With the rise of the gig economy, it is evident that adding contract recruiting to your staffing and recruiting firm’s capabilities can prove extremely lucrative. However, unlike permanent placements, placing contingent workers has several nuances that can trip you up, and get in the way of realizing certain profit potential.
As such, here are two major obstacles that keep some staffing firms and recruiters from contract staffing.
Of all the roadblocks that stop recruiters from taking advantage of contract staffing’s revenue potential, financing is the biggest. Many staffing firm owners who consider contract staffing are stopped in their tracks when they see that they must finance weekly or biweekly payroll while waiting for payments from their clients—a gap that can be as long as 45 to 60 days. Some staffing agencies address this challenge by waiting to pay the contractor until the client pays the invoice, but this practice can make it difficult to attract the best contractors.
Bank lines of credit or factoring services may on the surface appear to offer a solution, but these sources of financing can be expensive and can fall short of fully meeting the need. For instance, factoring companies may require the recruiting firm to share in the receivables risk, which could cut dangerously into a recruiting firm’s profit margin or erase it altogether. And the maximum credit limits assigned by the banks may be insufficient to cover on-going payroll obligations. Also, banks and factoring companies do not provide credit-checking services, leaving it up to the recruiting firm to ensure the creditworthiness of new clients.
Once a recruiting firm has identified an affordable source of adequate financing, the next step to unblocking the contract-staffing revenue stream involves the myriad of administrative tasks involved in hiring and paying a contract workforce. These administrative tasks typically include:
Depending on the size of the contingent workforce, these tasks can eat up a sizeable chunk of time in the schedule of the firm’s payroll clerk, bookkeeper, IT administrator, and even its recruiters.
While these two major roadblocks can prove complex and hard to manage, with the right resources and advanced planning, they shouldn’t keep a staffing or recruiting firm owner from taking advantage of the revenue potential of contract staffing. By partnering with the right back-office provider, you can receive resources to manage all of our administrative burdens, as well as financing options to best help you grow your business and fund payroll.
Interested in learning how a back-office solution could benefit your staffing or recruiting company? Contact us today!