Is Your Recruiting Firm at the Mercy of the Economy?

As a recruiter, have you ever felt like your livelihood was at the mercy of economic whims? That you are travelling down a winding path without a map? If so, taking a look at recent statistics could provide the map you are looking for. All signs pointing to contract staffing in all economic conditions.

Forty-two percent of employers told CareerBuilder that they planned to hire contractors in 2014. If you look at the Bureau of Labor Statistics jobs reports for the past several months, it appears employers are following through with their plans as the "Temporary Employment Services" penetration rate continues to rise. That rate, which calculates the number of contract jobs as a percentage of total employment, has risen for 19 of the past 20 months, according to Bloomberg.

It's typical for contract staffing to grow following a recession as employers test the hiring waters, but usually it declines again when the overall job market rebounds. This time around, contract staffing growth continues despite solid overall job growth.

It appears that there is a fundamental shift in the employment landscape where employers are utilizing contractors as part of an ongoing strategy in a blended workforce model .  Let’s see what is driving this shift.

  1. Rising Healthcare Insurance Costs - Employers of all sizes, especially those that will be subject to the upcoming employer mandate of the Affordable Care Act (ACA), are struggling with increasing healthcare costs. How will they cover those costs? Contract staffing provides a solutions. A third party (recruiting firm or contract staffing back-office) becomes the legal employer for the contractors and assumes responsibility for providing benefits.
  2. Increasing Regulatory Burden - Besides Obamacare, employment regulation in general is increasing on the federal, state, and even local levels. Again, contract staffing offers relief from this regulatory burden because the third party employing the contractors assumes all of the responsibility and liability for legal compliance.
  3. Political Unrest - Employers are still keeping a cautious eye on Washington as Congress continues to dispute issues that impact employment (spending debates, tax code, immigration reform, etc.). The November elections also promise some upheaval because all of the House of Representative seats and a third of the Senate seats will be contested.Contractors provide a level of flexibility in this volatile economy. Companies can quickly add staff when they have the business to support it and just as quickly reduce staff to respond to economic changes.
  4. Getting the Right Fit - While the jobs reports show that companies are finally warming up to hiring, they only seem to want to do so if they can find the perfect candidate. According to The Washington Post recently reported that it takes 25 working days for companies to fill the average job opening, the longest delay recorded since tracking of this statistic began in 2001.  To ensure the perfect fit, more companies are turning to contract-to-direct arrangements where a candidate is brought in on a contract basis so the company can evaluate their skills on the job.  
  5. Candidates Forge New Path - More workers are adopting contract staffing as a lifestyle to gain needed flexibility. Due to their project-based nature, contract positions typically allow a greater array of scheduling options. And because contractors are typically paid on an hourly basis and are paid for every hour they work, their earning potential is higher. Workers also like the variety contract assignments offer.

These issues are not going away anytime soon, so we can only expect contract staffing growth to continue. Experts expect contractors to comprise 40-50% of the American workforce by 2020. That is why contract staffing should be a key component of your strategic planning, helping you:

  1. Smooth peaks and valleys of direct hire. Because you are paid for every hour your contractors work, contracting provides steady, predictable income to sustain your business between direct hire placements.
  2. Secure client loyalty. There is no better way to strengthen client relationships than being able to satisfy ALL their staffing needs (direct hire AND contract staffing).
  3. Close more placements. Again, contract-to-direct arrangements help you speed up the hiring process.  It also can addrss other issues that can kill placements, such as hiring freezes, placement fee objections, and more.
  4. Exit strategy. Eventually you will want or need to sell your business, whether it is to retire, do something different, or other reasons. Contract staffing makes your firm more valuable due to the consistent income your contractors are generating for it.

Yes, the economy can play a huge role in your success as a recruiter but you have options.  By adding contract staffing to your business model, you can take the wheel of your future and establish a map to success!

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

Views: 253

Comment by Nicholas Meyler on January 8, 2015 at 11:52pm

Smart idea.  My thought is that it would be equally effective to focus on recruiting in 'niche-markets' where growth is still strong, instead of switching my paradigm or business plan to recruiting on a contract basis.  For some reason, I gravitate towards long-term placements.  Example:  my first retained search 25 years ago I placed someone who stayed at the company for 12 years and rose to VP/CEO positions.  People need to respect their own DNA and do things the way that works best for them.

Comment by Debbie Fledderjohann on January 13, 2015 at 11:10am

That's a good point, Nicholas. Recruiters often do gravitate towards one or the other. However, what's nice about contract staffing, at least if you use a back-office service, is that you can have the option in your back pocket if a client asks for a contract placement instead of a direct hire. The goal is to never turn away business unnecessarily. 


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