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Custom Decision to Hire New or Temporary Workers essay paper sample

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The case for either hiring new workers or hiring temporary workers in an endeavor to handle the increasing demand for our products is related to the price of goods produced. Executive managers, business owners and human resource managers are frequently facing some of the challenging situations due to the just recent financial crisis. It is worth mentioning that it is always the endeavor of companies to reduce costs as they try to maximize revenue. Therefore, no decisions or choices made by companies are easy.

However, the choices made by the company should always correspond to the objectives and goals of the companies. The choices made should maintain a stable flow of incomes and resources in any company. The law of demand specifically describes the concepts which clarify that a decrease in demand of products is usually brought about by prices, and increase in demand is usually brought about by a fall in prices (Hirschey, 2008). In this case, a company is always trying to know the maximum price that it should render to its services or goods. Indeed, the company uses forecast to make the most realistic and viable predictions in ascertaining whether some economic situations are economically suitable such as level of production or the pricing model. Therefore, the forecast serves as a suitable predictor to measure the economic feasibility.

Companies must always have the capability to estimate their level of production with the available personnel in the company. A decision to hire or fire usually has a direct impact on the level of output of a company. Therefore, the law of demand becomes important in determining what level of production is supposed to be maintained with the given workforce. Temporary workers usually work for a short period and then stop. The level of production of a particular worker during the time of work should correspond to the demand (Lehman & Png, 2007). On the other hand, a new worker might take time before he/she acquaints with the working environment.

Therefore, a company having new workers might find it difficult to supply its customers on time due to the reduction of production. Using deductions from the law of demand, the law assumes that the price of quantity is set. Therefore, when the price of commodities falls, assuming all other factors affecting demand remain the same, the demand for the products increases. Therefore, a company experiencing an increase in demand of its product is usually faced with a decision of choosing between hiring new workers and hiring temporary workers. As much as the company faces this kind of challenge, it must come up with the most prudent decision that optimizes profit (Webster, 2003).

In this case, the management must choose the option that utilizes the increase in demand optimally and leads to an increase in the profits of the company (%u014Csawa & Houseman, 2003). Hiring temporary workers might be productive in the short run since after the decrease in demand of the products the company can lay off its workers without affecting the normal company’s operation. A decision to hire new workers might have long term implications to the company costs (Wilkinson, 2005). The increase in costs on catering for the new workers might accompany the business in the unforeseen future, and the situation becomes worse when the demand for the product decreases. Therefore, a decision to hire new workers or temporary workers is instrumental in determining the future of a specific company (%u014Csawa & Houseman, 2003).

Definition

In determining the action that a company should adopt, factors affecting demand as well as productivity should be considered. The law of demand in this case plays a fundamental role in explaining the reason behind a company’s decision (%u014Csawa & Houseman, 2003). The law of demand states that an increase in prices of products leads to less demand. Therefore, a company decision to improve the demand for its product should endeavor to reduce the prices of its products. This move will lead to a large increase in the demand (Hirschey, 2008). Companies sometimes outsource services from other firms in other related fields. Outsourcing refers to the process whereby companies seek the services of other companies. However, outsourcing has proven to be an expensive venture over the years (Hirschey, 2008). Therefore, the only option that has been left is that of hiring temporary or new workers. The decision to hire depends on the current level of production of the respective company. If the level of production is optimum, then the company has no need of hiring new workers.

The marginal benefit of hiring a new worker is always equated with the marginal cost of producing a single product. Marginal benefit refers to the additional benefit that a company acquires due the hiring an additional worker. On the other hand, marginal cost refers to the incremental cost due to an additional worker (Wilkinson, 2005). Subsequently, the marginal benefit of hiring a worker should be equal to the marginal cost of hiring new worker. For the company to make a prudent decision, the company chooses that gives a high marginal benefit between the two options. A company having future prospects of growth has to choose the option that has a short term increase in the costs and a long term increase in revenue and productivity of the company (%u014Csawa & Houseman, 2003).

Costs                          

Costs are a relative issue, taking into consideration whether or not the marginal costs are in line with the marginal benefits of leaning toward such endeavors. In order to understand marginal benefits, these can be summed up to the total benefits caused by making a switch in the level of activities. The marginal cost of making changes is defined as the changes which have taken place in a set of variables. The sole purpose of the venture is to make a net profit from the change. The optimal benefit is to increase activity from the change and to somehow cause a positive effect in the workplace. The opportunity cost to hire a new employee or a temporary employee should not be chained to decision makings wishing to maximize the net benefits of an activity (Hirschey, 2008).

The opportunity costs of applying a viable resource is referred to as an incentive that management may deem necessary to carry out that resource. The more inputs use the more the organization can capitalize on those resources (Hirschey, 2008). An organization only pays a small portion of monies to a temporary agent in the hopes of retrieving competent individuals who are gainfully employed for at least ninety days at a temporary status. The sole purpose of these employees is to gain permanent work as a part-time or full-time hire. The implicit costs that management incurs are slim marginal monetary opportunities of utilizing competent individuals from a reliable source from a network staff (Hirschey, 2008). The implicit costs are solely due to the organizations non- monetary payments to utilize one’s own resources.

The explicit cost includes the use of a secondary entity to supply the reliable resources necessary for the tasks (Hirschey, 2008). The opportunity costs of losing a few slackers due to personal hardships might mean that they will soon shape up only gives a hint to some of the opportunity costs involved in the hiring of temporary workers or new workers to handle to handle new demand for our product.

In deciding whether to choose the services of a temporary worker or a new employee, the company should consider the impact on the company’s productivity if work remains undone. The company should calculate the tradeoff and come up with the most ample decision that will lead the company to growth. If the company decides to hire temporary workers, it is possible for the company to bring the employees under a job description and with a defined direction for their management (Webster, 2003). Therefore, the cost associated with the orientation of temporary employees does not lead to a high cost since the management is able to shape the direction of work taken by employees.

On the contrary, a decision to hire new employees will cost the company a lot of resources. The costs usually originate from the allowances that employees are entitled. For instance, employees are usually entitled to medical benefits and terminal benefits that raise the overall cost of production. In addition, new employees require time and resources so that they can be fully trained and acquainted. By the time all the new employees are oriented and trained, the company will have lost a lot of revenue due to the divergence of the company resources from production to training (Lehman & Png, 2007). The cost of new workers becomes a major problem to organizations especially when the demand declines. Therefore, it terms of costs derived from each option temporary workers usually have both implicit and explicit costs while hiring new workers usually consist of cumulative costs that accompany the company in the unforeseen future.

Employing temporary workers is a cheap process and costs the company minimal costs. This is because the company does not have to deal with administrative costs associated with employment of permanent workers. The company gains an advantage since temporary workers dare usually paid only a portion of the services they offer.  The bonuses they usually receive depend on the experience and job specialty. Mark ups or bonuses granted to employees usually range from 25 percent to a 100percent (Hirschey, 2008). For higher volumes of work, agencies responsible for temporary workers should campaign for a high payment and better treatment.

Measurement

In Managerial Economics: foundations of business analysis and strategy, there are several means to measure data on a statistical level. Therefore in this case management forecast sales on a given day to determine the feasibility of whether or not hire of temporary workers or hire new workers could assist with demand of products. Expenditures such as organizations total sales play a major role in the decision making process. Production and cost can be closely examined by any member of the management staff. Regression analysis is a statistical tool used by management which foretells information useful to make decisions that maximize profits greatly appreciated (Lehman & Png, 2007).

Economies of scales results, when a given increase in all inputs results in a more than proportional increase or output. Goods and services have some ways under which they can be substituted in an effort to obtain maximum benefits. Oftentimes the management is willing to embark on these trade-off or substitutions. However, factors involving the way economy are responding to change has caused many organizations to mend their long-run planning techniques. One aspect of our economic is relative to market equilibrium and profit maximization (Wilkinson, 2005). Members of management make the best decisions given the best actions of their neighbor’s efforts. Equilibrium occurs at the rate when given a price demanded because a decrease in the quantity demanded thus increasing the revenue for the organization.

Analysis

Finally, should our company hire temporary workers to handle increase demand for our product? Is it a question of whether or not demand is in line with supply? A decision will have to be made irrespective of whether the idea is good or a bad. The management usually bases these decisions on many factors. One of these factors is highly relative to the way the economy is fairing. Currently, the condition of the economy does not favor hiring of new employees. These decisions weigh heavily on companies’ profits and the interest of the shareholders. In case there is an opportunity to incorporate the assistance of new worker and temporary workers, management should be able to deal with certain risks that may occur during the process (Webster, 2003). Temporary employees are only hired for a given period of time, and after that they are laid off. Typically, they are later faced with the challenge of seeking other avenues of employment.

Summary

Based on all the pros and cons of the hiring a temporary or a new employee, companies should choose what is best for their company at the time. Most companies in this economics crisis that we are in will chose to hire temporary employees for a couple of months to see how it will affect their production and budget. If the outcome is positive then they should hire the temporary employee as a new employee. If the economy return to normal then the company should hire a new employee.

Hiring temporary workers always seems the formidable option since it increases the company’s profit in the short run and the long run. The management is usually able to achieve this through getting a lot of work being done at a minimal cost (%u014Csawa & Houseman, 2003). In addition, there are many issues concerning temporary workers that need to be analyzed in detail. These issues arise from the explicit and implicit costs that usually arise due to the companies using the temporary workers. The use of temporary workers usually brings about growth of job insecurity and unemployment in the job sector.

On the other hand, the advantages of using temporary workers are many and elaborate. Use of temporary workers brings about growth in cash flows and profit margins of companies (%u014Csawa & Houseman, 2003).  Therefore, everything that the companies do will have negative and positive effects. A decision to hire new workers will affect a different of group in a different manner. A decision to hire temporary workers will affect the group of individuals seeking permanent employment in companies (%u014Csawa & Houseman, 2003). Since hiring temporary workers has taken precedence in taking advantage of the increase in demand, companies should grant temporary workers more benefits and demanding higher- level and efficient work from them. 

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