There are so many advantages to having a blended business model that includes both direct hire and contract staffing. You get the best of both worlds – the large placement fee checks from your direct hire placements and the consistent, steady income of contract staffing. Providing contract staffing services also builds client loyalty because you are able to meet all of their staffing needs. And as the popularity of contract staffing continues to grow, it is becoming more important for recruiters to offer it in order to remain competitive.
But for those running small recruiting firms, or maybe even “one-man shows,” the prospect of adding and running a whole additional line of business can be daunting. Getting set up can take months if you plan to handle contract staffing issues in-house. Plus, you need to allow one or two days every week to keep up with all of the timesheet, payroll, and invoicing issues. Not to mention you have to take on the financial risk and all the liability tied to employees.
How can you find the time and resources for that and still provide quality direct hire recruiting services?
Outsource the employment of your contractors to a full-service contract staffing back-office service. As the legal W-2 employer for your contractors, the back-office service should handle all of the legal, financial, and administrative tasks associated with contract placements, including:
- Generating client and candidate contracts
- Executing background checks on candidates
- Generating employee paperwork
- Timesheet collection and tracking
- Payroll funding and processing
- State and federal tax withholding
- Workers’ compensation coverage
- Unemployment insurance coverage
- Client invoicing
- Collections of accounts receivables
- Certificate of Insurance
- Benefits administration – medical, dental, vision, 401(k), etc.
- Affordable Care Act (ACA or Obamacare) compliance
Choose a Full Service Backoffice
It is important that you select a full-service backoffice that will become the W-2 employer of record and handle all of the employment-related tasks, not just payroll processing and funding. You also want to make sure the provider has a well documented history, an impeccable reputation, and positive referrals and testimonials. Remember that your backoffice is a reflection of you, the recruiter.
In addition, you will want to be sure to ask the following questions of any potential backoffice service:
- What happens if a client doesn’t pay an invoice?
If the backoffice provider’s standard practice is to ask recruiters to pay client invoices they can’t collect, think twice. Imagine your potential financial obligation if your client stops paying the invoices for the hours worked by the contractor. It could run thousands of dollars! - Do you provide contractor benefits?
In light of the ACA’s requirement that most Americans have health insurance, you will likely find that quality benefits are becoming an important requirement for many of your contract candidates. Therefore, you will want to make sure your contracting backoffice offers group benefits to its contractors so you can attract the best candidates. This includes medical, dental, and vision coverage - From a workers’ compensation perspective, what positions do you accept?
They may only place office professionals who fall under the standard 8810 Workers’ Compensation (WC) code because those placements present the lowest risk of claims and therefore have the lowest WC rates. You want to be sure the backoffice you select can handle all the positions you place. - Do you recruit candidates and fill your own job orders?
If the contract staffing backoffice also recruits, what is to stop them from working directly with your clients and candidates in the future? Your safe bet is to stick with a backoffice provider that does not do any recruiting.
If you use a quality contract staffing backoffice, you can easily offer both direct and contract staffing services to your clients, regardless of your size. You can enjoy the extra income and client loyalty that comes with contract staffing without having to worry about all of the administrative details tied to a blended service business model. In short, you will be able to focus on what you do best – recruiting.