of effort and performance you can expect to receive from the particular individual as well as view any certifications or advanced skills the person possesses.
The transparency of the ratings and knowledge that the performance ratings are out there drives a meritocracy that allows the better operators to stand out. Operators that accumulate poor performance or attendance are rated lower and receive fewer work opportunities.
On-site management: staffing vs on-demand labor
A key differentiating factor that a staffing agency can offer is on-site management, which is particularly relevant for sites with a high headcount of temporary labor. The on-site management presence, which can be part- or full-time, will handle administrative requests from you and then can also handle interaction on your behalf with the temporary labor people.
When using a tech solution to deploy operational labor, these tech tools are not able to provide on-site management from the technology company itself. You will need to validate that the operator is present and performing as requested. You’ll need to have the knowledge to rate the operator and align their compensation accordingly.
Administrative work: staffing vs on-demand labor
If you’ve contracted for on-site management, the administrative tasks like attendance and productivity tracking are included. Otherwise, you’ll have to ensure that you track and record attendance and productivity to ensure people are appropriately compensated for their effort.
On-demand labor platforms typically ask you to conduct administrative tasks on a regular basis to make sure the temporary labor is paid according to their contribution and appropriately rated for their effort. Some tech-enabled staffing solutions will use geofencing or QR codes to track clock in / clock out.
However, this does not ensure that the clock in / clock out was an honest one. You’ll have to have controls in place to ensure positive confirmation that a person has accurately represented themselves in tracking their time just as you do for your full-time workforce.
Alignment to outcomes: staffing vs on-demand labor
A staffing agency is compensated by putting its people to work at facilities like yours. This means that a staffing agency wants to find consistent work to keep their employees generating revenue for them.
The longer and more consistent work they can find, the better for the staffing agency. When this happens, the firm is covering their costs and making a margin on top of that. Because of this, staffing agencies are better suited to covering consistent labor gaps in the full-time workforce vs. adjusting labor to meet fluctuating production requirements.
An on-demand labor platform is aimed at partnering with you and your business to drive results that improve your bottom line and delights your customer. Using an on-demand labor platform means that you pay for the labor you need when you need it. This translates into responding to customer demand and not planning to averages. The goals of an on-demand platform are:
- Improving your operational flexibility
- Lowering your cost per unit
- Operating with responsive lead times
Cost: staffing vs on-demand labor
Without a commercial agreement in place, staffing agency rates are typically 45% on wages paid because the client business is paying for the staffing agency’s full-time employee and associated costs of payroll taxes and worker’s compensation.
Usually staffing agencies will ask that you sign a contract that commits your business to using a certain number of people for a defined period of time, or they will ask to have a first look to fill any of your needs over a period of time.
On-demand labor platforms typically follow the same markup model, but come with a lower markup - around 30-35%. The costs of on-demand labor come without any expectation of hours, utilization, or minimum commitments over a defined period of time, which gives your business the flexibility to scale up or down as your demand requires.
Traditional staffing vs on-demand labor platforms: which option should you choose?
You are the one responsible for hitting your performance goals, so you will have to make the decision regarding staffing versus on-demand labor.
Staffing particularly suits the businesses that are challenged to staff their full-time workforce up to meet a baseload of demand. Long-term placement and consistency of work are two primary factors that staffing agencies look for as a good fit for them. Businesses can use this as a point of negotiation to gain a price reduction.
Traditional staffing is a good fit for:
- Maintaining your full-time workforce numbers at a baseload operational level
- Providing on-site supervision for the staffing agency labor for businesses that request it
- Operating within businesses that do not experience demand volatility
On-demand labor is a great fit for businesses that face uncertainty each day in their labor requirements due to changing customer demands or workforce fallout. An on-demand labor platform is particularly successful at filling one-day to one-week needs for operations companies to respond to the demanding needs of their customers.
On-Demand labor is a good fit for:
- Creating labor flexibility for your business to respond to customer demands
- Curating a labor pool and selecting people with credentials to work
- Achieving operational outcomes for your business to delight your customers
Unlike staffing, an on-demand labor platform is a tool for you to perform and grow your business by connecting to labor when you need it. At Veryable, we operate an on-demand labor platform to help manufacturing and logistics businesses like yours find the operational labor they need to delight their customers. If you'd like to learn about what an on-demand labor platform looks like for your business, please head over to the Find Workers page to learn how an on-demand labor platform works.