By DEBBIE FLEDDERJOHANN, President of Top Echelon Contracting
We have talked extensively about how contract staffing keeps gaining in popularity and has broken records over the past several months. But how is this impacting the employment landscape and recruiting? Based on the contract placements we are seeing and conversations we have had with recruiters, we are noticing the emergence of a new blended workforce model. Rather than only using contractors sporadically as a stop-gap measure in limited circumstances, employers are integrating contractors into this new workforce model and using it as a long-term business strategy.
This new workforce model consists of a small core group of traditional, direct hire employees surrounded by a larger, outer ring of contractors. The direct hires in the core are the key personnel with the experience and longevity that can make or break the business. Therefore, high turnover in the core is very detrimental. The outer ring of contractors is no less important, as they are often responsible for day-to-day tasks and critical projects. However, they typically are not driving the growth and stability of the business, so turnover is not as disruptive.
The beauty of this model is its flexibility, which is made possible by the outer ring that can easily be adjusted based on business demands. When extra help is needed, contractors can quickly be added to the outer ring, which is important with sudden and unexpected peaks. The ring can be reduced just as quickly during slow times so companies don’t have to conduct ugly layoffs. Contractors know from the get-go that their assignments will eventually end.
Let’s look at this model in action:
- When a company neglects computer upgrades, they often find themselves having a lot of IT projects to do in a limited amount of time. Contractors can be brought in to get the work done, and the assignments can be ended when the work is complete.
- Manufacturing is known for its frequent ups and downs in production. Engineers and other highly skilled contractors can be brought in as needed to respond to business demands.
- Insurance companies need more adjusters and other workers following major disasters than they do in “normal” times. Rather than having a large staff of direct hires “just in case,” they can bring in contractors when needed to respond to the extra workload.
- Accounting firms have predictable, annual “crunch times.” They can ramp up for these times, such as year-end reconciliations and tax season, by bringing in auditors, accountants, and tax experts on a contract basis. This helps them avoid having an over-inflated staff the rest of the year.
We could point to many other examples, but the point is that companies are starting to look at every open position to determine if they really need a direct hire. Many times, the answer is no, so they instead go with a contractor.
This represents a major change for recruiters, especially those who have traditionally only placed direct hires. If they don’t already, your clients are going to have a consistent need for quality contractors that only a recruiter can provide. The business is there for the taking. All you have to do is ask if they have a need for contractors. Statistics show that 80% of contract job orders come from a recruiter’s existing direct hire clients.
If you already place contractors, you will want to make sure you are in a position to take on the volume you will likely be seeing. This is also a good time to consider expanding your business into additional states and industries so that you can further capitalize on this trend.
Whether you are just getting started or expanding your contracting business, you will want to give serious thought to how you will handle the back-office tasks that come with employing contractors. You may want to consider outsourcing the employment of your contractors to a contract staffing back-office service. Doing so can allow you to establish or expand your contracting business with no ramp-up time or upfront financial investment.
The new workforce model appears to be a permanent change in the employment landscape. This is a case where change can be very good. Recruiters who can provide direct hires AND contractors can be very successful in this new environment as companies start seeing them as staffing partners rather than mere vendors.
(Editor’s note: This article is intended for informational purposes only and should NOT in any way be considered legal advice.)
