Contract staffing offers recruiters many ways to earn more money. Contracting can increase your sales by allowing you to offer clients a variety of staffing solutions, including traditional contract staffing, payrolling, and 1099 independent contractor to W-2 employee conversions. You can also offer contract-to-direct arrangements through which you can earn an additional conversion fee. And with contracting, you earn money for every hour your contractors work, and even more when they work overtime.
But there is another way contract staffing can increase your income that is often overlooked: recurring revenue. While direct placements provide a large recruiting fee in one nice lump sum, you generally can only earn that fee once per candidate. But with contracting, you have the opportunity to place the same candidate multiple times, earning your placement fee many times over.
Consider this: In a 10-year span, one recruiter placed the same programmer analyst in six separate contract assignments. Every time the contractor neared the end of an assignment, the recruiter would find out what new skills the candidate had picked up and then looked for that candidate’s next contract assignment. During this 10-year period, the recruiter earned a total of $140,515 from placing that one candidate. If he had only placed this individual once, he would have only made $20,000 to $25,000.
Your candidates are your firm’s inventory. And just like any business, you want to get as much value out of your inventory as possible. As you can see from the example, you can make much more by renting out your inventory (contract staffing) than selling it (direct hire). If you have a quality pool of highly skilled candidates, you could be sitting on a virtual gold mine.
The question is, what are you going to do with this huge asset? Are you going to use it once and walk away? Or are you going to re-invest it by placing some of your top candidates several times in contract assignments?
The perception is that it is easier to place candidates directly. But that’s not the case. In fact, placing the same person on contract assignment after contract assignment can actually be easier than placing many new candidates in direct positions. If you’ve already placed the candidate on previous contract assignments, you don’t need to conduct an extensive pre-screening when you reassign them. All you have to do is touch base, like our recruiter above did, to make sure you are up-to-date on all of the candidate’s skills and experience. You already have done the majority of your due diligence because you have an established relationship with the contractor.
The key to making these recurring contract placements as easy and smooth as possible is to use a contract staffing back-office to handle all of the financial, administrative, and legal details, including contracts with clients, payroll processing and funding, withholding state and federal taxes, benefits administration, invoicing and collections, etc. When you outsource those tasks, the process of placing contractors is nearly identical to direct hire placements. All you have to do is get the job order, find the candidate, and negotiate rates. Once you’ve done that, simply call the back-office to have them handle the rest.
You may find that many candidates even prefer this type of arrangement over traditional direct hire jobs. Working multiple contract assignments allows them to work on a variety of assignments and pick up additional skills. They also enjoy the opportunity to travel and experience living in a different location for a period of time. And if you are working with a full-service contract staffing back office, those contractors can have access to a full menu of benefits (medical, dental, vision, life, 401k) with no gap in coverage if they are working back-to-back assignments.
There is nothing wrong with pursing solid direct-hire job orders, but when you have a quality candidate who is interested in working in recurring contract assignments, there’s no reason not to jump on the opportunity. There are plenty of companies out there that could benefits from a skilled, experienced worker to complete short-term projects or help them meet critical deadlines. By making the most of your “inventory,” you can greatly increase the income you can make from placements.