Why “Cutting Corners” Isn’t the Solution to the Manufacturing Talent Shortage

Right now, manufacturing and industrial employers are stuck between a rock and a hard place. They’re dealing with record-high demand driven by AI data center construction, grid modernization, infrastructure investments, reshoring, and more. But at the same time, there are not enough qualified workers to capitalize on that demand; somewhere around two million manufacturing jobs could go unfilled by 2030.

One response to this situation has been to “cut corners” in the hiring process. By that, we mean:

• Hiring underqualified, less expensive workers because they’re not as competitive
• Misclassifying workers as 1099 contractors as a cost-saving measure
• Failing to implement I-9/E-Verify documentation
• Undertraining workers in an effort to get them onto the floor faster

These costs can be detrimental to manufacturing and industrial companies, ranging from $900 to $165,000+ per worker or violation, depending on the issue and claim involved. Not to mention the indirect costs of lost productivity, errors, and rework that come from rushing a hire and putting an unqualified person onto the floor.

In this article, we’ll break down the costs of cutting corners in manufacturing hiring, how it exposes you to undue risk, and how an experienced workforce partner helps you hire faster without compromising on quality.

Key Takeaways

• The math on “cheap” hires doesn’t add up. A single workers’ comp claim from an underqualified hire can run north of $47,000, easily wiping out years of savings. The compliance exposure from 1099 misclassification, I-9 failures, and OSHA violations compounds that risk further.
• Talent shortages are driving employers to cut corners, often with costly results. With 79% of manufacturing leaders already reporting that labor gaps are affecting production goals, the margin for error on a bad hire is thinner than ever. Rising material costs mean every error, rework cycle, and disruption hits the bottom line harder.
• A workforce partner is a compliance solution. While a workforce partner will help you fill roles faster, they also bring a built-in compliance infrastructure that keeps manufacturers out of the scenarios described in this article.

How Are Manufacturing Talent Shortages Impacting Operations?

The past five years have seen significant changes, positive and negative, in the manufacturing and industrial sectors. As of now, Industrial Sage’s U.S. Manufacturing Investment Tracker shows nearly $1.8 trillion in announced manufacturing investments since 2025.

However, anyone who has been through Capex or other investment cycles knows firsthand that “announced” isn’t the same as “spent.” And one of the biggest obstacles that keeps money promised from becoming money invested is a lack of skilled talent.

CADDi’s 2026 Manufacturing Outlook Study found that 79% of manufacturing leaders said skilled labor shortages were a major external challenge, and 71% said the shortage was already directly affecting their ability to meet production goals. The same report also revealed that 69% planned to invest in robots and equipment in 2026, which means the talent shortage is so acute some companies are planning a workaround.

Although talent shortages are often complicated, here are some of the major factors that are driving this shortage:

• Experienced workers are retiring without sufficient replacements, which can account for as much as 75% of the shortage itself. Indeed, over an eight-month period in 2025, the manufacturing sector lost four million workers (Deloitte, 2026).
• Skill shortages within the existing talent pool, where there may be plenty of workers but the demands for specific skills (i.e., AI, robotics, industrial maintenance) are lacking.
• Cross-industry and multi-regional competition, where roles and skills that are in demand across multiple sectors are receiving enticing offers from various sectors and geographies, making the competition even steeper.
• Lagging perceptions about the nature of manufacturing work, whether that be the assumption that manufacturing is a low-skill or low-pay field, may dissuade certain individuals from entering the talent pool.

Other factors are exacerbating this limitation. A recent Deloitte report showed that the cost of intermediate materials and components has increased 29.8% from 2024 to 2025. This means that while direct cost of talent has increased, the cost of poor, unqualified, or underqualified talent has, likewise, increased. After all, if inadequate talent inevitably increases errors, rework, and wasted materials, that means a bad hire increases the odds of bottom-line losses.

As such, whether by necessity (not enough qualified applicants) or choice (being too selective in hiring existing applicants), organizations are struggling to fill critical manufacturing roles. This ends up resulting in organizations cutting corners in hiring, which can end up being the costlier option.

How Much Do “Cutting Corners” Cost?

A lot of employers are in a bind: they want to avoid the excessive costs of a mis-hire, while at the same time leaving critical roles open too long is tantamount to leaving money on the table. So what’s the solution?

Unfortunately, many manufacturing firms choose to “cut corners.” That is, they go with a short-term fix that has serious long-term consequences. Here are some of the biggest mistakes we see people doing and the costs that result.

1099 misclassification

Hiring workers as 1099 contractors is an age-old way of avoiding payroll taxes, overtime, benefits, unemployment insurance, workers’ comp, and more. Not to mention, you can avoid committing to a permanent hire when the market is volatile.

But especially in manufacturing where work has to be done at a specific time and place, with specific equipment and under specific conditions, the number of roles that actually meet the IRS definition of an independent contractor is smaller than a lot of people think.

And if you misclassify an employee, you can expect to pay:

• $10,000–$100,000 per worker in back wages
• FICA taxes
• Overtime premiums for hours worked over 40 per week
• DOL willful violation penalty for up to $25,000 per case

Basically, whatever little bit you may have saved by classifying someone as a contractor, you’ll end up paying for it later.

Workers’ compensation

According to data from the National Safety Council, a single workers’ comp claim can cost upwards of $47,000 per claim. Let’s assume a scenario where you hired someone for $2.25/hour less than what the market was demanding, and thus brought in a less capable worker. If that worker ended up in a situation requiring a workers’ comp claim, you could end up spending 10 times what you “saved.”

Multiply that out across all your workers and facilities, and hiring un- or underqualified workers becomes a risky decision. The best way to protect your workforce, and your bottom line, is to invest in bringing in quality people.

I-9/E-Verify

When manufacturing firms are rushing to get workers onto the floor, compliance and admin often take a hit. Sometimes, these oversights are innocuous enough. But when it comes to I-9/E-Verify, failure to file is expensive, with penalties ranging from $973 to $1,942 per employee.

What’s more, knowingly hiring or continuing to employ an unauthorized worker can result in a much higher penalty, depending on the firm’s offense history. Whatever time was saved by rushing someone onto the floor gets eaten up by investigations and penalties.

OSHA penalties

Since most manufacturing workers function in high-hazard environments, the risk of incurring an OSHA penalty is higher than you may think. Many situations that arise from hiring unqualified or underqualified workers can often lead to OSHA violations: improper machine guarding, fall hazards, live electrical work, and more.

The maximum penalty for a willful or repeated violation is $165,514 per violation, and failure-to-abate can add $16,550 per day beyond the abatement date. However, this only accounts for obvious, surface-level costs. Delayed production, rework, and labor disruption all carry their own costs, making the full bottom-line impact even costlier.

How a Strategic Workforce Partner Helps You Avoid Cutting Corners

Cutting corners when hiring manufacturing workers ends up costing you more than you save, often by orders of magnitude. But like we said above, keeping critical roles open for months on end has its own consequences: slowed production, more errors and rework, and missed opportunities.

Thankfully, you don’t have to choose between speed and quality.

By working with a strategic workforce partner like PEAK, you can leverage our 55+ years of relationship-building with hard-to-place talent, as well as our built-in proactive compliance services that help you head off potential issues before they happen.

Learn more about our expertise and the quality of our total talent management solutions here.

Frequently Asked Questions on Manufacturing Talent Shortages

How does high turnover create safety problems?

High turnover causes safety problems because when experienced workers leave, teams lose the communication patterns and shared rhythm they’ve built over time. In the current talent market where roles can sit open for 60-70 days, that means there are extended periods without a qualified worker on the floor. This shifts the burden onto un- or underqualified workers, which increases the chance of a safety incident.

Is there a connection between safety culture and employee retention?

Yes, and manufacturers often treat them as separate problems when they’re actually the same one. Employees in high-risk environments are acutely aware of whether safety is a genuine priority for the organization. Facilities that extend safety standards to every hire (including temporary and seasonal workers), invest in proper equipment and training, and reinforce safe behavior consistently see lower turnover alongside better safety outcomes. A facility that cuts corners on safety signals to workers that it cuts corners on everything.

How far in advance should manufacturers start building their workforce before a production surge?

Facilities that begin building their workforce months before a production surge experience significantly fewer operational disruptions than those hiring reactively. When you’re scrambling to fill roles two weeks out, you hire whoever is available, rush onboarding, and create the perfect conditions for an incident to happen. The more proactively you approach your workforce, the more deliberately you can hire, onboard, and have experienced workers available to mentor new hires instead of managing them.

What happens when manufacturers push their existing team too hard to compensate for headcount gaps?

Overworked employees make more mistakes, and they leave. Absorbing demand surges by burning out your core team is a short-term fix with costs that compound significantly. Temporary staffing can serve as a buffer here, but only when the staffing partner specializes in manufacturing environments and maintains workers already familiar with production settings and industrial safety expectations.