Staff augmentation, also known as contract staffing, is a go-to solution for many companies looking to rapidly scale up resources and access specialized skills. This flexible staffing strategy generated a whopping $212 billion in revenue in 2022 for staffing firms, according to Staffing Industry Analysts. Staff augmentation utilizes temporary contract workers from an external firm rather than hiring additional full-time employees. While this approach can provide workforce agility, it also comes with some potential drawbacks. In this article, we will weigh the key pros and cons of staff augmentation so you can evaluate if it is the right fit for your business needs and situation. By examining the benefits as well as risks, you can make an informed decision about incorporating contract staffing as part of your overall workforce strategy.
Pros of Staff Augmentation
Rapid Scaling to Meet Business Needs
One of the biggest appeals of staff augmentation is the ability to quickly ramp up resources when you need them. By bringing on contractors through a staffing firm, you can swiftly get more people working on key projects or initiatives without going through full recruiting and hiring processes. This agility enables you to meet tight deadlines, work through fluctuations in workload, or fill temporary skill gaps.
Within just days or weeks, you can have additional staff on board. This level of scalability provides flexibility in adapting to changing business needs. You avoid being stuck with under or over-allocation of full-time staff.
For example, consider a company that is launching a new customer portal in 6 months. The internal IT team does not have enough web developers to build all the new functionality in that timeframe. By utilizing IT staff augmentation and bringing on 3-5 contract web developers through a staffing firm, they can meet the tight launch deadline.
Access to Specialized Expertise
According to a 2023 report from ManpowerGroup, 77% of businesses globally reported difficulty finding the skilled talent they need, more than double the 38% who reported the same challenge in 2015. Staffing firms have connections to contractors with skills in virtually every industry and function. This gives you easy access to specialized expertise that may be difficult and time-consuming to recruit directly. The staffing firm handles identifying and vetting qualified candidates for the specific roles you need to fill.
For example, if you need to quickly ramp up your analytics team for a new project, a staffing firm can find data engineers, data scientists, and other technical contract staff. If you don’t need permanent full-time hires in an emerging skill, contractors allow you to experiment without long-term commitments. The staffing firm can source experienced contractors qualified for the specific roles in a matter of weeks. The IT manager does not need to post listings, screen candidates, and run lengthy interview processes. Within the 6-month launch window, the team can scale up and back down flexibly. This on-demand access to IT skills and rapid scaling is difficult to achieve with only full-time hiring. IT staff augmentation provides agility to meet urgent IT project needs. The key is working with a staffing partner that understands the company’s tech stack, tools, and processes to find aligned talent quickly.
Lower Risk Than Full-Time Hires
Bringing on new full-time employees involves significant investments in recruiting, hiring, training, benefits, and payroll. There is inherently more risk and commitment when hiring full-time rather than using temporary contract workers.
With contract staff, you can easily change out workers if there is a bad fit for the team or project. You are not locked into any long-term employee arrangements. If the scope of work changes and you no longer need the contractor’s skills, you can simply end the assignment. This flexibility and lower commitment enables agility in adapting your workforce.
Cost Management and Avoiding Overstaffing
By only paying for contract workers when you need them, you can effectively manage project costs and avoid overstaffing during slower periods. Having full-time employees on payroll during workload troughs can become very expensive. The ability to scale up and down is especially useful for companies with seasonal fluctuations or changing project needs.
You can also convert contractors to permanent hires once you’ve evaluated their actual performance and fit. This allows you to test out workers before making long-term commitments.
Cons of Staff Augmentation
Higher Costs Than Full-Time Employees
While staff augmentation provides more flexibility, there are higher costs involved. Contract workers typically have hourly rates up to 30-50% higher than full-time employees in base salary. The staffing firm also charges fees for sourcing, screening, and administering the contract workers.
When factoring in the lost productivity ramping up new contractors versus existing employees, the total costs can add up. However, this premium may be justified by the quick access to niche skills and scalability. The costs of over-hiring full-time workers can also be very expensive.
Lack of Long-Term Ownership and Continuity
A downside of contractors’ short-term tenure is the lack of ownership and continuity on projects and initiatives. When work is handed off between multiple contract workers, progress often stalls while new resources come up to speed. With full-time staff, there is a greater opportunity to build team and institutional knowledge.
Contract workers are focused on short-term assignments rather than the organization’s long-term success. You miss out on the passion and loyalty of full-time employees invested in the company’s future. Continually cycling through contractors also incurs productivity costs versus retaining learned skills.
Less Control Over Contract Staff
Within a full-time employment relationship, HR maintains control over policies, performance management, time off approvals, and corrective action. With contract workers, you cede some control to the external staffing firm.
For instance, the contractor’s availability may be constrained by assignments through their staffing firm. Requesting time off would go through the staffing firm rather than your internal process. In practice, lacking full authority over contractors can complicate people management.
Integration Challenges with Full-Time Staff
Managing a mixed workforce of full-time employees and contractors comes with some inherent challenges. It takes work to integrate contract staff into teams alongside existing permanent staff. Some employees may view contractors as outsiders based on their short-term tenure and external admin.
This can potentially breed resentment, perceptions of unfairness, or communication gaps. Companies have to proactively foster an inclusive environment between permanent and contract staff. This takes additional effort compared to managing only full-time employees.
Knowledge Transfer and Loss
Once a contract worker’s assignment ends, their specialized expertise and organizational knowledge disappear — unless efforts are made to retain it. With no guarantee of contract renewal, you face the constant risk of losing accumulated knowledge.
It’s critical to incorporate knowledge sharing, documentation, and cross-training in processes to minimize this downside. Losing a firm’s institutional knowledge with each contract worker that leaves can significantly impair productivity, operations, and innovation.
Key Considerations for Your Business
Staff augmentation can be a strategic workforce approach when used for the right reasons and situations. The biggest advantages typically relate to rapid scaling, accessing niche skills, and managing costs. Yet there are also substantial drawbacks to evaluate.
Carefully examine your business objectives, plans, and talent philosophy. Do you want to build more permanent capabilities? Is constant attrition through contractors hurting morale, continuity, and progress? Or is your top priority remaining as adaptable as possible to workload fluctuations?
Structure contracts with staffing firms to align incentives and minimize knowledge loss. Also, focus on integrating contract staff strategically rather than in a haphazard “just-in-time” manner. With the right policies and practices, staff augmentation may offer the workforce scalability your business needs.
Conclusion
Staff augmentation fills an important role for many companies in rapidly meeting changing talent needs. While not a complete workforce strategy in itself, contract staffing provides valuable workforce flexibility when applied strategically.
If your business is experiencing growth, has variable staffing needs, or lacks specialty skills, staff augmentation may be a useful approach. Just be aware of the pitfalls around costs, continuity, and culture. Managing a mixed workforce well takes effort but can unlock the benefits of staff augmentation.
Assess your specific business objectives, workforce philosophy, and current talent gaps. This will tell you whether staff augmentation makes sense as a supplemental staffing strategy. With the right balance of contracted and full-time employees, you can build an agile, scalable workforce for the future.
