Temp recruitment can be a crucial component of your dual-desk recruitment agency’s long-term success, but there are a few mistakes you need to avoid.
In a recent JobAdder webinar, How to build a resilient temp business in 2023, Angela Cameron, Founder and CEO of Consult Recruitment, and global recruitment advisor Greg Savage revealed the biggest mistakes that recruitment agency owners make when it comes to running a temp desk.
From cash flow issues to relationship-building woes, in this blog, we’ll cover the top five mistakes that savvy agency owners avoid in temp recruitment.
1. Not understanding the commercial realities of a temp business
Angela, who trained as an accountant before moving into recruitment, stresses the importance of financial literacy. “If you’re going to run a temp and contract business, you’ve got to understand financial statements and cash flow. Often, you’ll be paying temps and contractors before your client has paid you. So there’s a cashflow gap that you need to mitigate. You need to get to know your bank quite well until you get up and running.”
Greg agrees and says that this is a recurring issue. “A lot of agency owners could not define the difference between a temp margin and a temp markup. So, that’s one of the big risks is a lack of understanding of the commercial realities of our business. As an advisor, I’ll ask about the temp margin every month and I’ll get all skittish and upset if it goes down 0.1%.
Some owners might say, “but we’ve got 500 temps and you’re worrying about 0.1%,” but that’s because 0.1% is tens of thousands of dollars a month. So, a lack of understanding of the financials and cash flow is a huge issue.”
Greg continues that this leaves agencies open to significant risks. “You pay your temps, which you have to do by law before your clients pay you. You’ve got a hundred temps out, you might have a payroll of $150,000 that week for example, and then the clients don’t pay for two weeks. And then one of your biggest clients doesn’t pay for six weeks. That’s very common. You’re funding that. That’s another reason why you need a strong permanent business, as it’ll help fund your temporary business.”
“You need a great relationship with the bank and you need a line of credit. Cash flow is important. Collecting your debts is important. Ironically, if you have a good client where you’re building up temps, that’s wonderful. It’s also high risk because if they don’t pay, you have to pay. Remember, you can’t say to your temps, “I’m not paying you this week because my client hasn’t paid,” you’re their employer.”
2. Not building individual relationships with your temp workers and contractors
Another big mistake in temp recruitment is failing to invest in your relationships with your temp and contract workers.
As their employer, you want to build strong and trusting relationships with these workers, not only to ease communication but to ensure repeat business and long-term collaboration.
Angela states: “The worst loss you can make in a temp business is to lose your contractor and have them walk down the road and turn up at one of your clients through another agency. We call that a double loss. So that’s the last thing that you want to do.”
“One of the common traps is ego. You might get a bit of ego around how great you are as a temp and contract recruiter, you’ve got 50 or 100 contractors out and that’s great, but you forget the fact that each contractor you have is a person with their own career, and it’s your job to look after them, to nurture them and to make sure that they’re ok. When they have workplace problems, it’s your problem. You need to be there to understand what they’re going through.”
“Often, I guess it’s busyness or a lack of resources, so a lot of recruiters forget about that. The negative feedback that we sometimes hear from candidates is that they get placed and then never hear from a recruiter again, which is terrible.”
3. Missing opportunities due to a lack of proactive business development
Another positive ripple effect of strong relationships with temp and contract workers is proactive business development.
Greg states: “Temps will be your advocates. They will send their friends to you. They will be your insiders, your spies in the market. If they prefer to work for you, they’ll give you the first shot. If you’ve got a bank of temps that you keep recycling into jobs all the time, that’s just so much more effective and profitable than having to re-recruit people, particularly in a tight talent market where you can’t find people.”
“A great temp recruiter will look forward to talking to their temps on assignment because they’ll get information, they’ll be sniffing around. Is anyone else working there? What’s happening? What’s happening with that new office opening? Are they hiring? I can’t stress how much it’s about outbound sniping, hunting and connecting.”
4. Ignoring compliance or other legal responsibilities in temp recruitment
As an employer, you need to ensure you’re meeting your compliance requirements and legal responsibilities.
Greg emphasises that recruitment agencies need to be aware of their legal obligations when it comes to temp workers.
“If something happens to them, whether it’s sexual harassment, bullying, unfair dismissal, injury or other issues, it’s your responsibility. You are their employer, so you need a wide range of insurance and processes, and you need to make sure that you’ve done your due diligence. You need to go out and inspect the client’s sites before you send temps out. If you don’t do that, and the temp chops their finger off or falls down the stairs, your company could be sued into liquidation, so there are risks that you shouldn’t be taking.”
“There are also legal obligations around tax and superannuation/pension and a diverse range of leave entitlements. Running a temp business requires resources and processes. You’re going to need better accounting, credit control, payroll and technology.”
To add in a little plug, JobAdder’s new temp dashboard allows recruiters to see which candidates are compliant in a single snapshot. If you’d like to learn more, here’s a very quick, five-minute video demo.
5. Dabbling in temp recruitment without the right support and investment
Finally, Greg argues that temp recruitment isn’t something that recruitment agencies can just dabble in on the side.
“I love temp, I think it’s very important. It takes special skills to do it, so don’t think it’s an easy little add-on that you’ll dabble in. Don’t dabble in it. Do it seriously. Get the right advice, set up the right processes and compliance systems, then hold your nerve and really go for it once you’ve worked out that there’s a market there that you’re aiming for.”
Angela agrees: “You basically need good support around you. If you’re serious about building a temp and contract business, you do have other obligations. You’re at the coal face of people’s lives a lot more than in permanent recruitment, where it’s a bit more transactional.”
“I’ve had one contractor that died and that’s very hard. Not many recruiters know how to deal with that and how to look after their client and their candidate’s family at the same time. I think it’s really important to touch on the fact that there are a lot more responsibilities but there’s also a lot more reward as well. You have a bigger family, you have a wonderful pool of people. We have so many people come into the Consult network because they’ve worked with other contractors and they know that we look after our contractors and so they want to work through us next time. They’re great advocates for us, so it can be a beautiful thing. It is a big responsibility though, and if you’re going to do it, commit to it. Do it well.”
Want to learn more about the do’s and don’ts of temp recruitment? Check out our free eBook, Setting your agency up for success: The power of temp recruitment.