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Home improvement stores and social media sites like Pinterest have us convinced that we can do everything for ourselves.  But just because you CAN doesn’t mean you SHOULD.  Sometimes the frustration, time, and risk associated with doing it yourself isn’t worth the money you can save.

And so it goes with contract staffing.  Trying to keep costs at a minimum leads some recruiters to run their own contract staffing back-offices.  But like a complicated bathroom remodel, the back-office tasks associated with placing contractors are often better off being outsourced.

Just ask Cindy Stephens, Owner and Executive Recruiter of Stephens International Recruiting, Inc.  For about the first year of its existence, the firm ran their own contract staffing back-office for private sector Biomedical Equipment Technician contractors as well as contractors working on government contracts.

“I was really overwhelmed and could not find enough time to concentrate on our primary business areas,” Stephens said. “It took a lot of time to take care of the legal aspects and the payroll as well as the headaches that comes with the HR piece.”

Instead of throwing up her hands and giving up on contract staffing, Stephens made what she calls “the best business decision we could have ever made” and outsourced the employment of her contractors to a contract staffing back-office service. By doing so, she eliminated a number of headaches and risks that come with “DIY Contract Staffing:”

  1. Accepting out-of-state placements. If you have in-house employees, you are probably already set up to run payroll and provide Workers’ Compensation coverage in your own state. But trying to expand your business into other states can be a major pain. “We had to be registered in each state where we had a contract and had to worry about each state’s requirements, which ended up to be a huge headache,” Stephens said. Many recruiting firms who do their own back-office choose to only place contractors in their home state to avoid these hassles, missing out on potentially lucrative out-of-state opportunities. Aligning with a contract staffing back-office that is already set up to do business nationwide can allow you to accept placements in other states with no ramp-up time.
  2. Workers’ Compensation. Getting coverage in each state where you place contractors is just the first time-consuming obstacle.  Then you have to deal with selecting the correct Workers’ Comp code for each contract assignment, managing claims, and managing yearly Workers’ Comp audits.  And what if your coverage is cancelled due to too many claims?  Those worries and frustrations also led Stephens to outsource the back-office to a provider that would take responsibility for Workers’ Compensation.
  3. Payroll and taxes. Payroll processing and funding, as well as handling the payroll taxes, is a real source of pain for recruiters running their own back-office. First, you must secure funding so you can float the contractors’ payroll until you get paid by the client. This is typically done by securing a line of credit from your bank, but what happens to that line if a client stops paying or goes bankrupt? Then there is the issue of following the unique payroll and tax laws in each state. One little mistake or delay in payroll can wreck your firm’s reputation quicker than anything else.  And who has time for the weekly gristmill of processing payroll and handling tax reports? Stephens didn’t, and that’s one of the main reasons she decided to outsource.
  4. Exposure and liability. Keeping up with employment laws was another frustrating aspect of running the back-office, Stephens said. And it’s no wonder. Employment laws are complex and can vary by state, sometimes even by locality! More laws are added every year, and one of the biggest, the Affordable Care Act, still hasn’t unleashed the worst of its regulations . Moreover, if you OR your contractors make even the slightest misstep, it can cost your firm thousands of dollars at best and take down your business at worst. As the employer of the contractors, a back-office service will assume the legal responsibilities and liabilities.
  5. Certificate of Insurance. To help mitigate the risk, you need to have an extensive professional liability insurance, which can be hard to obtain and expensive. Having a comprehensive Certificate of Insurance is so important that clients often ask to see yours before they will do business with you.  When you outsource your back-office, your provider carries the Certificate of Insurance, so that is one less thing to worry about.
  6. Human Resources. As if all of this weren’t enough, there is the “HR piece” Stephens mentioned above.  That includes employment paperwork, Unemployment claims, background checks, employee relations, and employee terminations  just to name a few. A contract staffing back-office will take care of all the financial, administrative, and legal tasks associated with contract placements.

It may seem foolish to pay someone to do something you can do for yourself, especially in our increasingly DIY culture.  But you just may find that the extra time you will gain by outsourcing can help you bring in more business doing what you actually love to do – recruiting!

“I value my time, and I can now focus on taking care of our primary business operations,” Stephens said.  “More importantly, our clients look to us as a valuable resource because we offer flexibility and alternative staffing services.  By using a back-office service, we can really promote our ‘Alternative Staffing Solutions’ to our clients.   They realize how flexible we are because we can offer direct hire, contract, contract-to-direct , or temp-to-perm, and now our clients are even coming to us for payrolling services.”

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