With increasing confidence, experts are stating that the world is moving to contract and freelance worker positions. These flexible arrangements offer better flexibility and income potential for the worker and lower costs for the employer. By 2025, it is expected that more than 50% of the U.S. workforce will be comprised of contract, freelance, and part-time workers. This presents a great opportunity for staffing and recruiting firms to build contract staffing businesses.
Using Shifting Trends for Business Success
The demand for flexible working options is primarily spurred by millennials, at present, the largest segment of the U.S. workforce. At the same time, businesses that want to scale with less capital are using contract workers to gain employees while also spending less. These two factors are crucial to making this new economy work.
This convergence is fantastic news for contract staffing and recruiting firms looking to scale their business in the next few years. The current boom sets up staffers with a great solution for when the economy does take a downturn. Additionally end client organizations have goals for contract recruiting and diversity initiatives. That combined with the fact that higher skilled workers are willing to work for just a few hours at a time, means that both the contractor, the recruiter, and the end client will get precisely what they want and need to succeed.
What industries need this the most?
While recruiting firms without recurring revenue are the ones that should be looking hard at this contract opportunity, there are specific sectors within this industry that do the best. For example, FoxHire clients have made the most placements in the healthcare, IT, and educational segments. Information Technology contract positions have specifically been on the rise in the last 10 years. Did you know that more than half of Google’s workforce are contract workers? Imagine being a recruiter for them! They have over 121,000 contractors on staff according to this article. What’s more interesting is the pressure Google is facing to make these contractors full time employees.
Since, like Google, most firms won’t want to take on the burden of adding 121,000 employees to their payroll, they will be looking for alternatives. This is where recruiting organizations can capitalize. However, there is one thing that recruiting organizations are going to have to be able to offer, which is the ability to be the legal Employer of Record (EOR) for the contractors that they place for the end client (in this example, Google).
Being able to serve as the EOR will solve the client’s (Google’s) problem of needing to bring these contractors on full time. It will also deliver a flexible work structure for the employee; one where they can agree with the client on when they work and what they work on. This will also generate the one thing that most recruiting firms are looking for – recurring revenue. So how do you do it?
How to Use Contract Workers to generate Recurring Revenue
First, you need to determine what your goals are if you don’t already have some. This step and the next two are specifically for businesses that aren’t generating recurring revenue already. For example, if you are looking to double your revenue or increase the number of projects that you can take, you should determine the best steps and goals that will get you there. While you don’t want to throw caution to the wind, looking at the clear, appropriate, deadline-driven goals that you can take to get things moving will be the best first step.
Pick Your Model
Next, you should determine how you are going to price and package your contract staffing offerings. Are you going to be offering high margin, low volume placements? Or will you be focusing on high volume, low margins placements? Both options have their benefits, but not every firm can handle both types of business models. Selecting the right one for your firm will set you up for future success.
Value Your Pricing
Pricing for contract placements can be a confusing topic. Many firms aren’t sure how to price these types of engagements. What most end clients want to know is the “Mark up” or the “multiplier”. Essentially they want to understand how much more are you charging me compared to how much the contractor is making. Within FoxHire the average mark-up is 56%, which aligns well with industry standards. Regardless of what you decide your mark up should be, valuing your pricing will be essential to your success. Getting driven down on margins by demanding clients won’t set your business up for long term success. Small margins mean small profits for contract placements. Since you will be working just as hard to place these contractors, as you do to place permanent candidates, you should be getting healthy profits.
Determine What Budgets Come About
Like adding any new product or service, there will be a cost associated. Since you will need to be able to offer the ability to become the Employer of Record for your contract placements, there will be things that need to be in place to support that ability. For example you will need to be able to fund and administer payroll, monitor time and attendance for contractors, offer benefits and insurance for your placements, and much more. There are many ways to make this possible, including partnering with an Employer of Record like FoxHire.
Either way, if you can set up recurring revenue through contract staffing, your firm will be positioned to succeed long into the future.