In this article you will be going over the basics for entrepreneurs who have a start up and grow their business from scratch with using any outsourced services or partnerships like those that are offered by our business, SDF Systems – Outsourcing, Recruiting & Staffing Services.
We believe that entrepreneurs need to gather the appropriate information to make the most informed decisions when selecting any offshore outsourcing firm, and this article has the goal of providing the facts needed to make the best decisions moving forward. Let’s begin the process of finding your staffing and recruiting firm!
What Services Will They Provide To You As A Customer?
In the case of staffing and recruiting businesses the answer may sound simple, but as you learn more, it becomes complex. You will have several options when deciding on your services providers.
In most cases, staffing and recruiting businesses are very similar to other personal service businesses because both are service-based, driven by personal relationships, hard work, and dedication to filling the needs of the customer.
Four Primary Services Of Staffing And Recruiting Firms:
1: Contingency Recruiting (aka Direct Hire Recruiting)
This is a service in which the customer has an open position and they need help filling the position. Customers typically work with two to three recruitment firms, and it is a competition to find the best qualified candidate in the quickest time. The service fee ranges from 15-30% of the first year salary of the position, but there is typically a 60-90 day money-back OR replacement “guarantee period.” This service has a large upside, because the fee can be $10,000-$30,000 depending on the salary of the position. However, since the customer is looking at themselves and other recruitment firms are searching for candidates, it is a competitive process. Based on national averages, a good recruiter will be successful in placing one candidate for every six active orders they work on, assuming they spend adequate time recruiting and submitting candidates.
- In this service, it is the responsibility of the recruiter to recruit, interview, and screen out candidates based on the preferences of the customer. The best way to ruin a relationship with a customer is to submit unqualified, uninterested, or unscreened candidates to the customer.
- The recruiter is responsible for maintaining the relationship with the candidate during the interview process. Building rapport here can ensure the candidate stays through the “guarantee period.”
- The customer will provide payment to the recruiter between 30 and 90 days after the start day, depending on the contract agreement and guarantee period.
2. Retained Search Recruiting:
This is a service similar to the Contingency Recruiting; however, the customer typically agrees to use your firm exclusively, and the customer typically pays a fee up front. The candidate is then still ultimately hired by the customer. The customer is going to expect three of the best qualified candidates to be submitted, which is why this service is typically reserved for senior-level positions. The customer wants to work closely with the recruiter to develop the screening tools and to ensure the best candidate is hired.
- Side note: this is popular today in large Fortune 500 companies that are looking for senior level positions, but oftentimes small businesses don’t utilize this type of search.
- Businesses in specific niches, or with open positions in specific niches, are the biggest proponent of this service because there may only be a handful of qualified candidates in the country based on the industry knowledge, specialization, or experience needed to be a successful candidate.
3. Contract Staffing Placement (aka Temp Staffing):
This is a service that requires the recruiter to find a candidate to fill a need, and run all aspects of the payroll process associated with the employee. The candidate recruiting process is the same when it comes to working with the customer to find the qualifications required, but in this case, the customer wants the employee to remain on the payroll of the recruiting agency. This is often due to budget considerations or self-limited project needs. The qualifications for the candidate are typically less rigorous, but the customer will still have a few “must-haves” when it comes to skill set and experience. This service is often used by businesses that have an employee on leave, or to fill temporary gaps in their workforce. Many companies utilize contract staffing for projects that are either behind, or that have a deadline that is coming up in the short term.
- Contract staffing allows for constant contact with customers and weekly billing, which is great for cashflow. The customer typically pays in 30-day terms.
- There is extra risk for the recruiter because the employee’s taxes, workers’ compensation insurance, unemployment insurance and HR issues are all the responsibility of the recruiter.
4. Contract-to-Perm Placement (aka Temp-to-Perm):
This service has increased in popularity over the past 18 months and is the best opportunity for a recruiter to maximize cash flow and profitability when working with customers. In a typical situation, the candidate is hired by the staffing firm and starts working at the customer worksite, similar to a contract placement. In this case, the contract has a built-in conversion fee schedule which allows the customer to “buy out” the candidate based on a prorated schedule. In many cases the conversion schedule starts with the normal direct hire fee and then is reduced based on the number of billable hours that the candidate works. In 2019 we have seen an extension of the contract period to six-nine months, and the buyout fee was slower to be reduced.