The “Great Recession” has supposedly ended and the economy is recovering. But it sure doesn’t seem like it when you look at the unemployment rate, recent financial news or the lack of direct-hire job orders on your own desk.
There is one area where the recovery and placement opportunities appear to be very real. According to numerous news reports, surveys, and Top Echelon Contracting’s own experience, contract staffing has surged since 2006 and the trend indicates it will continue into 2011.
The Numbers Behind the Contract Staffing Trend
There is plenty of evidence of this growth in mainstream media and current statistical data from recruiters who place contractors in addition to their direct-hire placements. For example, the October 8, 2010 CNN Money article “Temp hiring is back. Is a jobs recovery next?” cites Department of Labor statistics showing that temporary (contract) jobs are up 22.1% over last year. The American Staffing Association (ASA) has been tracking similar statistics, reporting in its October 2010 Staffing Index that staffing employment was 20% higher than in October 2009.
Top Echelon Contracting (TEC) was established in 1992 to help direct-hire recruiters offer contract staffing services to client companies. TEC becomes the legal employer of record and handles all the legal, financial and administrative issues for professional, technical and healthcare contract placements. Recruiters soon realized that contract staffing was profitable for their own business, and it provided a great source of continual cash flow. In addition to basic contract placement opportunities, there were other opportunities for contract-to-direct hire, 1099-to-W2 conversions, payrolling, and retiree re-staffing.
TEC has experienced contract placement growth in sixteen out of eighteen years in business. The recent historical growth from 2006 through 2009 documents a 26% increase in contract placements. Add this to the most current data which shows an 8.6% increase in contract placements from 2009 to 2010, and the bottom line… contract placement job orders are becoming more predominant with each passing year!
What Type of Contract Placements Occurred in 2010?
Contract placements are found in nearly every professional, technical, and healthcare occupation. Top Echelon Contracting tracked its contract placements throughout the United States in 2010. The numbers show the hottest areas for contracting were:
- 33% – Healthcare (Professionals: PT, OT, SLP, Pharm, Nurses, but not Doctors)
- 20% – Engineering and Manufacturing (Professional and Technical)
- 13% – Information Technology (All areas, levels, platforms, etc.)
- 13% – Business Professionals and Support Staff (All industries)
- 12% – Finance and Accounting (All levels, except CFOs)
- 5% – HR/Legal/Recruiting (All levels, except Attorneys)
- 3% – Insurance/Real Estate (All levels)
- 1% – Miscellaneous
The best way to find out which client companies are the utilizing contractors is to simply ask them. You may be surprised to learn that 70-80% of companies utilize contract staffing. Recruiters also tell us that 87.5% of their contract placements come from their direct-hire clients.
Client Company Flexibility and Cost Savings
So why are there so many contract job orders and only a handful of direct-hire opportunities? Well, with talk of a possible double-dip recession, the looming expiration of the Bush tax cuts, upcoming healthcare reform mandates, and other factors, the economy is still very uncertain. But client companies who have been putting off hiring are finding they can’t wait any more as current workers are stretched to their limits, systems need upgrades that can no longer be ignored, and critical projects can’t be “shelved” any longer.
What these companies need is flexibility to adjust their workforces to fit their business needs. Therefore, they are turning to contracting, which allows them to add workers to get them through busy times. If necessary they can easily end the contractors’ assignments when the need passes, and in situations when they need more long-term help, contracting allows them to “try” someone before “buying” (extending a direct-hire offer) in a popular trend known as contract-to-hire.
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Flexibility, however, is only part of the equation. As companies continue to watch their bottom lines, they realize contracting is a cost-saving measure. By hiring contractors and outsourcing the employment to a contracting back-office, companies avoid costs such as Workers’ Compensation premiums (and claims), unemployment insurance, paid time off (holidays, vacation, etc.), benefits, etc. Another cost “strategy” involves the company’s budget. The money for contractors often comes from the operating budget rather than the capital budget that typically funds direct-hires. This gives hiring managers increased flexibility to bring on additional workers (contractors) during difficult financial times or a hiring freeze.
Hiring contractors also helps companies reduce legal risk (and legal costs) because most of the liability for complying with employment laws falls on the contracting back-office. This is important as the government continues to pass more employment laws and increases enforcement on violations related to wage and hour laws and the mis-classification of W-2 Employees as 1099 Independent Contractors.
The Future of Contracting
So will contracting growth continue? It appears the answer is yes. A recent forecast by staffing industry consulting firm G. Palmer & Associates predicts demand for temporary help will increase by 20.9% in the fourth quarter of 2010 when compared to the last quarter of 2009.
Some foresee a more permanent change. In the article “The Disposable Worker,” Business Week illustrates that the trend toward companies relying on a more temporary workforce has been brewing for years and will likely gain more steam over the next five to ten years. A recent CNN Money article, “Say goodbye to full-time jobs with benefits,” predicts that full-time employees could become the minority in the United States within the next 20-30 years. According to the article, contingent workers accounted for 31% of the workforce in 2005 and could increase to 40% or more in the next ten years. Note that while the article suggests that temporary jobs will leave workers without benefits, many contracting back-offices, including Top Echelon Contracting, do offer benefits to their contractors.
Should YOU Consider Contracting?
It remains to be seen if these predictions prove to be true, but the historical data shows a definite trend for contract staffing, and there is certainly money to be made by offering contract staffing to client companies.
Fortunately, making contract placements does not have to be any more difficult than direct-hire orders. To learn how to get started, check out Top Echelon Contracting’s “Quick Start to Contract Staffing” Video.