Placements made by recruitment agencies often fall into two main categories:
- Permanent placements where an agency introduces a candidate to a client for them to take on as a new employee
- Or a contract/temporary placement where the agency provides a candidate for an agreed period based on a time work basis
However, the internal logistics behind administering contract placements are very different from permanent placements, even though the rewards can often be high and for a longer period.
Below is a list of things that a recruitment agency needs to consider when making contract placements:-
The first difference between a permanent and contract placement is the contract process. When a permanent placement is made the contract is only between the client and the agency, whereas, on a contract position there is an additional contract between the agency and the candidate (and/or their limited/umbrella company).
The client contract will determine what is required of the contractor during the placement and will give details of charge rates (hourly/daily), contract dates, etc. The agency may be able to use their own contract template, or the client may insist the agency use their template instead. It is advisable to ensure that the contract covers aspects such as liability, introduction fees and termination clauses so that the agency is covered should anything happen during the contract period.
The candidate contract will often mirror the client contract but give details of pay rates (hourly/daily) instead of charge rates. The agency will use their contract template and depending on the IR35 status of the placement, this will either be between the agency and the candidate or the agency and the candidate’s limited company.
The compliance on a permanent placement can be fairly basic (right to work, references and ID checks), a contract placement can have additional compliance requirements depending on the industry such as CRB checks, insurances and immunisations. If the candidate is using an umbrella/limited company, there also needs to be additional compliance checks on the company, such as copies of their Certificate of Incorporation, VAT certificate and insurances. An agency may also want to ensure that the umbrella company is compliant under FCSA or Professional Passport.
TIMESHEETS AND INVOICES
Once the candidate is on-site, they need to be submitting timesheets on a regular basis which have been authorised by the client. This may be in the form of a paper timesheet or using an online timesheet portal. The agency may provide these online timesheet portals, or in some cases, the clients may have their own timesheet system. In the same way, the agency will need to prepare invoices in accordance with the client’s schedules based on the signed timesheets and in some cases, follow a particular process for the invoices to be paid.
The main difference between permanent and contractor placements is the requirement by the agency to have some kind of funding in place to pay the contractors before the client makes payment. This may be in the form of using a Pay-And-Bill company, arranging invoice finance or using company funds.
CREDIT INSURANCE REQUIREMENT
Another consideration that contract agencies may want to cover is ensuring that the funding of the contractors is covered should the client go bust. The way to protect the agency would be for them to ensure that the client is creditworthy by completing a credit check prior to the placement and ensuring that the debt is suitably insured. This may be either through the Pay-And-Bill company, the invoice finance provider or having a separate credit insurance policy.
Making contract placements overseas can be very lucrative for an agency, and the profit margins can be much higher than on UK placements. However, when dealing with overseas companies, you need to ensure you are aware of differences in the contract law of the country you are dealing with. You need to ensure you can process the placement in the required currency and are aware of any additional taxes that may be incurred on these placements.
Once you understand the requirements for making contract placements, the process becomes much simpler, and the rewards for the recruitment agency are much larger than permanent placements due to the increase in turnover, ongoing profitability and a better relationship with your clients and candidates.
TBOS looks after the daily back office and administration for a large number of contract recruitment agencies. As part of our TBOS solution, we have been able to help our agency clients source appropriate invoice finance for their contract placements or provide our TBOS Freedom solution to secure the placements for their clients. Please contact our office if you would like further information on how we can help your agency.