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Dealing With Staffing & Consulting Firms
If you welcome and appreciate the freedom of a consulting or contract position be prepared to do the homework. You’ll need to have current information about the job market, rates, staffing firms, benefits, and all the thing that are a part of living that independent life. As you are working an assignment you’ll want to be preparing for the next one, monitor the jobs out there, basically look for the next assignment.

If you plan on contracting versus taking a permanent position you will have to learn to deal with the “agencies,” staffing firms, consulting firms, headhunters, search firms, call them what you will. Now, you can read the pleasantries in any slick magazine that deals with the topic of consulting firms and consultants, so I won’t belabor that here. What I do want to do is put you on guard so that you understand, right up front, that dealing with these firms is seldom better than a necessary evil, and at worst can become a really unpleasant experience.

There is an array of statistical information available about these firms, their staffs, how they work, and what is important to them. Essentially, you are one kind of customer for them, one of their consultants, Mark those words. You are a “customer” as one of their consultants. Their other customer is their client using people like you, one of their consultants. I’ve often had to remind staffing firm representatives that I am a customer, not one of their employees. They will always try to lead you down the road to believe you work for them, not the reverse.

Consulting firms generally have a less the ideal reputation with their consultants and deservedly so. The majority of consultants I know work through an agency only because the choices are limited. Some larger firms will not use independent contractors due problems it may cause with the IRS. But there are other reasons too, such as reducing recruiting demands for HR staffs by using the agencies to filter and qualify. The consequence of these two factors is serious both for the person who wants to be an independent contractor and the hiring firm. For the individual it significantly reduces opportunities to do work; for the hiring firm it dramatically increases costs. Out-sourcing is all the buzz these days, even in a more challenging economic climate, so firms will take the cost hit, write it off, and work with the “consulting firms.” So, we find a situation where if we want to contract we are often essentially forced to deal with the agencies. That said, let’s move on to the actual relationship elements you’ll experience.

You’ll deal with a recruiter through most of the process. This is a person who should wear two hats, one as a representative fo the firm to their client, the other as someone who works for you. Why do I say that? Because more often than not the recruiters work on a commission directly derived from your labors. There are hidden subtleties in this, e.g., they get more money if they can hire you at a lower hourly rate than your bill rate suggests you should be making. For example, I know one firm that demanded a minimum of $12.50 per hour from their consultants billed rate. That was the minimum! IF they could get more because the consultant had no clue about the market, they would take it. I can’t tell you the number of IT consultants I’ve known who were being paid $30-40 per hour and billed by the agency at $60-80. If you think used car dealers are bad, wait until you start dealing with the staffing firms. And if you happened to be on a visa or the staffing firm provided sponsorship… You just have to hear some of the horror stories about this to know how bad it can get.

Here are some guidelines:

Contractors use staffing firms to provide certain professional services on a fee-for-service basis. These services include:

DO NOT allow these firms to lull you into the mindset that you are an employee. You won’t like the consequences nor will the IRS. Staffing firms work for you just as they do their other the clients – the firms hiring their consultants. Secondly, if the firm is one of the more ethical – and there are few of them out there – they’ll be willing to tell you their bill rate for your services to the company where you’ll be working. Don’t be surprised if they refuse to provide this information. It is common practice to withhold billable rates from the consultant. You must know the job market and current rates for your area. If you don’t, you’re at the mercy of the staffing firm – don’t expect it them to be gentle. Their goal is to make as much money from your bill rate as possible without great jeopardy to the relationship with you.

Benefits? Basically, you get the privilege of paying for what you get. In most cases, you pay all of it. So, to make a long story short, there are no benefits from the agency per sey. They’ll have a group health plan, but you pay for the majority (or all) the cost associated with any coverage. This includes medical, dental, eye care, etc. 401k? Yes, but few offer matching funds and if they do you won’t be vested before 3-5 years. That really makes sense for a contract position – Right? It sure does for them.

If you get the idea I’m not a friend of these “businesses,” you’re right. The U.K. and other countries have put laws in place to control some of the practices that were out of hand, but we don’t have that benefit here – yet. They are an evil we are forced to deal with, nothing more or less.

If you have the prospect of working in a 1099 or W-2 pass-through mode, you might want to consider a relationship with an organization such as the Professional Association of Contract Employees (www.pacepros.com).