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Do you want to start a healthcare staffing agency? Have your friends or colleagues started one recently due to the growing demand for healthcare professionals? Over the past 24 months, the demand for contract and temporary staffing in healthcare has boomed. This is mostly due to the COVID-19 pandemic and the growing staffing shortage due to healthcare workers leaving the workforce. Many believe starting an agency is easy, but there are some major keys to success and pitfalls to be aware of before venturing into the healthcare staffing space. Below we will explore those best practices, options, and pitfalls so that you can start your firm with confidence.

Can anyone start a healthcare staffing agency?

The short answer is yes. Many staffing owners are former healthcare professionals themselves, and you do not have to come from the “business world” to be a successful recruiter in the healthcare space. In fact, medical professionals are sometimes the best fit to start firms because they know all the things it takes to work in the field. However, there are some things to be aware of if you plan on starting your firm and you are not a medical professional.

Things you will need:

  • Applicant Tracking System
  • Payroll funding
  • Payroll administration or software
  • Insurance
    • Workers Compensation insurance
    • Professional Liability insurance
  • Onboarding services
    • Background check vendor
    • Drug screens
    • Credentialing vendor
    • Immunization vendor
  • Timesheets
  • Invoicing capabilities
  • Employee handbook
  • Contracts
    • Employment contract for workers
    • Services contract for clients
  • Licenses
    • Business license in each state you plan to work
    • Nurse Pool license (for states that require them)

Is “do it yourself” the only way?

You do not have to do everything listed above yourself. There are many service providers that can help with some or all of the things mentioned above. However, working with 3,5, or even 7 different vendors may take a lot of your time. Not being able to focus on your candidates and clients may prohibit you from growing your business. Good news is, there are services that handle all of the above for staffing agencies so that recruiters like you can focus on finding candidates and clients. Those types of services are called Employers of Record of “EORs”.

What is an Employer of Record (EOR)?

An employer of record is an organization that serves as the employer for tax purposes while the employee performs work at a different company. The employer of record takes on the responsibility of traditional employment tasks and liabilities, so that their clients (recruiting and staffing agencies) do not have to carry those responsibilities. Basically they bring to the table almost everything on the above list, so you can focus on finding great talent for clients.

By using an EOR, recruiters and other businesses can free up time. Not having to deal with payroll, insurance, and HR issues can potentially save hours every week. Those hours can be used to find candidates and clients, which is the most important thing when first starting out.

EORs are cost-effective ways to outsource payroll and HR functions. The business pays the employer of record a set rate for every hour the employee works, and the employer of record handles all tasks.

EOR services can be especially helpful when dealing with payroll and employment laws for employees in multiple states. The employer of record stays updated on the state and local laws so you don’t have to worry about learning and complying with laws in multiple places. This also helps small staffing firms compete with the big players by opening up the entire united states for business, and not just their local area.

Major Pitfalls for Healthcare Staffing:

1. 1099 Compliance

Many healthcare staffing firms start out by placing RNs, LPNs, CNAs and more on a 1099 basis. However, this can be a major pitfall that leads to fines and penalties. The government is watching out for non-compliant 1099 workers, especially when they blow the whistle on staffing firms. If they do so, and your firm is found to have violated the Fair Labor Standards Act, you could end up owing a lof of money back to those works, and penalties, like this firm.

2. Licenses

Many states require licenses for staffing firms to place healthcare professionals. In fact 10+ states have this requirement. Some of these states also require the staffing firm to have an RN or higher level professional on staff to “manage” the temp workers. So for those of you that are not medical professionals, this may be a tough barrier to entry, unless you use an Employer of Record (EOR).

3. Reliable staff

Last but not least many new staffing firms struggle to get reliable staff to work for their clients. This has been a trend among lower level healthcare roles for many years. However, with the demand in healthcare growing, there are so many options for these healthcare workers to choose from. So many are incentivized to jump between different firms and employers in search of the best rate, or “crisis pay”. Be sure to vet each member of your team prior to deploying them at a client in order to avoid wasted time, no-shows, and lost revenues.

Next Steps:

Whether you are just starting out or you’ve been doing healthcare staffing for a while, you need to make sure employees are classified correctly, paid accurately, and employment issues are handled. Otherwise, there can be consequences at the state and federal levels.
FoxHire provides an employer of record back office solution for recruiting agencies and other small businesses. Learn more about FoxHire’s contract staffing services.

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