Drawing from a flexible pool of employees
on short-term contracts can help engineering firms iron out the highs and lows of a lumpy business cycle. But the value of using contractors isn’t all about plugging gaps in capacity, explains Garry Rogerson.
Contractors form an essential strategic function for many engineering firms; allowing them to introduce different skills into their business at different stages in their growth or in the evolution of a project. Supplementing their team with specialist design engineers at the start of a project or experienced fitters in the build phase can be a highly effective strategy.
The right contractor will hit the ground running, realise a project quickly, bring new ideas or lead a team with credibility. This can be an extremely successful way to establish a new project or division until that area of the business is developed enough to support a permanent employee.
Widening the recruitment window
With over 70 per cent of company overheads made up of personnel costs, recruiting the wrong people can be a costly mistake. Fast-growing companies are particularly at risk when a permanent position needs filling quickly and they are forced to select staff from a narrow pool of available candidates. Hiring a contractor can take away the pressure of making permanent appointments too quickly and give businesses more time to make good recruitment decisions based on a wider selection of well-matched candidates, as well as helping to define exactly what is needed from permanent recruits to meet longer-term aims.
The contractor market offers a valuable resource for engineering firms that are growing quickly in terms of winning new contracts but don’t yet have enough guaranteed income to support permanent staff. A contractor can bring intensive support exactly when and where it is needed and subsequently step out of the business when they are no longer required, so that they are never an unnecessary financial burden.
Contractors typically cost up to a third more in wage costs than permanent staff at the same level, and this discourages some businesses from using them. But the contractor model involves little or no waste if the contractor enters the business to perform a specific role and leaves as that role is completed. The right candidate will already be experienced in relevant software or operating systems and require little or no training – therefore costing the business less in training and taking less time to settle into their role.
As global manufacturing output gathers pace and new opportunities emerge, the risk of growing too quickly also becomes a significant threat. If a business employs too many permanent staff on its payroll in a short space of time and before guaranteed income is secure, it can find itself in a position where its committed overhead base – which is mostly made up of employment costs – starts to outweigh cash flow. This position is unsustainable and can lead to a boom and bust scenario; typically ending in redundancies.
A flexible resource
The contractor model can be a useful tool for companies that want to increase staff numbers without jeopardising their financial stability. (don’t contractor costs fall onto the committed overhead base, or is this about the ability to release contractors if money becomes tight?) Employing a mix of permanent and contractor staff allows a business to increase and reduce labour without creating uncertainty within its permanent workforce. In a workforce of 100 staff made up of 80 permanent posts and 20 contractor roles, contractor numbers can be increased as new projects come on board, and reduced as workload intensity falls or income becomes secure. In this way, permanent employees never have to be laid off.
The value of hiring a contractor lies in the ability to inject the right blend of skills into a business, precisely where they are needed and only for as long as they bring value. For engineering businesses riding a growth curve or exploring new opportunities, the right contractor can not only provide targeted expertise and fresh inspiration, but also breathing space to make good longer-term decisions.