Consider the following scenario – does it sound familiar? Your business is well aware of contractors being an attractive resourcing option for the flexibility they provide, however when your client tasks you with placing a new contractor engagement, you pause. Well internally at least. Pause to think of your associated obligations during the lifecycle of the prospective contractor and how it impacts your operating procedure considering all the required insurances, the administration of contracts and the ongoing payroll. It’s a reaction we hear consistently from recruitment agencies as they find viable ways to manage contractor engagements for their clients; particularly for boutique/smaller-scale agencies or those still in their infancy.
Reviewing your approach to compliance
We’re observing how client demand for a contingent workforce is growing and it poses a number of compliance and resource challenges for your business that must be addressed. The preference for traditional, permanent placement must give way to allow your contractor offering to flourish. Problematically, the stretch in internal resources to compliantly engage one or multiple contractors is often reflected in increased fees that risk alienating clients seeking a cost-effective recruitment option. As such, it prompts an important discussion in first assessing your responsibilities and then determining which tasks will be handled in-house and which will be outsourced. Payroll is the more common task to delegate but there are plenty of other considerations in making contractor engagement a seamless and compliant part of your service offering.
Managing risk within the operational constraints of your agency
Knowing your legal obligations within legislation pertaining to contractors is one thing, but maintaining a compliant contractor workforce that doesn’t drain your time and resources is another matter entirely.
- Balancing funds
Prompt payment is your chief concern- do you have the capability and processes in place to ensure contractors are paid on time even if the client has not yet paid your agency? Ensuring a contractor is paid on time, every time is obviously important to the contractor and client, and becomes important to you in retaining a good reputation and not burning bridges in the contractor community. There are safeguard measures you can take such as negotiating firm client payment terms, but a more solid contingency plan may be required depending on the scale of your contractor workforce. Payroll funding to supplement outsourced payroll is a lucrative option open to agencies to appease their contract workforce, ease cash flow, and eliminate that payment-related risk that can cripple an agency.
- Balancing time
We hear time and time again from agencies that the lure of maintaining a flexible workforce is often outweighed by the overwhelming amount of administration involved. If they are not confident they can juggle these responsibilities alone, they should be aware that they can tap into ‘chain of on-hire’ arrangements with labour hire firms who already have a dedicated contractor function and established engagement model. With the overall benefit being a purity of focus for an agency, these firms can take on the mammoth effort that is onboarding and liaise with contractors. Furthermore, they can accept liability for remitting PRT (payroll tax) while you retain your agency margin, amongst a host of other administrative tasks. Determining whether another entity can do the job faster, better and cheaper is crucial in your time and risk equation.
- Access to the right counsel
Many recruitment agencies and consultancies (including the big name firms) don’t have a dedicated, in-house resource(s) who know how to apply the intricacies of contractor compliance. Furthermore the different dimensions are very rarely housed within the one person! Add in the fact that legislation is ever-evolving, requiring industry upskilling, and this can get unruly. Mobilising a team to ensure each area of specialisation is ticked off should be your focus, as is industry learning such as taking advantage of information sessions from government departments and labour hire firms related to changing labour hire legislation.
Moving beyond risk to opportunity
Of course your approach to contingent labour should not be restricted to that which is reactive and risk-based. Once you have established a firm footing in the compliant onboarding and management of contractors, it’s wise to consider how proactive measures to protect the broader interests of contractors can be a point of differentiation for your agency and position you as a recruiter of choice. As the demand for contingent labour increases, so too will the expectation for a holistic engagement service tailored to them. We’re referring to value add services that are not typically available as a part of a standard payroll service, such as those from affiliate partners and offered through contractor management organisations (CMOs). Consider the following contractor-focussed service offerings:
Preparing your agency for the growth of contingent labour to meet legislative and client expectations is critical to its survival. The upfront and ongoing costs and combined resources to establish a contractor model, and the risks for not doing it correctly, can be daunting for any agency irrespective of size. Effectively managing that risk begins with prioritising your approach to contractors so it is not of secondary importance to your permanent workers. It means harnessing the tools and services at your disposal to create the right blend of in-house and outsourced functions, which will ease operational pressure and be the key to your agency’s competitive advantage
If you require any further advice on developing the engagement of your contractor workforce, don’t hesitate to contact us!