Just Because You CAN Run Your Own Back-Office Doesn't Mean You SHOULD

With the multitude of home improvement stores and social media sites like Pinterest, we are increasingly becoming a Do It Yourself nation. Want to remodel your kitchen? DIY. Need a fabulous cake for a party. DIY.  But just because you CAN DIY doesn’t mean you SHOULD.  Saving a few bucks often is not worth the frustration, time, and risk associated with doing it yourself.

And so it goes with contract staffing.  Being cost-conscious, some recruiters try to go it alone when it comes to the contract staffing back-office.  But like a complicated electrical job, it is safer and less time-consuming to outsource the back-office tasks associated with placing contractors.

But don't take our word for it. Ask a fellow recruiter - Cindy Stephens, Owner and Executive Recruiter of Stephens International Recruiting, Inc.  She decided to run her own back-office for about a year when her firm was first established, employing private sector Biomedical Equipment Technician contractors as well as contractors working on government contracts.

“I was really overwhelmed and could not find enough time to concentrate on our primary business areas,” Stephens said. “It took a lot of time to take care of the legal aspects and the payroll as well as the headaches that comes with the HR piece.”

It would have been easy at that point to just give up on contract staffing. Instead, Stephens made “the best business decision we could have ever made.” She outsourced the employment of their contractors to a contract staffing back-office service, waving  goodbye to the headaches and risks that come with “DIY Contract Staffing:”

  1. Out-of-state placements. Recruiters are often already set up to run the back-office in their home state if they have in-house employees.  But when they try to expand into other states, they find there is a lot of footwork and homework involved in getting set up. “We had to be registered in each state where we had a contract and had to worry about each state’s requirements, which ended up to be a huge headache,” Stephens said. For this reason, some firms decide to turn down contract placements in other states.  But you don't have to turn away business. Instead, outsource to a contract staffing back-office that is already set up to do business nationwide. That way, you can accept placements in other states with no ramp-up time.
  2. Workers’ Compensation. Once you have coverage in each state where you place contractors, there is the ongoing burden of having to select the correct Workers’ Comp code every time there is a new contract assignment. Plus you have to manage claims and yearly Workers’ Comp audits.  And what if your coverage is cancelled due to too many claims?  Those worries and frustrations also led Stephens to outsource the back-office to a provider that would take responsibility for Workers’ Compensation.
  3. Funding, payroll, and taxes. Payroll (and everything that comes with it) is a real source of pain for recruiters running their own back-offices. For starters, you have to get funding so you you will be able float the contractors’ payroll while you wait for the client's payment. Recruiters often handle this by securing a line of credit from their bank, but what happens if a client stops paying or goes bankrupt? In addition, you must stay up on all the payroll and tax laws in each state.  And of course there is the weekly gristmill of processing payroll and handling tax reports? One little mistake or delay in payroll can wreck your firm’s reputation quicker than anything else.
  4. Legal liability. Legal compliance was another thorn in Stephens side. And it’s no wonder. There are employment laws on the federal, state, and even local level recruiters have to keep up with, and more are added every year. Perhaps the biggest is the Affordable Care Act, and its most challenging provisions hasn't even kicked in yet! All it takes is the slightest misstep by you OR your contractors to cripple your firm. When you outsource, the back-office service becomes the employer and therefore is responsible for legal compliance.
  5. Certificate of Insurance. Professional liability insurance is vital to mitigate the risk described above, but it is also hard to obtain and expensive. There is no escaping it though.  It is so important that clients often ask to see your Certificate of Insurance before they will do business with you.  When you outsource your back-office, your provider carries the Certificate of Insurance, so you can breathe easy.
  6. Human Resources. Then there is the “HR piece” Stephens referenced.  This piece includes employment paperwork, Unemployment claims, background checks, employee relations, employee terminations, and more. You can outsource all these tasks to a contract staffing back-office.

We know you hate paying someone to do something you can do for yourself. We all do.  But you can offset the cost of outsourcing by spending your time doing what you really want to do – actual recruiting!

“I value my time, and I can now focus on taking care of our primary business operations,” Stephens said.  ”More importantly, our clients look to us as a valuable resource because we offer flexibility and alternative staffing services.  By using a back-office service, we can really promote our ‘Alternative Staffing Solutions’ to our clients.   They realize how flexible we are because we can offer direct hire, contract, contract-to-direct , or temp-to-perm, and now our clients are even coming to us for payrolling services.”

Debbie Fledderjohann is the President of Top Echelon Contracting, Inc.

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Tags: Agency Recruiting

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