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How many recruiters do you know who have gone out of business during the past two years? We all know that direct-hire job orders have decreased significantly, and there really isn’t a light at the end of the tunnel signaling, “Direct job orders are coming!”

Now think about all the recruiters who have survived the recession, and in many cases are thriving. What is one thing that can make a difference between going out of business or thriving in this difficult economy?

One recruiter who has devised a solution to the problem of fewer direct-hire job orders is Donna Carroll, CPC of Systems Personnel in Southwick, Mass. That solution involves making contract placements at her client companies—namely hospitals—in a specialty niche. That specialty niche is the Health Information Technology field and MEDITECH software found within it. This field includes professionals who are proficient in the following areas:

1. Application support/systems analysis
2. Programming
3. Implementation consulting
4. Report writing
5. Project management
6. Systems assessment and training

Cash flow is king
Carroll, who started in the recruiting industry in 1990, has long been a proponent of contract placements. In fact, she made her first contract placement in 1995. According to Carroll, there are numerous benefits associated with adding contracting to your business model, and at no time are those benefits more obvious than during an economic downturn. That’s because, as the saying goes, “cash flow is king,” and contracting provides a steady stream of predictable revenue.

“The cash flow is a big part of it,” said Carroll. “Whenever you’re in any kind of a down time or recession, having the cash flow of contract placements will essentially pay the bills in between the big perm placements. For me, the biggest impact of steady cash flow and knowing that the bills are taken care of is that you make smarter decisions as a business person. When you’re not worried about the bills getting paid each month, you’re able to assess situations more clearly and make better business decisions.”

So what kind of money has Carroll been earning by placing MEDITECH contractors at her clients? When a recruiter places a contractor, they’re paid for every hour the contractor works. In 2009, Carroll placed eight contractors and her average recruiter profit was $23.72 per hour. At one point in 2009, she had five contractors working at the same time, and she was earning a combined total of $115.23 per hour. Most contract placements have a start date and an end date, so you can anticipate how many hours a week the contractor(s) will work, and that gives you the ability to budget for your own expenses.

Staffing solutions provider
Developing a long-term business relationship with a client is a goal of most recruiters. You want clients to come to you in good times and bad times. You want to be their “staffing advisor” and have solutions to their problems. “Contracting is the solution to fill the gaps when they can’t hire people full-time for one reason or another,” said Carroll.

MEDITECH is geared more toward the small to mid-sized hospitals, the majority of which prefer a single, fully-integrated system versus a number of different vending solutions. In addition, because of their predominately rural location, these hospitals often have difficulty hiring people on a full-time basis. That’s what makes hiring candidates on a contract basis such an attractive option.

Carroll indicated that demand for these types of candidates has increased quite a bit in recent years, due in large part to Healthcare initiatives and mandates such as the Health Insurance Portability and Accountability Act (HIPAA).

“Hospitals need healthcare information systems in place in order to comply with specific mandates,” said Carroll. “Everybody is moving towards compliance with these mandates and initiatives, and they have to implement advanced clinical systems to do so. That’s caused the demand for MEDITECH professionals to increase during the past 10 years, and it should continue to increase in the future.”

Considering the sense of urgency associated with finding candidates who possess these skill sets within the Healthcare niche—and specifically, within MEDITECH—hospitals have absolutely no problem hiring them on a contract basis. In fact, in some instances, they prefer to do so. Contract staffing also offers a lot of flexibility for the client and the candidate.

“Some of these contract workers are part-time and some of them are full-time,” said Carroll. “Sometimes there’s a project that needs to be completed, and there’s no need to hire a full-time person. You can find a person part-time, and they can even work remotely. That way, the hospital can get the job done and not have the overhead associated with another staff member.”

Similarities—complementing a direct-hire desk
In the past, Carroll has run a desk consisting of approximately 60% direct-hire placements and 40% contract placements, but 2009 was different. She estimated that the ratio was 75% contracting and 25% direct, and expects it to continue in 2010. “I’ve had several turndowns on the perm side, and even some fall-offs,” said Carroll. “When you look at the numbers, not only will contracting keep you afloat during bad times and get you through a recession, it’s also a wonderful supplement to your perm desk, and that includes during good times.”

One of the most striking aspects of contracting is that it is similar to direct-hire work, at least in terms of the recruiting. “The process of locating, referring, and placing the candidate is the same” said Carroll. “In fact, the process is actually quicker. Most of the time, the hiring authority doesn’t need to meet the candidate in person. They just do a telephone screening.”

Differences—administration and paperwork
The part of the contract placement process that is different is the back-office, which includes all of the administrative, financial, and legal duties. The truth be told, these definitely represent the least fun aspects of contracting, not to mention the most time-consuming. However, by using FoxHire (FH) as her back-office for contract placements, Carroll is able to bypass these duties, maximize her time and energy, and focus her efforts solely on the recruiting part of the placement process.

“I use FoxHire whenever possible,” said Carroll. “FH will take care of all the administrative and financial details. They handle all of it, and their customer support is phenomenal. Sometimes the client wants to make changes to the contract or do other things, and FH does whatever is necessary. I can’t speak highly enough of them. They’re wonderful to work with.”

The argument that using a back-office service provider for your contract placements will cut into your profit margin doesn’t hold water in Carroll’s case. She’s still earning very attractive and profitable margins for her MEDITECH contract placements. FH is a full-service back-office provider, and you don’t have to worry about any of the legal details or responsibilities that go along with being the W-2 employer. The burden of taxes, Workers’ Compensation, benefits, and all the other legal tasks are handled by them.

But there are other advantages of using FH, as well. You don’t have to deal with the daily or weekly issues like time sheet collection, payroll funding and processing, invoicing, or collections. Plus, there is one additional item that can be a true drain on your time… people issues! When you’re dealing with people (employees), you really must have your I’s dotted and T’s crossed. FH has three full-time, degreed Human Resource professionals (PHR certified) on staff, and they are available to handle anything from background checks to harassment lawsuits.

Candidates’ perspective
Not only do Carroll’s clients love the idea of hiring workers on a contract basis, but her candidates do, too. One of the aspects that they like the most is being paid weekly.

“Most of the people I work with are independent consultants,” said Carroll. “They’ve worked for other consulting firms, and those firms have paid them either every two weeks or once a month. These people typically work Monday through Thursday and fly home every week. As a result, they have expenses they have to float until they’re reimbursed. If they only get paid once a month, they have to carry those expenses for an entire month. With FH, not only are they paid weekly, but they also have direct deposit, so they don’t have to worry about running to the bank to deposit their check.”

In addition, contractors find the prospect of health insurance inviting. “Having the option of being able to purchase group insurance through FoxHire is a big benefit,” said Carroll. “The rates are pretty reasonable, and FH evens pays a portion of the premium.” FH’s health plan is through Anthem Blue Cross and Blue Shield, and it is a national plan. Contractors also have access to dental, vision, and life insurance… and they can even get a 401(K).

The Winners’ Circle
Considering the fact that clients love contracting, candidates love contracting, and the recruiting part of the placement process is exactly the same as perm (with the exception that contract placements happen more quickly), Carroll is almost amazed that more recruiters aren’t offering contracting. It’s truly a winning solution all the way around.

“The problem is that a lot of recruiters don’t know what they don’t know,” said Carroll. “They think they don’t know anything about contracting, but they do. They know how to recruit! The front end [of the process] is exactly the same. It’s just that a lot of things involved in direct-hire placements don’t come into play, like how the candidate is going to sell their house. Contracting is something everybody should look into, and it can really be a stress-saver in this economy.”

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