When leadership pushes for tighter budgets, department heads and managers are quick to look for areas to reduce costs. Often, that means trimming office perks, minimizing travel, cutting third-party vendors—and, unfortunately, pulling back on staffing services.

At first glance, that might feel like a logical move. After all, staffing agencies are a line item in your P&L that can appear “optional.” But what if removing that line is actually driving your costs up?

Let’s break this down!

Most Costs Are Fixed—Labor Can Be Flexible

Your rent won’t shrink. Your software subscriptions won’t either. Office supplies are a must—you need to print POs, invoices, onboarding documents, and more. Maybe you can cancel the cleaning service and have staff take out their own trash. But beyond these small cuts, labor becomes the biggest adjustable lever you can pull— and that’s where staffing strategy comes in.

The Overtime Trap

When companies cut staffing services and don’t refill open positions, they often overlook what comes next: overtime.

Let’s say you have four full-time employees making $20/hour. When they go into overtime, you’re now paying them $30/hour. Add in the average 10–25% in burden costs (payroll taxes, workers comp, etc.) and you’re suddenly paying $33 to $37.50/hour.

Compare that to hiring a temporary employee through a staffing agency:

• Bill rate: $22 to $27/hour depending on your market
• No overtime premium
• No additional burden or taxes to calculate on your side
• The flexibility to scale up or down each week

You’re not just paying more with overtime—you’re missing out on smarter labor flexibility.

A Real Example

We recently met with a distribution center manager overseeing over 500 employees. In an effort to cut costs, he eliminated all temporary staff and proudly reduced headcount to 400. But here’s the problem: more than half of those 400 were averaging 10+ hours of overtime each week.

The math didn’t work.

That excess cost could have easily been avoided by keeping 40–50 temporary workers on board to absorb the extra workload. The company ended up spending more, straining their full-time team, and limiting their flexibility to adapt week to week.

What’s the Real Cost of Cutting Staffing Services?

Managers often make decisions based on what’s visible on their P&L. Staffing services show up clearly as an expense. But overtime premiums? Payroll tax increases? Employee burnout, turnover, and recruitment costs? Those are harder to tie to a single decision—but they add up fast.

Here’s what happens when you choose flexible staffing instead of pushing overtime:

• Controlled labor costs: You avoid the 1.5x overtime rate and hidden burdens
• Improved employee satisfaction: Balanced hours mean happier, more productive teams
• Scalable workforce: Add 5–50 temporary workers as needed without long-term commitment
• Trial-to-hire potential: You get a pipeline of potential full-time employees already trained in your systems

So, What’s Smarter?

Cutting staffing services might feel like a quick win, but in most cases, it’s short-sighted. You may actually be increasing your total spend—and risking employee burnout in the process.

When budgets are tight, that’s the time to get strategic—not reactive.

At Hire Up Staffing, we help employers do exactly that:

• Find cost-effective labor solutions
• Avoid overtime costs and burnout
• Scale teams up or down quickly
• Stay productive without overextending your core staff

Let’s talk numbers. Let’s talk workforce strategy. Let’s help your team work smarter—not harder.