The staffing industry in the US continues to see impressive growth, now valued at an estimated $218 billion. This highlights considerable opportunities for ambitious staffing firms looking to grow. However, as staffing firms scale, they can begin to face more challenges which slows down growth and impacts profitability.
__________________________________________________________________________________________________________
Table of Contents
The Scaling Challenge for Staffing Firms
Handling an In-House Back-Office
Understanding Employer of Record (EOR) Solutions
Agile Turnkey™: A Customised BPO Solution
Key Advantages of Agile Turnkey™
Seamless Growth with Embedded Payroll Funding
__________________________________________________________________________________________________________
The Scaling Challenge for Staffing Firms
With downward pressure from clients to reduce bill rates and rising inflation and expenses, staffing firm leaders must constantly look for ways to protect and optimize their net profit margins. An often overlooked area that can significantly impact EBITDA is the reduction of Selling, General, and Administrative (SG&A) expenses. According to some industry reports, SG&A typically accounts for around 21.3% of revenue, equaling over $20,000 per month for small to mid-sized agencies. Whether a staffing firm is using an EOR or an in-house team, it may be worth asking the question: “Is there a way to achieve the same or better compliance and administration while maintaining or reducing costs?”.
This article explores that question by explaining how a staffing firm can reduce SG&A expenses by outlining three back-office options: in-house, EOR, and BPO, and the potential advantages of transitioning from one to another when the time is right.
Handling an In-House Staffing Back-Office
Handling back-office operations in-house for staffing firms is a traditional yet risky and expensive approach. It involves managing staffing payroll, compliance, and administrative tasks internally, which can be resource-intensive. Running an in-house staffing back-office means training and keeping specialized staff, and dealing with the costs of setting up the appropriate hardware and software required. They also have to handle the team to prevent problems when staff are sick, on long leave, or if there is staff turnover. These things can all affect how smoothly and efficiently the back-office runs while compounding the cost with high initial setup costs followed by a significant cost for maintaining the back-office operations. While this is the more traditional approach, there are other options available that provide greater benefits.
Understanding Employer of Record (EOR) Solutions
Employer of Record (EOR) is a service where a company takes on the legal responsibilities of an employee, managing tasks such as onboarding, payroll, tax filings, and HR queries. Traditional EOR solutions offer benefits such as enabling staffing firms to seamlessly access new markets, handle administrative burdens, and comply with complex regulations. This solution is ideal for smaller or medium-sized staffing firms or recruiters looking to enter the US market from abroad. However, as staffing firms reach critical mass and size, traditional EOR solutions may become less attractive as they scale, due to increased costs and limited control. Bringing these operations back in-house presents challenges such as increased costs, operational complexities, and potential legal liabilities. Therefore, staffing firms should consider alternative solutions to manage these aspects as they grow.
Agile Turnkey™: A Customised BPO Solution
Agile Turnkey™ by Agile Partnering is a specialized Business Process Outsourcing (BPO) solution designed for staffing firms targeting growth. This model diverges from the traditional Employer of Record (EOR) approach by offering more control, reduced costs, and scalable operations. Agile Turnkey™ acts as an external back-office, managing administrative duties, and allowing staffing firms to concentrate on making placements and growing revenue. It simplifies worker onboarding, ensures compliance, and streamlines staffing payroll, making it an efficient choice for staffing firms looking to grow. Agile Turnkey™ stands out by allowing firms to maintain direct oversight of their workforce while offering a more cost-effective and scalable alternative to EOR solutions.
Key Advantages of Agile Turnkey™
By allowing staffing firms to outsource back-office processes, Agile Turnkey™ provides increased control, lower costs, and unlimited scalability, without the drawbacks of traditional Employer of Record (EOR) models. The key benefits include:
Enhanced Cost Savings and Profitability with Agile Turnkey™
Agile Turnkey™ significantly reduces Sales, General, and Administrative (SG&A) expenses, typically accounting for approximately 21.3% of a firm's revenue. By adopting Agile Turnkey™, staffing firms can expect not just a reduction in SG&A spending by roughly 1%, but more impressively, a 17% increase in EBITDA. This translates into a substantial annual profit increase for growing staffing firms.
Streamline Operational Efficiency with Agile Turnkey™
Agile Turnkey™ streamlines back-office operations, enabling staffing firms to focus on their core services. This unique Business Process Outsourcing (BPO) solution liberates firms from administrative burdens and compliance tasks by managing worker onboarding, payroll processing, timesheets, invoicing, and compliance. Additionally, the factoring payroll funding solution and expert introductions to insurance brokers further enhance operational efficiency and ensure compliance. These features collectively offer a cost-effective, efficient, and scalable solution, empowering staffing firms to concentrate on client acquisition, placements, and revenue generation, while Agile Partnering manages the rest.
Ensuring Compliance and Mitigating Risks with Agile Turnkey™
Agile Turnkey™ provides comprehensive compliance and risk mitigation support for staffing firms. By outsourcing back-office operations to Agile Partnering, firms ensure compliance with employment and taxation laws, workers' compensation insurance, client-facing insurance coverage, and credit risk mitigation. Detailed process alignment services, including worker onboarding, compliance rubrics, contractor agreements, and classification protocols, ensure staffing firms are shielded from potential legal and financial liabilities. This approach offers significant benefits at a fraction of the cost of managing an in-house staffing back-office team, making Agile Turnkey™ a superior solution for staffing firms seeking growth while minimizing operational complexities.
Customized and Tailored Solutions for Every Growth Stage
Agile Partnering stands out by offering customized solutions that evolve with the staffing firm from startup to established enterprise. This adaptability ensures that staffing firms can maximize their profitability and business equity at every stage of their growth. Unlike a one-size-fits-all solution, Agile Turnkey™ seamlessly transitions firms from the Agile EOR™ model to the Agile Turnkey™ BPO model, providing tailored services that meet the unique needs of each firm as they expand.
Reduced Disruption Risk and Enhanced Focus
Agile Turnkey™ is specifically designed to address the common disruptions faced by staffing firms due to sickness and staff turnover within an in-house back-office team. These internal challenges can disrupt a staffing firm's ability to focus on making placements. By integrating inbuilt redundancy, Agile Turnkey™ effectively shields staffing firms from the operational instability and productivity losses often associated with managing an in-house team. This strategic approach not only reduces the distractions and burdens that come with overseeing back-office operations but also ensures staffing firms can direct their full attention towards client acquisition and making placements.
Seamless Growth with Embedded Payroll Funding
Agile Partnering's payroll funding solution allows staffing firms to secure upfront cash by leveraging their clients' credit. This factoring solution guarantees consistent cash flow for prompt worker payments, safeguarding your finances with a non-recourse funding option, even in the event of a client defaulting on their payment. Integrated with Agile Turnkey™, this solution streamlines operations, reduces financial pressure and enables staffing firms to concentrate on growth and profitability. It's designed to support staffing agencies in managing cash flow efficiently, even during economic downturns, ensuring their expansion remains uninterrupted.
Implementing Agile Turnkey™
To start with Agile Turnkey™, staffing firms need to contact Agile Partnering for a consultation. Here we will discuss your current approach and analyze how Agile Turnkey™ might benefit your staffing firm over a traditional EOR or in-house solution. We will look at how Agile Turnkey™ will integrate with your processes, including onboarding, compliance, payroll, and more. Agile Turnkey™ was developed to provide staffing firms with more control and scalability at reduced costs compared to in-house operations or Employer of Record solutions. The transition to Agile Turnkey™ is smooth, with immediate benefits in operational efficiency and profitability.
For a tailored solution that fits your staffing firm's needs, reach out to Agile Partnering and learn more about implementing Agile Turnkey™.
This content does not constitute legal advice or create an attorney-client or other fiduciary relationship. Please contact your own attorney for legal advice. Links to third-party sites are provided for convenience only, and Agile Partnering is not responsible for their content. For more detail, see here: https://www.agilepartnering.com/privacy-policy#disclaimer.