When it comes to running any business effectively, one of the biggest challenges facing managers is effectively staffing the business. Having the right number of employees in the business throughout the year is important to ensuring both service quality and profitability. With too few staff on shift, both the customer and employee experiences suffer. Too many staff and the payroll costs eat away at profits, leaving less to invest in other areas of the business.
However, it’s not just the total number of employees that matter when working out how to staff the business. The types of contracts those staff are employed on, whether they’re permanent full time, part-time or temporary, can have a dramatic impact on the ability of the business to adapt to periods of peak or seasonal demand.
In order to balance profit and performance, managers look to hire the right ratio of permanent to temporary staff, one that provides the flexibility and the stability that the business needs year-round. Finding this optimal mix of contacts, known as the optimal staffing ratio is complex, influenced by a multitude of factors. In this article we’ll be exploring the benefits and challenges of permanent vs temporary staff, what to consider when calculating the optimum staffing ratio and how to overcome the challenges you will face along the way.
Pros & Cons of Permanent vs Temporary Recruitment
Before diving into calculating and recruiting your optimal staffing ratio, let’s explore the pros and cons of both types of contracts. You can find a summary of these in the table below.
Temporary Hire Pros
Temporary Hire Cons
Permanent Hire Pros
Permanent Hire Cons
When it comes to deciding whether to hire more or less of each type of contract, you can measure the decision by how they impact two factors; flexibility vs stability. Temporary staffing can increase the flexibility of your workforce by their ability to be sourced quickly, hired on partial or fixed-term contracts while attracting fewer liabilities. For this reason, businesses often look to temporary staffing for periods of peak or seasonal demand.
Taking into account the benefits of both permanent and temporary staffing, you can begin to consider how to balance flexibility vs stability to promote an optimal mix of contracts in your team.
What to Consider When Calculating your Optimal Staffing Mix
Now that you understand the pros and cons of permanent vs temporary staffing, the question becomes what factors should you look for to consider whether to hire more or less of each type of contract.
The Predicted Demand Curve
As you undertake your long term sales forecasting for the coming months and years, what do the numbers look like when plotted on a graph? Are there peaks and troughs or is it mostly flat? Peak periods of sales demand can stretch your team and require more flexibility, periods of more predictable sales can benefit from a more stable workforce.
Workforce Capacity Curve
Similar to the demand curve, workforce capacity evolves over time. As staff take leave, attend mandatory training or take promotions or secondments, these create gaps in workforce capacity. When plotted on a graph, does your workforce capacity have peaks and troughs as well? If short-lived, these capacity gaps could be best filled by temporary contacts.
The types of contracts you offer and the conditions on them such as contracted hours, contract duration, salary and benefits determine how well you can fit the supply of labour to demand. If you’re finding you’re struggling to do this with the contract types on offer, it may be time to consider introducing new types.
Whether they are imposed by the government or simply internal policy, regulations impact what you can and can’t do with your recruitment strategy. Some businesses require minimum staffing, mandatory staff certifications or impose other restrictions. These can influence your decision to invest more in flexibility or stability.
Challenges to Achieving the Optimal Staffing Ratio
Understanding the factors to consider when calculating the optimal staffing ratio is important to ensure businesses achieve both the flexibility and the stability they need to delight customers while trading profitably. However, there are a number of challenges that make achieving this optimal mix of permanent vs temporary staff difficult. A few of the most common challenges are as follows;
The Optimal Staffing Ratio is a Moving Target
There are many “Good” Answers for Optimal Staffing
Handling New Vs Replacement Recruitment
Factoring in Time to Hire and Recruitment Costs
Difficulty Calculating Workload from Demand
Putting the Optimal Contact Ratio to Work in Your Business
Calculating the optimal contact ratio is complex and takes into account many factors including your predicted demand and capacity curves, HR metrics and decisions you make around replacing staff who leave. Hitting this moving target over the coming months and years will rely on you having the tools necessary to quickly and accurately calculate this ratio on the fly.