6 Risks of DIY Contract Staffing

166219814“Do It Yourself” has become somewhat of a mantra in the United States. Sites like Pinterest have us convinced we can be the next Martha Stewart. Home improvement stores revolve around this concept. DIY can be a great way to save money, but sometimes this method costs more in the long run. It can even be dangerous, like when you take on a complicated electrical repair without the proper training.

The same is true of your contract staffing back office. You may think you are saving a lot of money by running your own back office, but it can actually end up costing you more in overhead. And don’t forget, time is money, too. Running your own back-office can keep you away from revenue-producing recruiting activities. It also can be dangerous. If you don’t have a strong background in employment law, human resources, and payroll, the results could be more disastrous than a botched DIY remodeling job.

Here are just a few details that make the DIY method a risky proposition:

1. IRS audits — The Obama administration has been cracking down on worker misclassification, and the stakes keep getting higher. The IRS is now sharing misclassification information with the Department of Labor and state agencies, so it’s more important than ever to make sure you are not incorrectly classifying W-2 employees as 1099 independent contractors.
2. Workers’ compensation coverage (or cancellation) — Getting affordable workers’ comp coverage is time-consuming and expensive, especially for small to midsize firms. Once you finally have obtained coverage, the risk of having your carrier cancel coverage because of too many claims looms.
3. Exposure and liability — In our increasingly litigious society, one little mistake or oversight (by your contractors or in-house staff) could put you out of business. You also want to be sure that legal counsel is reviewing and negotiating contracts on your behalf.

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4. Certificate of Insurance — Do you have sufficient insurance coverage? Can you afford the ever-increasing premiums and the additional coverage potential clients may require?
5. Line of credit — As your business grows, so does your line of credit. But what will happen to your line of credit if a client stops paying their invoices in a timely manner (or at all)? What if they go bankrupt?
6. Missing payroll — Missing a payroll for ANY reason is one of the quickest ways to completely destroy your reputation. It only takes once, and word can spread like wildfire through social media. Think how you would feel if you worked 40 or 80 hours and someone couldn’t pay you!

Solution: Outsource It

The alternative to the DIY method is to outsource the back office.  A contract staffing back-office service can take over the employment of your contractors and handle the legal, financial, and administrative tasks associated with your contract placements. They will make sure workers are classified properly and handle any audits.  They will set up and administer Workers’ Compensation and handle the funding and processing of payroll.  They will be responsible for carrying the Certificate of Insurance. Not only does this save you time, it also ensures that those tasks will be completed accurately. In a nutshell, the back-office service will retain the legal liability, not you.

Just as you would only trust your most sensitive home projects to a reputable professional, you should only trust your back-office tasks a seasoned expert. Outsourcing your back office may seem like an unnecessary cost, but it can save you time, money — and your reputation — in the long run.


MORE: Customer feedback is crucial in selecting the right staffing and recruiting system

Debbie Fledderjohann

Debbie Fledderjohann
Debbie Fledderjohann is president of Top Echelon Contracting Inc., the recruiter’s back-office solution. Find her on LinkedIn.

Debbie Fledderjohann

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