Questions Independent Recruiters Need to Ask Before Placing Their First Contract, Pt. 1
The majority of independent recruiters specialize in permanent placements. They maintain relationships with passive and active candidates and fill permanent roles for companies. Once a candidate is placed, the recruiter then moves on to other placements. However, the employment sector is changing, and temporary and contract roles are becoming more and more popular in today’s world—presenting a great opportunity to build a recurring revenue stream for your independent recruitment business!
As an independent recruiter, focusing solely on filling permanent roles may have worked well for years, but now, you may be noticing more and more of your clients are asking you to find them independent contractors (ICs) or temporary employees. Though you may respond to them that you don’t fulfill these services, you might be wondering whether it’s the right time to start filling contract roles.
Of course, many factors need to be considered before you decide to expand your services, and you likely have many questions to consider before you fill that first contract position, such as the ones below.
1. How Do I Pay These Workers?
When it comes to permanent placements, you don’t need to worry about paying the candidates you place. Once the employee has been hired, your work is done. The company pays the employees moving forward. This isn’t the case for temporary or contract workers. As the recruiter, you will be the one responsible for payroll on a weekly or bi-weekly basis.
What does this mean? You’ll need to pay careful attention to your cash flow, as you will likely need to pay the workers before clients pay their invoices. This could lead to financial instability. You will need to learn how to process payment in the state or jurisdiction the worker is placed, how to meet government requirements, how to process year-end/tax forms, and more. You’ll also need a system in place to process payroll and provide direct deposit.
2. What is the Cost of Payroll?
To keep your cash flow in check and ensure you’re paying your workers properly, you’ll also need to determine your cost of payroll. What are the payroll burdens you’ll face, such as tax remittances? How much time will you need to dedicate to payroll processing each week? Your payroll costs will also differ per position type, by state/country, etc. There are many factors to consider when it comes to the costs of payroll.
3. How Do I Determine if a Worker is an Employee or Should Be Treated as an Independent Contractor?
The government is cracking down on the misuse of independent contractors. It’s important to understand which factors determine whether a worker is an employee or contractor, so you can classify them properly for payroll, benefits, workers’ compensation, etc. Misclassifying independent contractors, whether on purpose (to save on the costs and burdens of payroll), or mistakenly, can be costly. Not only might you face lawsuits from employees, but you will likely also face hefty fines and penalties levied by the federal government.
Before placing your first contract role, it’s critical to ensure you have an IC classification system in place, so you can ensure you’re making the right decisions regarding their employment status. You’ll also need to ensure you’re reviewing statuses on a regular basis.
4. How Do I Handle Requirements for Workplace Safety?
Workplace safety is a top concern when you become the employer of contract workers on your clients’ sites. You will need to understand what paperwork you need, what insurance you need, and which type of health and safety training is required for the workers.
To learn what other questions independent recruiters need to ask before placing their first contract, click here!