Recruitment Insights

Are you ready for a contractor-led recovery?

May 25, 2020
Are you ready for a contractor-led recovery?

Whilst the recently released unemployment rates were not unexpected, there has been wide-ranging commentary around what the inevitable recovery will look like and when it will begin.

To the credit of the recruitment industry, speculating has been left to the media and politicians.  Some of the most respected voices in recruitment agree that irrespective of the shape it takes, it’s going to be a contractor-led recovery and best encapsulated in this quote…

“The recovery will likely follow a similar trend to previous recessions in that temp and contract will come back first as employers will be inevitably tentative”.   Greg Savage 20th May 2020

To stick with this pragmatic tone, we have listed some of the more pertinent questions that recruitment leaders need to consider in order to be ready for a contractor-led recovery.

Inhouse V’s Outsource Payroll

Whether you are a perm recruiter wanting to expand into contracting, scaling your limited contractor book, or are already solely focused on contracting and looking for efficiencies, one of your first and biggest decisions will be whether to run your payroll inhouse or outsource it to a specialist. Some of the key questions that need to be answered are…

Resources – do you have the right staff, technology and ability to run and maintain regular contractor payroll cycles?

Costs – what is the cost of setting up and staffing an in-house payroll model versus the costs of outsourcing to a contractor payroll company?

Focus – As a business owner or leader, where is my (or my team’s) time best spent, building an inhouse payroll capability, or focusing on growing the business through more strategic and sales related tasks that impact the top line?

Compliance – Do I, or my team have the ability and time to properly manage and meet the various Federal and State tax, insurance and reporting obligations, and what are the risks of getting this wrong?

Onboarding Contractors – How can I create an efficient workflow and system for the contractors to securely provide and update their personal data? How can I educate them on their role and ongoing requirements – is that inhouse or an online self-service portal provided by a payroll provider?

Working with hundreds of recruitment agencies, we have seen both inhouse and outsourced models work well for our clients. If you come to the conclusion that you’d like to explore an outsourced model, you’ll also need to consider which provider is the best-fit for you and who can help you integrate your other systems, such as CRM, ATS, invoice finance, accounting software etc. To help you get started on this journey, you can refer to this list of reputable APositive partners.

Whilst a large percentage of recruiters choose to outsource their payroll to specialist providers, there are many that are running a lean and cost-effective inhouse model. This case study highlights how an inhouse model can work for recruiters that are at the right stage and open to advice on how to build an integrated back office.

Selecting the right Finance

There has been a lot said and written about the changing market conditions being an opportune time for recruitment agencies to reassess their current business so that it is best placed to survive and thrive.

Starting or scaling a contractor book creates a cash flow gap between paying your contractors and being paid by clients, and you will need to determine the most suitable Finance arrangement to fill this gap.

The imminent changes to recent Government assistance ( JobKeeper, ATO deferrals etc ) mean that there are now additional variables to consider when making this important and often long term decision.

In our next blog we will delve deeper into the key considerations if you are deciding between self-funding, setting-up a bank loan that is linked to the family home and personal assets, or releasing working capital that already exists in the business e.g. invoice finance.

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The APositive team is made up of recruitment industry experts with decades of experience helping businesses like yours. Get in touch with us today and see how we can make a positive difference.