5 Reasons Perm Only Recruitment Agencies Should Start Making Contract Placements

There are many recruitment agencies that will only make permanent placements, either due to industry, clientele or internal set up. Compared with temporary/ contract placements, making permanent placements is often viewed as an easier process to follow because generally the administration process is less onerous; there is no funding involved and very little compliance, meaning this can be seen as a quick way to make profit and make a placement. Often, the closest a permanent agency will come to making a contract placement will be making a profit only/margin only deal, so the candidate is paid by the client directly and the agency will receive the profit element of the placement.

As permanent agencies already have relationships with clients and the transition to making a contract placement is fairly simple, we have listed below some of the reasons why agencies should start making contract placements:-

  1. Increase Company Turnover
    When a permanent placement is made, only the invoice value for the placement is reflected in the company books. However, when a temporary/contract placement is made, the amount charged to the client for the candidates pay PLUS the profit element is shown. This increase in company turnover can help make the company appear larger and more saleable in the future.
  2. Ongoing Profits
    The problem with permanent recruitment is that you are only as good as your last placement made – if you go on holiday or stop recruiting, the profits stop coming in. However, when you make a contract placement, every day that the contractor works, the agency makes profit even if no permanent placements are made.  Although the profits are initially lower than a permanent placement, the possibility of contract extensions can often mean the agency will make more profits in the long term.
  3. Improve Client Relationship
    Having a contractor on site means that the agency has a link to the client which can be used to make further contract or permanent placements. Also, by being able to offer clients the additional services of providing contractors means that the agency may win more business and widen to other areas within the clients remit.
  4. Increase Company Value
    When an agency starts to consider selling, it needs to evaluate the best way to increase the company value. Having contractors on the books can increase the company value 2-3 times compared to only having permanent placements.  If the contractors still have a long time remaining on their contract, or the agency has PSL agreements signed up, this only further increases the value and makes the agency more appealing to potential buyers.
  5. Funding is easy to come by
    The main issue for perm only agencies making contract placements is the funding and administration headache. However, with a number of funding providers offering administration and funding for contract placements, this is much simpler and easier to manage going forwards.  Even major banks are happy to provide factoring facilities to new start up or SME recruitment agencies that are making contract placements as they see timesheet based funding as very low risk.

TBOS gets many enquiries each week from permanent agencies who are looking to branch out into the contract arena.  TBOS  can provide 2 solutions: either funding and administration support through our TBOS Freedom model, which provides a pay-as-the-contractor-works solution;  or through the TBOS Complete model, which provides a full back office service including arranging bespoke funding with invoice finance companies.  Using our wealth of experience and expertise, we can ensure that the first placements run smoothly and remain compliant.

If you would like more information on how TBOS can help your permanent agency move into the contract market, please contact our office