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Reasons Staffing Agencies Fail & Where Staffing Factoring Can Help

Triumph Business Capital

August 17, 2015

There are about 17,000 staffing and recruiting companies in the U.S., according to the American Staffing Association (ASA) — but not all of those agencies will succeed. The ASA recently reported that staffing industry growth is outpacing overall economic and employment growth, even though labor force participation is at the lowest level in decades. That means serious competition for staffing agencies. If you want to know more about how to run a successful staffing agency given the current economic climate, it can be helpful to look at the top reasons why staffing agencies fail. Look out for these six common mistakes to increase your chances of success:

1. Hiring the wrong people

It seems simple enough — find the right person for the job, and your job as a staffer is done. However, if matching candidates to positions was that simple, no one would hire a staffing agency in the first place. While no staffer can be expected to achieve 100% retention rates, if you place the wrong person too many times, you may be the one visiting a staffing agency. These quick staffing tips can help:

  • e-Verify Applicants.

    Hiring someone who is not legally qualified to work in the U.S. is one of the biggest mistakes a staffing agency can make. Fortunately, it’s also one of the easiest mistakes to avoid. Simply download Form I-9 from the U.S. Customs and Immigration website, complete required fields, and verify the documents requested from potential employees. With the new e-Verify system, it’s even faster to ensure a legal workforce.

  • Find the right fit.

    You already know you should listen to what an employer wants, search for candidates that match, perform background checks, and call references. So, if you’re still hiring the wrong people, you may need to refine your recruitment process to learn how to hire top talent. Go beyond the basic job requirements, and look for other factors in making a successful hire, like ensuring a candidate’s personality fits well within the corporate culture, seeing that financial expectations are in line with the salary, and checking that career goals are a good fit for the position. You may also try casting a wider net to get more applicants in the beginning, and narrowing down your search later, so that you’re not tempted to present a candidate who isn’t a top contender. Including keywords in your job posts, and using creativity to attract the type of candidate you want can also be helpful.

2. Not verifying references

It’s awkward. It’s time-consuming. It requires an actual phone call rather than a text or e-mail. But verifying references is one of the most important things you can do as a staffing agency. You’d be shocked to learn how many people give false references — and how many candidates assume you’ll never call them. Not verifying references can cause staffing agencies to place candidates who are not qualified for positions — which can result in the agency’s downfall, and far worse. Always check references, and you may prevent the worst. And at best? You might just learn something about a candidate that their resume could never have told you — like that they are honest, reliable and kind, or that they seem professional at first, but never show up to work on time.

3. Falling behind on laws and regulations

Taxes. Sexual harassment. Workplace safety. Laws and regulations governing the staffing industry change all the time, and it can be difficult to keep up. Many agencies fail because they don’t follow legal requirements. However, a lack of knowledge is no excuse for lack of compliance with the law. The ASA website can be a great place to begin educating yourself on staffing laws and regulations in your state. Be sure you understand the basics, and then seek out legal counsel to ensure you’re operating in full compliance. An attorney can provide invaluable legal advice and draft Employment Agreements, Termination and Layoff Clauses, Disciplinary Policies, Health & Safety Policies, Workplace Violence and Harassment Policies, Service Agreements and more.

4. Not securing insurance

Staffing insurance is one of those things you may not know you need until you need it — only then, it may be too late. If staffing ethics aren’t enough to compel you to get insurance coverage, a potential client might. Many customers will want to know that you have sufficient insurance to cover damages for which your employees might be responsible. While it can be expensive to obtain coverage, it can be even more costly if you don’t. Speak to a reputable insurance company or broker who understands the staffing industry, and ask for recommendations on the type of coverage you need.

5. Not being transparent

When it comes to keeping your clients happy — and staying in business — honesty is always the best policy. It can be tempting to tell potential employers that you have fast access to a certain type of worker when in fact, you don’t, but resist the urge to stretch the truth. You’ll only set up unrealistic expectations that you’re unable to fulfill. Be transparent in your business dealings and don’t overpromise. Instead, tell the truth about what type of worker you can provide and how long it will take. Then, if you are able to deliver more than promised, they’ll be pleasantly surprised. (And that’s a much better type of surprised.)

6. Not making payroll on time

Your employees are your business’s lifeline — and they deserve to get paid on time. Unfortunately, you may have to wait 45 to 60 days for your clients to pay. Some staffing agencies don’t realize they are expected to pay the difference out of pocket, until they receive funds from their clients. Staffing factoring companies like Triumph can help you access working capital to bridge this gap. Beyond getting funding, you’ll also need to set up a payroll system to ensure employees are paid on a regular basis, calculate overtime, vacation and holiday pay, and remit taxes to government agencies. If this is outside your realm of expertise, consider hiring a payroll administrator or outsourcing payroll.

Staffing agencies are in the business of helping people and companies succeed — and when you avoid common mistakes and abide by staffing ethics, your chances of success are greater, too. If you need more information on staffing factoring or assistance securing working capital for payroll, insurance, or other staffing agency expenses, contact Triumph Business Capital.