The Difference: Direct Hire vs. Contract Placements
Just as with anything that is unfamiliar or outside a person’s comfort zone, there is a huge fear factor involved with contract staffing. Many recruiters believe contracting is extremely complicated and too different from direct hire. But as the popularity of contract staffing continues to grow, more recruiters are taking the leap. They’re discovering that contract placements are really not as different from direct hire as they thought.
Consider the main steps involved with contract placements:
- Get the job order.
- Locate the candidate.
- Negotiate rates.
- Employ the contractor and handle the employment tasks. (Outsource this.)
You will notice that the first three steps are things you already do for direct hires. The rates are a little different when it comes to contract placements. However, once you understand the process for determining the hourly rate structures and markups that will be charged to the client company, it’s EASY!
Contract placements: easier than you think!
The biggest difference between direct hire and contract placements is the employment of the contractor and the “back-office” tasks associated with being the legal employer. Fortunately, those tasks can be outsourced to a recruitment back office. This leaves you with the tasks with which you’re already familiar.
If you decide you do NOT want to outsource, you need to allow yourself plenty of ramp-up time before you start making contract placements. You will need to get set up to withhold taxes and obtain Workers’ Compensation insurance in each state in which you plan to place contractors. You’ll want to decide how you will fund payroll (by yourself or through a third-party funding company). You will need to decide if you are going to offer contractor benefits.
These are just some of the biggest set-up tasks to consider if you want to be the legal employer. You’ll also want to make sure that you have sufficient administrative support (both human and electronic) to handle the day-to-day tasks associated with employing contractors and running a contract staffing back office. This includes the following:
- Legal contracts with the contractor and the client
- Payroll processing (on at least a bi-weekly basis)
- Tax withholding and filing
- Background checks and drug screening
- Unemployment claims
- Workers’ Compensation
- Invoicing clients and managing accounts receivables
- Benefits administration, if applicable
- Employee issues
- Employee terminations
- Keeping up with and complying with the complicated web of local, state, and federal employment laws
Just call us . . . CALL us . . .
This whole back office piece is what scares many recruiters. But again, if you outsource this piece, you are left with the typical recruiting tasks.
Just be sure to select a FULL-SERVICE back office (like Top Echelon Contracting). This back office will become the legal employer of your contractors and handle ALL of the employment tasks and legal liability. Otherwise, you may find yourself still wrangling with complicated contractor issues when you should be focusing on revenue-producing recruitment tasks.
You can can also call us at 888.627.3678. Start making contract placements and start making more money!
(Editor’s note: This article is intended for informational purposes only and should NOT in any way be considered legal advice.)