rehiring through temp agencies eliminates expensive health care, retirement benefits, severance packages, and vacation days.
I'm an engineer with a minor in mathematics, not a business administration grad with a financial degree, but I don't understand how using temp agencies reduces costs and eliminates benefits, etc. All it does is shift money from one accounting budget to another, but the costs are higher in the new bucket.
Temp agencies are in business to MAKE money. They have to offer health care to their employees, but to their size, they are way more expensive than what Cisco provides and provide worse coverage. They provide 401(k) plans and some even provide some sort of matching, again, not as good as Cisco, but some. They can even provide PTO, but they'll lower their employees wages more per hour than what it costs them to provide 80 hrs pay in order to cover their overhead of managing/tracking PTO time. The only thing they don't tack on and pass onto their clients is the cost of severance packages because they don't provide them. When your gig ends with the client, they immediately terminate you and you're gone. If the client gives them enough advance notice, they'll try to find you a follow-on gig with another client, but there's no guarantee that will work out.
But, in order to make a profit, they have to find someone willing to work for X dollars, pay Social Security and employment taxes on that person, offer them health care, 401(k), PTO, etc. and then manage the client hours billing and pay the employees for those hours worked. They have a lot of management overhead costs that they have to absorb.
I've been a contractor/consultant off and on for a long time and I've been paid at best 50% of the client bill rate and at worst 30% of the bill rate. Yet, at the end of the day, my take home pay after deducting taxes (same regardless of client employee or consultant agency employee), deducting benefits (much lower as a client employee vs. much higher as a consultant agency employee), same 5% 401(k) deduction, etc. has remained pretty much the same. I make more as a contractor per hour than I do as an employee to offset my higher benefits cost and provide me with a little extra dollars that I bank each payday to cover the unpaid days for corporate holidays and give me 2 weeks off each year. If I'm getting paid 30% of the bill rate, and I'm paid more per hour than Cisco pays me, Cisco is paying more than twice as much for my services as a contractor than they would as an employee because my agency is padding their bill to Cisco to cover all those costs, cover their overhead of all the additional billing paperwork/time tracking they do, and make a profit. The recruiter makes a commission off keeping me in place, the account manager makes a commission off keeping me in place, the company makes money providing the service. Cisco pays for all of that. How is it cheaper?!? It's just funny financial math to say it's not a liability when it's still a cost that Cisco carries.