6 Scary Risks of Running Your Own Contract Staffing Back-Office

Forget about ghosts and goblins. When it comes to running your own contract staffing back-office, there are very real risks that can keep any recruiter up at night.

Handling the back-office duties associated with contract placements becomes more complicated each year as employment regulations continue to increase. 

Here are just some of the scary details to fear:

  1. IRS audits — The IRS seems to be cracking down on worker misclassification more every year with no end in sight.  Most recently, the IRS, Department of Labor, and several state agencies agreed to share information on worker misclassification, so it's more important than ever to make sure you are not incorrectly classifying W-2 employees as 1099 independent contractors.
  2. Workers’ Compensation coverage (or cancellation) — Getting affordable Workers' Comp coverage is hard enough, especially for small-to-medium-sized firms. But what happens if your carrier decides to cancel your coverage because of too many claims that were totally out of your control?
  3. Exposure and liability — In our increasingly litigious society, one little mistake or oversight could put you out of business. We’re talking about mistakes made by either your contractors or your in-house staff. And don't forget to have legal counsel review and negotiate contracts on your behalf.
  4. Certificate of Insurance — Do you have enough insurance to protect you from those legal risks? Can you afford continuous premium increases? Can you afford the additional coverage potential clients may require in their contracts?
  5. Line of credit — As your business grows, so does your line of credit. But what will happen to your line of credit if a client stops paying their invoices in a timely manner (or at all)? What if they go bankrupt?
  6. Missing payroll — Missing a payroll for ANY reason is one of the quickest ways to completely destroy your reputation . . . and it only takes once. Think how you would feel if you worked 40 or 80 hours and someone couldn’t pay you!

So does this mean you should run screaming in the opposite direction from contract staffing? No, of course not! You can still reap all of the benefits of contract staffing without having to handle the scary details. You can outsource those tasks to a back-office. As the Employer of Record for the contractors you place, the back-office assumes all the employment responsibilities and risks.  So you have nothing to fear - except missing out on great opportunities if you don't offer contract staffing to your clients.

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