How is COVID-19 Affecting Contract Staffing?

The novel coronavirus, and its subsequent disease COVID-19, has officially swept the globe and earned itself pandemic status. The situation is ever-changing and fluid, meaning its impacts are still evolving. What we know today may not ring true in two or three months. On an economic scale, however, we know one thing’s for sure: people are losing their jobs. Those lost jobs are affecting the contract staffing business and the firms that rely on this industry for revenue.

Last week in the United States, over three million people filed for unemployment in a record-breaking event. Without profit to support payroll, many companies and small businesses are struggling to maintain employees, often resorting to layoffs and furloughs. Nation- and state-wide employment laws still support those with permanent positions, but where does that leave contract staffing? 

Social Distancing and a Loss in Revenue

As the coronavirus first started to make headlines, business seemed to continue as usual. As cases progressed, however, governors released orders of lockdowns and shelter-in-place notices that swept the country and cut off a significant customer base that kept many businesses afloat. Social distancing and stay-at-home campaigns became household lingo, prompting those who couldn’t switch their business to remote work to struggle.

Soon enough, two weeks of social distancing quickly evolved into 4+ weeks. This ripple effect of uncertainty has left contract staffing firms scratching their heads. They are contemplating questions that they’ve never had to address before, examining employment law, dissecting the Family and Medical Leave Act, and considering what paid time off would look like for their companies. For some, invoices are unpaid, and payroll has become reliant on lines of credit or business loans. 

Navigating Payroll and Unpaid Invoices

For companies looking to hire for temporary needs, contract staffing is a beneficial solution. It allows a business to gain the skilled workforce it needs at any given time while eliminating much of the cost associated with the hiring process. Potential contract staff is well-vetted, with only the best candidates moving forward. Along the way, the staffing firm supports administrative expenses, as well as any employment benefits. So when a pandemic like COVID-19 leaves a company short on funds and work, staffing firms can help to handle the fallout. However, the staffing firms may also be on the hook for weeks worth of payroll dollars until end clients can come up with money to pay their invoices. This has proven challenging and many staffing firms are feeling these effects. 

Contract staffing, like any employment process, must adhere to the law when it comes to employment contracts and client contracts that are still valid, even in these abnormal times. Staffing firms can handle client invoices and collections if needed, as well as payroll, payroll taxes, and unemployment claims. For many companies, unpaid invoices are mounting, which is causing layoffs and leaving employees without a paycheck.

Lack of Employment Opportunities

Because the novel coronavirus is an ever-changing situation, it’s difficult to know whether contract staffing firms need to secure sources of payroll funding for another four weeks or another four months. That is a big risk that many staffing firms take on when they begin contract staffing, is the risk of list payroll dollars due to unpaid invoices. There are 3-4 main ways to fund payroll, but most leave the staffing firm at risk. However, some firms don’t have to worry about that since they use employers of record like FoxHire. But payroll funding isn’t the only impact of COVID-19 on contract staffing; staffers are also grappling with the lack of opportunities for their workforce. Just one month ago, contract staffing was in demand. Today, it’s another story.

Pockets of Growth

There have been industries that are booming due to the corona virus and it’s effects. Healthcare clearly is seeing an influx in need for front line workers and the contract staffing industry is providing the talent. Traveling nurses and other healthcare roles and being staffed at levels never before seen in the US. The packaging and manufacturing industry is also booming with the need for products like cleaning products. Gojo, a producer of hand sensitization products is hiring heavily due to this demand. Grocery and Supply Chain industries are also seeing growth due to the need to continuously stock shelves and provide the public with access to necessities. All these industries are providing many contract staffing firms with great new opportunities to grow their businesses.

What Does the Future Hold?

As the weeks continue to reveal the trajectory of COVID-19 and its impacts, staffing firms are staying ahead as best they can. Opportunities will resume eventually, and as companies apply innovation to solve their dip in business, new jobs will inevitably emerge. With such a large number of unemployed skilled workers, when the time comes to open our doors again, there will be no shortage of those looking to return to work. Additionally companies will be recovering and not so eager to hire full time W2 employees back just yet. They will have a bigger appetite for contract workers, which are easier on the budget and less risky. Those types of arrangements will be in high demand all be a big opportunity for contract staffing firms over the next 6-12 months.

The bottom line is that COVID-19 is affecting contract staffing. But as employers navigate these unusual and unfortunate circumstances, contract staffing firms are keeping up with the changes. New challenges emerge, and firms will employ the actions needed to ensure future work and future pay.