Most new recruitment agencies will begin their journey by exploring permanent opportunities as they can provide that initial cash-flow injection. There are also agencies who only specialise in placing permanent candidates due to the consultants’ expertise in making those kinds of placements or their clients favouring workers on their books.
However, there are many good financial reasons why recruitment agencies who are mainly concentrating on permanent placements should start considering placing contract and/or temporary candidates such as:
CONTRACT PLACEMENTS INCREASE COMPANY TURNOVER
When invoicing for contract and/or temporary placements, the invoices not only show the profit generated but also include the cost of the candidate paid by the agency. This increase in turnover can improve a company credit rating and improve the company value compared to a permanent only agency who will only show the profit element on their invoices.
MORE OPPORTUNITIES WITHIN CLIENTS
As the candidates under contract will be placed for a limited time and paid by the agency, the agency will have to keep in regular contact with the client and candidate to monitor the progress of the project they are working on. This constant communication can lead to further projects and roles offered if the consultants ask the right questions to the clients and candidates whilst on site.
EASE OF FUNDING AND ADMINISTRATIVE BURDEN
Often, there is a misconception that contract and/or temporary positions are hard to fund and can have an increased administrative burden associated with them. However, there are many outsourced providers who can support an agency with the funding and administration of contract/temporary placements. In addition, invoice finance providers are keen to provide funding to recruitment agencies who are making placements based on timesheet-based work and will provide 85-90% funding on these invoices.
CONTRACT PLACEMENTS GENERATE DAILY PROFIT
Whereas a permanent placement will only generate fee income once based on a percentage of the initial salary paid by the client, a contract and/or temporary placement will pay profits generated for every day the contractor works. Although some placements may be short-term so the fee may not be as large compared to a permanent fee, it is often the case that a candidate may be on site for longer than a year and have pay rises during that time which the agency can generate additional fees from.
IMPROVE COMPANY VALUATION
Agencies with contract and/or temporary placements on their books will have a much higher value than a permanent only recruitment agency as the agency multiple is increased. This is because when a buyer purchases the agency, any candidate still on contract will continue to generate profit for the agency after it is bought. However, if a permanent-only agency is purchased, there is a reliance on the client relationships, which may go once the owners leave.
We have worked with hundreds of recruitment agencies who have made UK and International contracts and temporary placements over the past 20+ years. MAYACHI LTD has the expertise to help an agency with their back office set-up and arrange suitable funding to pay the candidates before the client makes payment.