Staffing service firms offer an alternative to traditional hire/fire cycle
With its boom or bust climate, the construction industry is nothing if not cyclical. Dependent on economic factors — as well as seasonal temperatures — the workload of the average U.S. electrical contracting firm may vary greatly from year to year or even month to month. Traditionally, these fluctuations have led to a hire/fire situation in which firms permanently hire workers only to have to lay them off in leaner times. The same firms may also find themselves scrambling to find qualified electrical workers during periods of peak demand.
Advertising themselves as the answer to periodic labor shortages are electrical staffing service firms, the majority of which offer a database of electrical workers available to contracting firms for short- or long-term assignments. Some provide workers who handle only electrical jobs; others deal with everything from low-voltage installations to superintendent tasks. Either way, staffing service firms claim that their function as liaison between firm and worker is vital in the current construction climate — and will only become more important as the number of qualified electrical workers in the industry decreases in the future.
Modus operandi. “The electrical industry is a project-oriented business,” says Phil Mussallem, president of New Haven, Ind.-based Electrical Staffing, Inc., an Independent Electrical Contractors, Inc. (IEC) Platinum partner. “Electrical contractors may have a project in a particular place that has a finite ending to it. By using us, they can gear up for that particular job. Then when they're done, they don't have to worry about workers' comp and unemployment issues.”
Electrical Staffing charges the contractor on a base amount per hour or a “perm basis,” which is a percentage of yearly pay that is used for the company's professional division, for the services of its more than 9,000 electrical workers. Workers' wages and funds for benefits are derived from that fee. Like most professional staffing service firms, Electrical Staffing offers vacation and holiday pay and health benefits. “It's good for workers and their families,” Mussallem says. “It's not catastrophic, but it is a medical insurance policy that covers doctor, hospital, and emergency room visits. It's a supplemental health insurance, but we give that to them free from day one.”
Because staffing service firms work mainly with merit shop contractors — union contractors generally hire through the union's hall — they don't use scale to set pay rates. To determine wages, the companies may survey pay rates in the area where they will be dispatching workers. “We need to make sure we're fair and not overpaying or underpaying our guys,” says Mike Widner, director of Strategy Construction Co., Inc. (SCC), Colorado Springs, Colo., an electrical staffing company with a current base of 75 to 100 electricians combined with a local service department with two trucks. “Once we determine the mean wage in that area, we take that cost plus the labor burden — unemployment, workers' compensation, liability insurance — and come up with a base price for the contractors.”
SCC adds a 5% to 7% administrative charge to the contractor's fee, which includes personnel tasks, such as background checks, drug testing, skills assessment, and in-person interviews.
Rack and stack. Both Electrical Staffing and SCC screen applicants before adding them to their database of eligible workers. They administer tests online and on paper, as well as conduct personal interviews. When time permits, the contractor may also interview the prospective employee. There are different tests staffing service firms administer to substantiate the level of experience claimed by the applicant. Most of these are geared toward the NEC and try to classify the particular discipline — industrial, commercial, or residential — of the workers in order to match them up with appropriate jobs. Tests for less experienced workers are of a more mechanical nature and can range from simple parts recognition questions to math problems.
“The mechanical tests are to see if they have the aptitude to mount conduit,” Widner says. “We have different levels for different times in their careers. None of these are pass or fail, but as far as skills certification, then we really dig into references and ask very specific performance-related questions. We don't worry about the soft skills until we actually sit them down and interview them. So we get a holistic view of the person by the time we're done screening them.”
The screening process is also driven by requirements dictated by electrical contractors. Sometimes the depth of the process may be sacrificed in order to get workers to a job site more quickly. “If they're in a time crunch and need people sent out immediately, we come to an agreement with the contractor,” Widner says. “The process has to be flexible at times, especially during the busy season.”
Once the applicants are screened, the staffing service firm then puts prospective workers' personal information in their databases and ranks them based on skill level and reliability. “‘Rack and stack’ is a good way to put it,” Widner says. “We've got two numbers — skill level and performance — that determine the likelihood we're going to call them to go out.”
Labor on demand. The decision to use an electrical staffing company is usually determined by workload. For most contractors, the rule of thumb is if they can keep workers busy for at least 12 months, they'll hire on permanently. If the duration is less than 12 months, they prefer to go with a staffing service. “When I'm right in the heat of the project and know that for six weeks we'll need extra people, but that as soon as it's done I'm not sure where I'd put them, that's when we hire temporary,” says Patty Adams, secretary/treasurer of Pace Electric, a commercial and industrial firm in New Castle, Del.
Staffing service firms allow smaller companies the labor power to work on projects that are larger than they'd normally handle. Pace Electric employs around 25 full-time electrical workers, but last year during peak season it nearly doubled its workforce by hiring 20 temporary workers. According to Adams, the company hires additional labor from staffing service firms at least once a year.
But smaller companies aren't the only customers using such services. Siemens Building Technologies, Inc. (SBT), the Buffalo Grove, Ill.-based subsidiary of Siemens AG, Berlin, often uses workers from staffing service firms in addition to its 70,000 full-time employees in the United States. The company's main focus is installing electrical and building automation systems, including fire and security systems. It contracts with government and municipal entities to perform work in municipal buildings, schools, and on military bases.
“We use workers from staffing services in almost every project we're involved with,” says Don Williamson, electrical systems project manager for SBT. On average, his division of the company hires three or four workers from a staffing service firm per project.
Mutual benefits. According to most electrical contracting firms, the biggest benefit of working with a staffing company is less paperwork, which, when talking about unemployment compensation, also translates into money paid out. “The unemployment rate is a big issue with me,” says Adams. “I'm going to pay unemployment on new hires anyway, and I'm going to pay benefits on top of it — so I'm going to pay a lot. When we hire somebody through a staffing service because a job needs 10 extra guys for a month, it saves us all of that cost, all of that hassle. I don't have to put anybody in my computer. They just never touch the business, and I'm not paying weekly.”
But for larger contractors, times savings can be a bigger influence than finances. “It takes from four to eight weeks to get someone hired on with the company,” Williamson says. “With staffing services, I can have somebody in two or three days, and generally not more than a week, depending on the skill set that I need.”
The larger companies aren't completely in denial about the financial savings either. “Our labor burden is higher than probably most contractors, and in using a staffing company we can get some people and save upwards of 40% on our labor,” Williamson says. “That's probably what keeps me coming back.”
Keeping the electrical contractor happy isn't the only consideration for the staffing service firm. In order to maintain a database of reliable, competent workers, they also have to foster worker loyalty. To do that, the companies sometimes go above and beyond merely offering decent wages, paid holidays, and medical benefits.
SCC swears by its bonus program in which workers can accumulate extra payment over the tenure of an assignment.“It's paid in a lump sum at the end of the job, and it's tied to safety, attendance, and job completion,” Widner says. “So, they've got an incentive to be there every day on time, to be safe, and to finish the job.”
In other words, the bonuses are a reason for a qualified electrical worker to stay with the same staffing company, even though that may seem at cross-purposes with the nature of temporary work. Also, when the staffing service firm works with the desired schedule of the temporary electrical worker, the relationship can be beneficial to both parties.
“We try to work with the same core group of people,” Widner says. “There are electricians out there that enjoy working with us instead of permanently with a company because they like to travel, and they don't want to be stuck on the same job doing the repetitious work day in and day out. They'll finish a job with us and come back and say, ‘What do you have for me now?’ Those are the ones — as long as they're maintaining a consistent performance level — that we keep out there working all the time.”
Risk management. Because most staffing firm's charges are set based on geographic region and employee skill set, the fees for temporary workers are relatively comparable. Another way the companies have of distinguishing themselves from the competition is to allow only competent and reliable workers out on jobs.
To do this, staffing companies must rely on their rigorous screening process and incentives, as well as feedback from electrical contractors. “If the guy's lousy, we send him back,” Adams says. “There are times when they are not qualified.”
There are also times when temporary workers aren't reliable, either. “One staffing service said they'd have two people for me first thing the next day, but then one didn't show up,” Adams says. “I called, and the service said, ‘Oh gosh, I hope nothing happened to them.’ They didn't understand. I don't really care if anything happened to him. I was supposed to have two people, and I didn't.”
Absenteeism is a definite risk with temporary workers. “Sometimes the guys fall through the cracks,” Williamson says. “They really don't want a full-time job, so you may get them on the job for two or three weeks, and then they pick up and leave unexpectedly.”
Nevertheless, Williamson maintains that this situation isn't the sole domain of the temporary staffing world. It can happen just as frequently with full-time employees. “That's something you live with,” he says. “I was an electrical contractor for 15 years, and it's not that much different.”
Labor shortage. That type of behavior probably won't change much as the industry prepares to enter into what could be one of the largest shortages of qualified electrical workers it has experienced.
Currently, the availability of workers mostly depends on what type of worker is needed and in which region of the country the project is based. Soon, however, workers may have the upper hand, finding themselves in a position where they can dictate the terms of their employment, including working less for more money. This, in turn, will make finding qualified electrical workers even more difficult.
If that happens, staffing service firms' databases will undoubtedly be in greater demand. “I think that's probably where these staffing companies will help us out,” Williamson says. “They'll be doing the leg work for us.”
True, but only if the staffing companies can keep their own databases stocked. “We recruit every single day,” Mussallem says. “So we are prepared for this, compared to companies that just recruit when they have a need.”
To combat the potential shortage of workers, Electrical Staffing sets its policy to one of aggressive recruiting. For example, it has begun hiring bilingual and Hispanic staff members in order to recruit and retain Hispanic workers. In addition, it is taking measures to expand its areas of expertise, including starting a professional division to handle project management.
SCC is actually taking a somewhat similar approach. “We're basically full-time recruiters,” Widner says. “We're constantly going out when times are slow and when they're busy: recruiting, recruiting, recruiting.”
At trade shows, SCC takes a two-prong attack: hoping to attract new business from electrical contractors as well as to interest electricians in signing up with them. “That's on a macro scale,” Widner says. “When we get down into the weeds, we run newspaper ads, do a lot of Internet advertising, and we're constantly staying in contact with the thousands of electricians that we've received applications from over the last six years, tracking them so we can gauge when they're going to be in between jobs and line them up with work that's coming up and match them with a contractor.”
Electrician for Hire. Most veteran electrical construction workers are accustomed to the cyclical nature of employment in the industry. The savvy ones plan around expected seasonal layoffs and sometimes even take jobs outside the industry to weather downturns in the economy. In the past few years, however, many electricians have turned to private labor pools to keep busy. These electrical workers are finding that the variation in type of work and freedom to take time off at the end of a project are definite perks of a temp job.
“I was able to keep busy as a journeyman electrician,” says Mike Halby, an electrician who signed on with Strategy Construction Co., Inc. (SCC), Colorado Springs, Colo., through his local IEC office in July 2005. Halby had been working as a security guard at a military base when he decided to return to electrical work.
“When you're working for a company for just six months or a year, and they're laying you off due to lack of work at almost the same time every year, a staffing company would probably be just as good if not better,” he says. “You're still going to have to plan for a small workload between the months of November and March, but having said that, with a staffing firm, you're not tied to one specific contractor: You're tied to an entire contractor organization. There's more of a possibility that you're going to be able to keep busy during those other times of the year.”
However, even the staffing service firms aren't immune to the larger shifts in the economy. When construction spending falls, staffing service firms, despite their list of contacts, may find it difficult to procure assignments for their workers. Recently, Halby signed on to a permanent position with an electrical contractor in the Colorado Springs area, but he often thinks about returning to temp work. “I'm finding I don't care for the permanent job as much, even though it's supposed to go for several years,” he says. “I probably will go back and work for them again should this job not work out or should the economy kind of drop down again. I like working different jobs. As far as the work is concerned, it's good because you're not stuck doing the same thing every day, every month, every year. It's not the best thing for everybody, but for me it worked well.”