What was once a by-line in many staffing companies that the direct hiring services has totally lost its appeal, has revved up. Many believed in 2009 that the list of companies that headed this segment was slowly heading south. But all hope is not lost predict the industry pundits.

Though there hasn’t been much happening in this segment lately, the highly cyclical nature of the direct hire services is bound to revive and reveal its lost glory. With the economy picking up and employers gaining confidence, the direct hire segment is bound to bounce back, defying all the predictions of a negative market.

When times were good, in ’05 -’06, when the economy was robust, direct hire services firms were raking in 35% year over year growth. Now that the economy has seen another upward trend, there are optimists who are vouching that ‘the rising’ has already begun. Within no time, clients of staffing services will be queued up to work with those companies that would help them with both direct hire and contract staffing.

Preliminary surveys carried out by the industry experts reveal sequential improvement in the direct hire segment that has stunned many, especially those who had pulled out their money thinking it has become a lame horse.

The NACE 2010 at Orlando, FL highlighted the known fact that the recruiting agencies and companies need to leverage the social media for recruiting. The inimitable Gerry Crispin revealed during one of his webcasts recently that the time tested formula of using the referral system accounted for 29% of full time hires and that direct sourcing through LinkedIn is accounting for more than 50% of social network hires. This should act as a sounding board to the direct hiring companies.

Crispin also highlighted points gathered from a survey gathered from 1500 recruiters and 200 staffing leaders of North America in 2009. Some important pointers to the direct hire recruiting firms are:
•    Collect the right information and stick to it
•    Do not depend only on one source. You need to map the entire channel

Staffing agencies are of two types namely temporary and permanent. A temporary staffing agency provides jobs to employees on a short term basis. Such jobs serve as a stepping-stone between unemployment and permanent employment. In fact temporary staffing agencies specialize only in providing temporary jobs. So they offer jobs in sectors which require a high volume of temporary employees. These primarily include labour intensive fields like, construction sector, manufacturing sector, nursing sector etc.

The manufacturing sector needs short term employees when they get production orders in bulk. When there are no orders for production these workers are no longer needed. Some such special sectors in the manufacturing field which require huge temporary workers are the garments sector, light-industries sectors like bulb and glass factories, and whole sale sector. In the same way, temporary workers are sought by the construction industry where bulk of the ground work is done by daily labourers. These jobs include bringing bricks, sieving sand, welding, laying bricks, mixing of cement etc. With a boom in construction in the urban areas, the demand for temporary workers in the construction sector is growing steadily. Even the health industry is in need of short term workers. These include employees from the humblest to the highest levels. The health industry is perpetually in need of nurses, medical attendants and even physicians. Most of them are employed on contractual basis. The food industry too employs workers on a temporary basis; chefs, helpers and waiters are employed contractually. 

Another sector which hires temporary workers on a regular basis is the security and house keeping sectors. This sector faces high rate of attrition. Employees are often employed for a short time in this sector to test their aptitude. Later on they are absorbed as permanent employees. Even the corporate sector needs the help of the temporary staffing agencies to meet their staffing requirements for an immediate project.

Temporary staffing agencies cater to the needs of all these sectors. They have a huge database of both skilled and unskilled workers. A temporary staffing agency serves as a link between the employees and employers.

Most metropolitan cities have a large number of staffing agencies. These agencies provide jobs to novices or even seasoned workers who are on the look out for a change. Most companies today entrust the job of finding the right candidate to staffing agencies.

Typically, staffing agencies focus on particular sectors of the job market. For instance, some staffing agencies focus on supplying day labourers to the labour intensive sectors. This includes manufacturing sector, construction sector or food service sector. Several staffing agencies restrict themselves to providing quality professionals for various types of office/clerical work. Likewise, there are staffing agencies dedicated exclusively to the health care sector. Similarly, there are other personnel agencies who work only with corporate clients providing them with all types of managerial and executive personnel.

Larger staffing agencies consist of several divisions. Each division take care of a different sector of the industry. Large staffing/recruitment agencies are more professional and better organised than the smaller ones and hence have a wider clientele base.

Recruitment agencies specialize in providing staff for either permanent placement or for temporary work. Companies that require the help of some added workforce for just a few months usually opt for temporary employment. These companies are mostly labour intensive, though some even belong to the IT sector. However, when it comes to high end jobs, most staffing agencies provide permanent jobs. Permanent hire services provide companies a chance to hire the right candidates and that too in a very short time.

Staffing agencies take great care in recruiting the right kind of candidates for companies. They base their selection strictly according to the guidelines provided by the companies. Candidates are first made to go through a few rounds with the agency. If they sail through, they are referred to the company for a final screening. More often than not the candidates chosen are just as desired by the companies.

Staffing agencies help companies have access to a pool of talent with ease. Without the help of these agencies it would not have been possible for companies to meet both their long and short term quality staffing needs.

Literally speaking, staffing services firms have their fingers in all the pies or in all the sectors of employment. However, a lot of them operate within a niche market. The many specializations that exist today make the staffing industry a complex arena, at the same time far more interesting, than it has ever been before.

Many opine that despite the recent debacle in the businesses world due to the recession, the staffing industry is picking up steam. In fact the U.S. Bureau of Labor Statistics (BLS) predicts that more jobs will be created in personnel supply services than in any other industry.  In fact, forecasting suggests that personnel supply services will be the fifth fastest growing industry through 2010.

Staffing services cater to Employers/Businesses by supplying qualified candidates, paying them, and taking care of their payroll taxes, workers’ compensation, disability and unemployment insurance.

Now, let us look into the different types of staffing services. They are; Temporary staffing services, Permanent placement services and Temporary to Permanent (contract-to-Hire) staffing services.

Temporary staffing makes up the largest slice of the staffing industry ‘pie’. Staffing services in fact largely depends on supplying client companies with skilled or un-skilled workers on a short term basis to either fill-in gaps or to supplement the existing employees in times of need.

Permanent placement services take up a much lesser share but are nevertheless an important need that every business organization has from time to time. It pays the staffing industry to cater to this as the fee structure is good. Such candidates are associated with the company for a longer period of time and are generally found in the professional and technical sectors.

A Temp to Perm (or contract-to hire) staffing service offers clients the option to try out the skills of a temporary worker and later on turn the same worker into a permanent employee of the firm once they are satisfied with them. The client can always decline to make them permanent if they’re found lacking.

Though the distinctions and lines between the different types of services are sometimes blurred, most staffing services agencies cater to all these types of staffing in order to stay ahead in the rat race.

When there is a need for skilled or specialized people to fill a position an organization uses the services of a staffing agency. A staffing agency is a great resource for just about any type of company. Essentially, a staffing agency matches the labor needs of its corporate clients with individuals who have the requisite skill sets necessary to meet the organization’s needs. An in depth knowledge of how staffing agencies work makes it very clear as to why they are needed.

A typical staffing agency will operate with a focus on particular sectors of the job market. For example, a staffing agency may choose to focus on providing skilled labor to an IT company or may provide quality clerical personnel for various types of office work. In some cases another staffing firm may direct its energies toward providing clients with executive and managerial personnel.

A staffing agency also focuses on providing skilled workers either on a temporary basis or on a permanent basis. The short term skilled workers support is ideal for companies that may need extra help for a three to six month period, while permanent staffing is for companies who need the right people without having to use a lot of time and resources in the hunt. Either way, the staffing agency provides a pool of talent that the client probably would not have been able to access within that short a duration.

The staffing agency can be advantageous for several other reasons too: the client does not have to go through the hiring process; the company does not have to pay taxes for having hired skilled labor, withhold taxes or extend any kind of benefits to them. All these are taken care by the staffing agency. This simplifies the process a great deal for the organization. Though the client may pay a slightly higher rate per hour for the temporary personnel, the overall cost remains much lower than on-boarding an employee for a short period.

Secondly, employees gain varied experience by working in different companies when they work for a staffing agency on a temporary basis. They are exposed to new assignments which require new and challenging ways to apply their skill sets. Furthermore, the staffing agency provides a steady source of income and a variety of projects that leads to a fresh perspective every time.

Finally, a staffing agency is bound by its reputation to find the right candidate for its client. Therefore it will go to great lengths in securing all the information about the hire before placement. This is advantageous for the company as it saves a lot of money, time and effort when the need for a new resource arises. Since staffing agencies maintain an exhaustive database of active resources, the chances of filling your job with the right talent will not much time at all.

A survey carried out by a reputable company in North America shows that 90% of companies use staffing services to hire their permanent and temporary workers. Businesses small or big have realised that to improve their operating margins their staffing policies need to be analyzed. Effective staffing is crucial to maximizing an organization’s profits. 

Temporary hiring for a project or for a specific assignment has been the norm since many years. In order to hire employees with specialised skill sets for a specialised project, most companies take the help of professional staffing services. All costs related to temporary hiring such as processing and payroll is transferred from the company to the staffing firm. The organization can have the advantage of trimming down its core staff only to those vital to its operations, while supplementing to meet its peak production needs with trained temporary skilled personnel that the staffing agency provides. 

When the company uses the services of contingent staff, all costs associated with processing and administering payroll/benefits are the sole responsibility of the staffing agency and not the company. This helps the company in controlling its costs and managing its sales in a much better way. In the same vein, the company isn’t responsible for the unemployment claims of its contractors, as the onus rests solely on the staffing agency. 

Hiring the wrong person for a job costs the company a lot in terms of money, time and effort. Similarly, the staffing firm too gets a bad reputation for the wrong hire. To avoid these complications, a staffing agency follows rigorous screening procedures for both temporary and direct hires. The aim is to get the right candidates, who not only possess the right skills and experience that the company desires, but also ensure that they have the right personality traits suitable to the company. As the overtime and benefits costs of an employee are higher than that of his payroll expenses, this huge expenditure is eliminated by using temporary and pay-rolled workers procured through a staffing agency. 

In short, a staffing agency ensures that the company gets the best candidates, at the right time and price, thereby playing a vital role in their profitability.

Organizations need high quality talent to achieve success and growth. High quality talent is not easily procured. Talent with skills, experience and more importantly willingness to work with the company for a longer period is doubly hard to find.

As the job-market continues to grow stronger and increasingly competitive, manpower with specialized skills become scarce. Recruiters need to be more selective in their choices and more careful when taking critical decisions. Poor recruiting decisions can produce long-term negative effects. If a company makes a wrong hiring decision, it has wasted its time and money due to the high training and mentoring costs required to on-board the hire successfully. 

Thus, organizations need help staffing their permanent positions too. They have realized the importance of permanent staffing as a human resource strategy. This is more so because organizations realize that quality and dedicated permanent staff have a greater chance of survival and success in the long run. External staffing agencies play a key role in delivering the required manpower that would meet all the expectations of the company with regard to permanent staffing. 

Over time, business in general embraced the concept of using external staffing agencies. The practice of using external staffing agencies acting on behalf of company's internal recruitment function for a portion or all of its jobs, gained popularity among Human Resource management. These staffing agencies manage the entire recruiting/hiring process from job profiling through the on boarding of the new hire and reporting. This saves the company the costs of hiring, time and effort.

Not only did staffing agencies reduce overhead costs but it also helped improve the company's competitive advantage in the labour market. There is no doubt that staffing agencies’ help with permanent positions is here to stay as long as there is a need for skilled manpower. Recession or no recession this is one business area that can boast having a clientele all year round

Gone are the days when skilled labour was permanently entrenched in the payrolls of an organization. It is now the age of skilled and expert workers not employed permanently by the company but used on a contract basis as when the need arises. 

According to Wikipedia; ‘A contingent workforce is a provisional group of workers who work for an organization on a non-permanent basis, also known as freelancers, independent professionals, temporary contract workers, independent contractors or consultants’. 

The role of staffing companies in representing this conventional resource of contingent workforce talent is immense as, individuals attempting to have multiple jobs or freelancing enlist themselves in these staffing companies for their placement. 

With a change in time and major shift in the employment picture worldwide, businessmen opine that the old way of doing business just won’t work. This is more so in areas of work-force planning and recruiting. 

In order to succeed in these turbulent times workers as well as corporations and staffing firms are rethinking strategies and modifying them according to the forces at play; such as cost and on-demand access to short term labour, preferably skilled, and technology innovation. With these changing times, the contingent staffing industry is reaping the benefits in terms of fast growth.

Now companies are more eager to adapt to this change since they find the use of contractors makes it easier to expand their need for resources when their business is growing.  Keeping highly skilled workforce on the payrolls is proving to be too costly. Hence, we’re seeing that more and more companies hire on a contractual basis even in the two most in-demand areas such as legal and healthcare. 

This mode of employment seems to be the preferred way to go in the IT-heavy industry too; where earlier the ratio of permanent employee to contingent workers was 90-10 mix but has now shifted to a 60-40 mix.

From an employee perspective this has opened up a world of opportunities for them to get the much needed self recognition and satisfaction that couldn’t be achieved as regular, full-time employees. Even though the benefits, such as health insurance, vacation/sick days, provided by companies to permanent employees will now have to be taken care of by the individuals themselves, there is no doubt that a change in times calls for a change in attitude towards contingent staffing.

Tax benefits in hiring contract employees

With changing times change in employing a full time worker in an organization, to companies preferring to hire temporary-skilled labour has caught on more in order to save on tax benefits. Similarly individuals preferring to work as freelancers have the advantage of working flexible hours, independent variety of work and tax deductions.

Companies opted to hire contract employees as many sought to reduce their payroll costs by cutting down on regular employees in order to remain competitive. Instead of hiring new employees and paying additional payroll taxes and benefits, many companies chose to increase their workforce by hiring work-for-hire employees. Businesses, especially small ones, gain several advantages from such arrangements. Employers hiring independent contractors are not responsible for paying taxes for freelance employees. Moreover, they avoid the high costs of providing health insurance, paid vacation and sick leave and other benefits granted to regular full time employees. In addition, employers are also saved from the risk of costly litigation over hiring, promotion, firing, and other employment practices. They simply file the required tax forms to report the total compensation paid to each independent contractor in a year.

Companies can benefit from hiring contract employees majorly in three ways - flexibility, cost saving and up-to-date business knowledge. Employers can benefit too from the fact that they can hire an individual from the pool of resources based on the skills required for the job, the length of time needed to complete the job, budget earmarked for hiring and flexibility in the given labour market. It is up to the recruitment agency (that companies generally refer to) to look into matters related to hiring, fixing of wages and other issues. This is a savings to the employer in terms of money, effort and time that would otherwise be spent on human resources and payroll.

Additionally, hiring contractual employees would benefit the employers in supplementing their permanent workforce as new projects roll in. With a short notice period, before hiring and after the contract ends, these contractual employees can be released when the project ends.

Wikipedia opines, ‘In the United States, any company or organization engaged in a trade or business that pays more than $600 to an independent contractor in one year is required to report this to the Internal (IRS) as well as to the contractor, using Form 1099-MISC.[1][2] This form is merely a report of monies paid; independent contractors do not have income taxes withheld from their pay as regular employees do. When computing taxable income on the federal income tax return, the independent contractor can deduct, from his gross income amount, the amount work related expenses, such as tools or safety gear needed for the work that were purchased by the contractor himself.

To sum things up just like in any business, there are two sides to the coin. Its best left to the businessmen to figure out the best way to save on their taxes and increase their profits.

When you hire a new employee, you may offer a pay package based on the going rate for the required skills.  If so, you can get employees with requisite skills with ease. The problem arises when one has to hire a person within a specified budget. With restricted budget, you may or may not get the right people to fit the job.

Most companies have a restricted budget to control costs.  Such companies have high chances of losing out on high performing candidates. Likewise, they have great chances of including underperformers. The crux of the problem is lies in hiring the most qualified people for the most competitive price.

The best way to go about is to adhere to the following ways:

 Decide on the skills and abilities you need the most. It is the most important aspect of hiring the right person for the job.

Search for people who have these skills. Your search needs to be thorough and the scanning must be perfect, lest the wrong person finds his way through by fluke. Such happenings lead to waste of time. So be careful.

 You need to interview people on the basis of their experience and salary.  Once you get a cluster of good candidates, you get to know the average salary that candidates with those set of skills expect.  Get a clear picture of the salary sought and that you can afford.  You cannot afford to ignore this. If you do you will save on budget at cost of turnovers. 

 With a ready pool of skilled people, you need to decide on what type of skill should be paid for to suit your business perfectly. Or in other words what type of skills will save you from expending money by way of bringing them up to the required levels.  

Having done this you need to find the money to make a job offer which is reasonable.  Anna Waugh, CEO of a marketing company says “I stretched my budget to draw an eligible candidate in, and it worked because his inclusion reduced our turnover.”

To hire and retain skilled people, pay fairly. Even if the budget does not permit, strike a balance which would fit both needs.