Oh the feeling of closing a direct hire placement and receiving that big placement fee! Finally, physical proof that all your blood, sweat, and tears were worth it. It makes you feel like you can splurge a little and celebrate over a fillet mignon dinner.
The problem is when that big placement fee runs out and there’s not another big placement waiting in the wings. All of a sudden you find yourself cutting back and eating macaroni and cheese.
We often get asked by recruiters what are the advantages of adding contract staffing to their business models. The number one reason is consistent cash flow. In other words, contract staffing helps you bridge the periods between direct placements so you can enjoy filet mignon everyday.
When you have contractors, you earn money for every hour they work and even more when they work overtime. This provides a steady, predictable income that can sustain you during those inevitable direct hire dry spells. With the peace of mind that you will be able to pay your bills, you can make smarter business decisions, turning down those job orders that you know in your gut are bad business. With contract staffing in your back pocket, you can be more choosy and focus your efforts on job orders that are more likely to be worth your time.
Contract staffing can even help make your firm recession-proof. Contract placements often cover overhead costs, making your direct hire placements pure profit. This can be a lifeline during an economic downturn. While we hope we don’t experience another recession for quite some time, history tells us there will be another one eventually. With contract staffing you can not only survive but thrive in all economic conditions.
You can even increase your overall sales. Contract staffing tends to increase client loyalty because they like a recruiter who can meet ALL their staffing needs. That loyalty often leads to more placements (contract AND direct hire) from existing clients, not to mention referrals. You can also attract new clients with your contract staffing services and pick up their direct hire business in the process.
So if contracting is so great, why aren’t ALL recruiters doing it? Well, there is a common myth that contract staffing is significantly more difficult than direct hire. In reality, contracting is not all that different from direct hire when you outsource the employment of your contractors to a contract staffing back-office service. The back-office will handle all the employment liability and tasks, including background checks and drug screenings, payroll processing and funding, tax witholdings and filings, Workers’ Compensation, unemployment, employee paperwork, and benefits administration, including ACA (Affordable Care Act or Obamacare) compliance. When you place your contractors through a back-office service, your tasks remain largely the same as with a direct hire placement: you match the candidate to the job order and negotiate the fees.