So you’ve decided to add contract staffing to your business model. That’s great! By doing so, you will become a sole-source provider who is able to solve ALL of your clients of their staffing issues.
But before you start taking contract staffing job orders, you have an important decision to make: are you going to run your own back-office, which entails becoming the employer of your contractors and handling all the employment tasks, or are you going to outsource that responsibility to a contract staffing back-office?
First, it is important to understand what a contract staffing back-office is and what it does. A contract staffing back-office becomes the legal, W-2 employer of your contractors. Your outsourced back-office handles all the usual employer responsibilities – and some that are specific to temp. (See chart)
You may be asking yourself why you should give a portion of your hard-earned fees to a back-office. Consider these reasons:
Once you have decided to add contract staffing, you want to start ASAP. But if you choose to run your own back-office, it takes an average of three to six months to get started, especially if you have never had employees or if you want to place contractors outside your home state. You must register to pay taxes, register for unemployment and workers’ compensation coverage, research the complex tax laws that vary from state to state, and more. If you utilize a contract staffing back-office that can employ contractors nationwide, all of that is done. You can literally get started in contract staffing a matter of hours.
The ongoing tasks, including payroll processing, timesheet collection, unemployment and workers’ comp claims, tax withholdings and filings, etc., can keep you from doing what you do best – recruiting. That is why many firms think they have to choose between contract and direct-hire placements. But when you outsource the back-office, you have time for both because the back-office provider is handling all of the employment tasks.
Employment laws are extremely complex and can vary from state to state. One little mistake can set you up for an ugly government audit or lawsuit. The time and money you will spend fighting an audit or lawsuit can cause serious damage to your firm, not to mention what happens if penalties are assessed.
Are you confident that you can process payroll without any errors? Do you have back-up in place in case the person who handles payroll is unavailable? Missing even a single payroll or making a mistake can damage your reputation and compromise your ability to attract quality contractors.
Benefits are an important consideration for contractors. A good contract staffing back-office will provide your contractors with a wide range of benefits (medical, dental, vision, life, 401k) through a national carrier offering group rates, making your firm more competitive.
One way to help mitigate your risk is to carry sufficient insurance. It’s so important, in fact, that clients may ask to see your certificate of insurance. Do you have enough insurance to cover yourself and satisfy your clients? When you align yourself with a contract staffing back-office, it’s their responsibility to carry the certificate of insurance.
Having the ability to provide a wide range of worker classification codes in a lot of states enhances your ability to place contractors. Don’t limit yourself to basic office professionals in your home state. A good back-office should be able to place contractors in a wide range of technical and professional disciplines across the United States.
If you do decide to outsource the back-office, be sure to select a provider with an impeccable reputation and an extensive experience in the business. Remember, the back-office is an extension of your office, so quality is king!