Across the nation, the demand for skilled labor continues to increase alongside a growing labor shortage. When labor supply is low and demand is high, how do you attract and retain a reliable workforce, especially when your competition has a virtually unlimited payroll budget? 

In my business, we faced this problem when Amazon and Domino's opened facilities in our area and began recruiting warehouse associates from the local labor pool at hourly wages that were higher than what we could realistically pay our people. 

Getting into an hourly wage bidding war with companies that have a virtually unlimited payroll budget isn't a sustainable option for most small and medium-sized businesses. Your pockets aren't as deep as theirs, and you'll go bankrupt trying to keep up. Instead, you might consider tapping into the relationships that you already have in place. 

Relationships with staffing agencies are invaluable, especially in a retail warehouse environment - they help to fill labor demands and provide access to the local labor pool on a day-to-day basis. You can bring on as many or as few workers as needed to meet the scheduled workload for the day. When there's a labor shortage, however, even staffing agencies can struggle to help you meet your demand. When this happens, you need to get creative. 

Here's an unconventional system for retaining your best associates: make your best-performing staffing agency associates full time employees.

Identify your best people.

Identify temporary staff who have been working with you for long and keep on coming back for different projects. In our case, though the staffing agencies provided us with day labor, many of the warehouse associates had been coming back day after day for years. Bringing these associates onto your payroll saves time and money; they are already trained to do the work, don't require any new training, and are already familiar with your company expectations.

Show them a path for growth.

Though companies with bigger pockets try to absorb all the labor in the pool by offering higher wages, higher wages can only go so far. Mapping out and communicating a path for growth with the best performing agency associates is key. Provide access to training that will give your associates transferable skills that also improve on-the-job performance. An example of this could be technology training with industry specific tools and software that deepen the skill set of an employee, making them an expert. Knowing you're investing in them makes them more likely to commit to you and your company.

Make it worth their while.

Combine the benefits of being an agency employee (flexible scheduling) with the benefits of being a full time employee (health insurance and vacation time) to make these associates an offer they can't refuse. Provide the associates with a sustained employment opportunity that gives them the security of knowing there's a place for them with a consistent, ongoing employment arrangement. 

As e-commerce becomes adopted by more people and more product categories, the demand for skilled labor will continue to increase. Putting a program like this in place in your business will increase your retention and ease the pain of competing with larger companies during a labor shortage.