Hiring decisions in the manufacturing and light industrial sectors often focus on base pay, but that hourly rate only tells part of the story. The full cost of hiring goes far beyond wages, especially when you consider the additional expenses and risks associated with maintaining a flexible, reliable workforce.
Whether you’re adding staff to your warehouse, production, or manufacturing teams, it’s important to understand the financial trade-offs between hiring directly and working with a staffing partner. This guide breaks down those costs so you can make the right decision for your operation.
The Full Cost of Internal Hiring
What are the hidden costs of hiring employees internally?
When you bring on workers through your internal team, your company becomes fully responsible for every aspect of employment. This includes base wages, payroll taxes, workers’ compensation, and unemployment insurance. Depending on your location and internal policies, you may also offer paid time off, shift differentials, or other benefits.
Overhead
There are also overhead expenses to consider. Uniforms, PPE, onboarding paperwork, training time, and equipment all contribute to the real cost of employment, especially at scale.
Internal Hiring Efforts
Hiring and managing the process internally means investing in advertising jobs, screening candidates, handling background checks, and coordinating interviews. These activities take time away from supervisors and HR staff, and high turnover in light industrial roles can make these efforts feel like a revolving door.
The Cost Model When Working with a Staffing Partner
How does staffing agency pricing work?
Partnering with a staffing firm changes the financial model. Instead of juggling all employment responsibilities in-house, you pay a single, all-inclusive hourly bill rate for each temporary or temp-to-hire employee. This rate includes the worker’s pay plus a markup that covers payroll taxes, workers’ comp, recruiting, compliance, and agency support.
How does it work for direct hire placements?
If you’re hiring for a permanent position, staffing firms also offer direct hire solutions. In this model, you pay a one-time placement fee, typically a percentage of the employee’s expected annual wages. Once hired, the worker joins your internal team, and your business takes on all standard employment responsibilities from day one.
What is a staffing agency’s bill rate, and what does it include?
The bill rate covers the hourly wage plus an added percentage (markup) to account for the full cost of employment. This includes taxes, insurance, and administrative services, as well as the costs of recruiting and onboarding. While the bill rate is higher than the worker’s base pay, it simplifies budgeting and helps reduce risk.
What is an employer of record (EOR), and how does it reduce risk?
When you work with a staffing partner, they serve as the employer of record (EOR). This means the staffing agency takes on all legal and administrative employment responsibilities. Your business avoids managing tax withholdings, wage and hour compliance, ACA reporting, and other complex regulations. It also helps shield your company from the costs of turnover, unemployment claims, or worker misclassification.
What’s the cost difference between hiring directly vs. using a staffing agency?
Here’s how internal hiring, temp/temp-to-hire staffing, and direct hire placements compare:
Flexibility, Efficiency, and Reduced Risk
What are the cost-saving benefits of working with a staffing firm?
While the hourly bill rate may be higher than a worker’s base wage alone, staffing services can create long-term savings by streamlining hiring, reducing turnover, and minimizing risk. You avoid the direct costs of unemployment claims, benefits administration, and the time-consuming work of replacing employees who don’t work out.
A staffing partner offers valuable agility for operations that need to adjust staffing levels frequently. You can scale up during peak production periods or special projects and scale back when demand slows, without the administrative strain of hiring and releasing employees directly.
Making a Smarter Hiring Decision
Understanding the true cost of hiring is essential for running a cost-effective operation. Whether you choose to staff internally or work with a partner like Doherty, having a clear picture of each approach allows you to make decisions that align with your workforce goals and budget.
If you’re looking to learn more about staffing pricing or workforce management, explore additional insights in our Learning Center.
