Contracting IT personnel via staffing firms

[KrillBee]

I've noticed its become much more common these days for companies to simply contract IT personell for projects through staffing firms instead of hiring temporary employees directly.

Why is this so? Isn't it a waste of money for companies to employ personnel by using a 3rd party? Why not just post the temporary position in paper and online classifieds instead and interview candidates themselves?

I understand if you need someone on short notice, and for a small time period (like a couple weeks) how this could be advantageous, but for contracts that are several months or longer, I dont understand the sense in this.

 

[EagleKeeper]

Amount of manpower required to screen people.

Pay the agency to filter and determine qualifications.

 

[Wreckem]

Originally posted by: KrillBee
I've noticed its become much more common these days for companies to simply contract IT personell for projects through staffing firms instead of hiring temporary employees directly.

Why is this so? Isn't it a waste of money for companies to employ personnel by using a 3rd party? Why not just post the temporary position in paper and online classifieds instead and interview candidates themselves?

I understand if you need someone on short notice, and for a small time period (like a couple weeks) how this could be advantageous, but for contracts that are several months or longer, I dont understand the sense in this.

Its actually cheaper. My sister in law works for one of those staffing firms/header hunter firms, she screens and interviews applicants, as well as places them at companies.

 

[AreaCode707]

Cost efficiency depends.

A good staffing firm will have capable people they've worked with before. You essentially have the staffing firm vouching for this person's competency. They've saved you time on finding a qualified person and hopefully are providing somebody that's a great match. They make a markup.

A bad staffing firm does what you would do yourself; run ads, find somebody, and throws them in front of you. You've saved no time, are paying more money, and have the same chance of getting a good contractor as you would have if you did it yourself.


I've worked with both. I prefer to find my own people than trust to a staffing firm that's going to go dredge the unemployed for a semi-qualified person. On the other hand, I've worked with a staffing firm that repeatedly works with the same contractors and can almost instantly produce a great contractor. They're worth the money. A bad contractor in the wrong role can ruin or obstruct a project.

 

[AreaCode707]

Oh, and I forgot to mention payrolling and co-employment issues. There's a host of legal reasons that a company may want to have contractors rather than temporary labor.

 

[spidey07]

Not to mention you can use them for project specific tasks.

Let's say you are doing resource planning for a large 2 year project. It doesn't make sense to hire 20-30 people just for this project so you just get some competent contractors.

Also don't forget the cost of benefits to a company. Don't have to pay those with contractors. Heck, I've seen places with more contractors than employees.

 

[KrillBee]

Originally posted by: EagleKeeper
Amount of manpower required to screen people.

Pay the agency to filter and determine qualifications.

couldnt the company just hire someone themselves to do this as a part time thing?

Originally posted by: HotChic
Oh, and I forgot to mention payrolling and co-employment issues. There's a host of legal reasons that a company may want to have contractors rather than temporary labor.

what are some legal reasons?

Originally posted by: spidey07
Not to mention you can use them for project specific tasks.

Let's say you are doing resource planning for a large 2 year project. It doesn't make sense to hire 20-30 people just for this project so you just get some competent contractors.

Also don't forget the cost of benefits to a company. Don't have to pay those with contractors. Heck, I've seen places with more contractors than employees.

you could hire 20-30 people just for the project, couldnt you? I mean as long as they knew it was temporary, it seems like it'd work just fine.

You could always opt to not pay them benefits. its not like every employee at your company has to be entitled to benefits.

 

[ViviTheMage]

who wants a temp job these days.

 

[KrillBee]

Originally posted by: ViviTheMage
who wants a temp job these days.

I dont, the temp employee usually doesnt get benefits, and many times they have to pay their own FICA (1099)
And of course, most importantly, the job is temporary, meaning you'll have to be out looking again shortly. And who likes looking for a job?

But it seems like there isn't much available in IT in my area, unless its through a temp staffing firm

 

[Descartes]

Originally posted by: KrillBee

Originally posted by: EagleKeeper
Amount of manpower required to screen people.

Pay the agency to filter and determine qualifications.

couldnt the company just hire someone themselves to do this as a part time thing?

Originally posted by: HotChic
Oh, and I forgot to mention payrolling and co-employment issues. There's a host of legal reasons that a company may want to have contractors rather than temporary labor.

what are some legal reasons?

Originally posted by: spidey07
Not to mention you can use them for project specific tasks.

Let's say you are doing resource planning for a large 2 year project. It doesn't make sense to hire 20-30 people just for this project so you just get some competent contractors.

Also don't forget the cost of benefits to a company. Don't have to pay those with contractors. Heck, I've seen places with more contractors than employees.

you could hire 20-30 people just for the project, couldnt you? I mean as long as they knew it was temporary, it seems like it'd work just fine.

No. The IRS has very specific definitions of what constitutes an employee versus an independent contactor. If you hire them, you assume the payroll costs, benefits (the IRS requires that many investment plans be extended to all employees), etc. It's a large undertaking, and one you generally do not do for those that are there for a limited time. This is precisely why they have contracts; you work the contract and you're done.

You could always opt to not pay them benefits. its not like every employee at your company has to be entitled to benefits.

As I said above, you can't simply opt-out of paying benefits. Some plans require they be extended to all employees, some states have laws that require insurance group plans be extended (and this could be difficult if the contractor has a family with large health issues), etc.

Again, you're trying to create something that simply doesn't need to be there. This is precisely why there is doctrine in the internal revenue code for contractors.

 

[Descartes]

Originally posted by: KrillBee

Originally posted by: ViviTheMage
who wants a temp job these days.

I dont, the temp employee usually doesnt get benefits, and many times they have to pay their own FICA (1099)
And of course, most importantly, the job is temporary, meaning you'll have to be out looking again shortly. And who likes looking for a job?

"Temp" isn't the same thing as a contractor; sure, legally they're likely compensated in the same manner, but temps are what you hire when you need to transpose a 500 page legal document to a Word document.

In IT, you'll find most of your better talent is in some form of consulting/contracting. You don't look for a job; you tell people you're available and you go to work.

Benefits aren't an issue unless you have serious health issues that make insurance prohibitively expensive for you. Investments are much in favor of the self-employed, and there are many ways to reduce tax liability. Couple this with what's often a much, much higher income through consulting and the reason for consulting becomes clear.

It's not for everyone obviously. If someone likes working 8-5, knowing that their cubicle will be there everyday without change, etc. isn't likely going to enjoy the dynamicism of consulting.

But it seems like there isn't much available in IT in my area, unless its through a temp staffing firm

The overwhelming majority of large-scale IT projects are run, at least in part, by contractors. Most organizations simply do not have the resources to accomplish what they need, and it's far from cost-effective. It's a much better idea to simply hire quality consultants that can lead the effort and mold existing resources.

 

[KrillBee]

Originally posted by: Descartes

No. The IRS has very specific definitions of what constitutes an employee versus an independent contactor. If you hire them, you assume the payroll costs, benefits (the IRS requires that many investment plans be extended to all employees), etc. It's a large undertaking, and one you generally do not do for those that are there for a limited time. This is precisely why they have contracts; you work the contract and you're done.


As I said above, you can't simply opt-out of paying benefits. Some plans require they be extended to all employees, some states have laws that require insurance group plans be extended (and this could be difficult if the contractor has a family with large health issues), etc.

Again, you're trying to create something that simply doesn't need to be there. This is precisely why there is doctrine in the internal revenue code for contractors.

ah okay, i didnt realize this. Now I guess this makes more sense. I know some places that basically have full time employees but dont pay them benefits, so is what they're doing illegal?

 

[KrillBee]

Originally posted by: Descartes

"Temp" isn't the same thing as a contractor; sure, legally they're likely compensated in the same manner, but temps are what you hire when you need to transpose a 500 page legal document to a Word document.

so whats the difference between temp and contractor then? temp means a much shorter term?

In IT, you'll find most of your better talent is in some form of consulting/contracting. You don't look for a job; you tell people you're available and you go to work.

so why is it that the better talent is only usually available in the form of contracting/consulting? Because they are so good that people cant pay them enough to work for them full time reguarly?

Benefits aren't an issue unless you have serious health issues that make insurance prohibitively expensive for you. Investments are much in favor of the self-employed, and there are many ways to reduce tax liability. Couple this with what's often a much, much higher income through consulting and the reason for consulting becomes clear.

well, i'd like to have dental covered but it seems like most staffing firms dont cover that and I know that getting fillings can be pretty expensive.

how are investments in favor of the self employed?

and unfortunately i'm not seeing much of a higher income most staffing firms for helpdesk and pc support jobs around here only want to pay me $15-18 per hour.

It's not for everyone obviously. If someone likes working 8-5, knowing that their cubicle will be there everyday without change, etc. isn't likely going to enjoy the dynamicism of consulting.

job stability is the big thing im after, i want to ensure that i am able to pay rent each month! the change of setting is just a minor drawback. (sometimes if i like a place id want to stay awhile longer) but i can handle moves, as long as finding a new job isnt hard.

The overwhelming majority of large-scale IT projects are run, at least in part, by contractors. Most organizations simply do not have the resources to accomplish what they need, and it's far from cost-effective. It's a much better idea to simply hire quality consultants that can lead the effort and mold existing resources.

i agree with what you said in your last sentence.

Also, from what i've seen, it looks like helpdesk/desktop-support employees will find better over compensation if they find a long term job at a company, instead of looking for contracts.

 

[EagleKeeper]

Originally posted by: KrillBee
Also, from what i've seen, it looks like helpdesk/desktop-support employees will find better over compensation if they find a long term job at a company, instead of looking for contracts.

Sometimes you can use the agency to get your foot in the door if the client has a long term need.

Show them what you can do and they may be willing to bring you on board. Their costs will then probably will be less than what they are paying the agency for you yet MAY get you extra $$.

I once went from agency to independent and picked up an extra $15/hr - yet the company ended up saving $10 on top of that.

 

[Descartes]

Originally posted by: KrillBee

Originally posted by: Descartes

No. The IRS has very specific definitions of what constitutes an employee versus an independent contactor. If you hire them, you assume the payroll costs, benefits (the IRS requires that many investment plans be extended to all employees), etc. It's a large undertaking, and one you generally do not do for those that are there for a limited time. This is precisely why they have contracts; you work the contract and you're done.


As I said above, you can't simply opt-out of paying benefits. Some plans require they be extended to all employees, some states have laws that require insurance group plans be extended (and this could be difficult if the contractor has a family with large health issues), etc.

Again, you're trying to create something that simply doesn't need to be there. This is precisely why there is doctrine in the internal revenue code for contractors.

ah okay, i didnt realize this. Now I guess this makes more sense. I know some places that basically have full time employees but dont pay them benefits, so is what they're doing illegal?

No. I'm only saying that some (I'd say most) companies have plans (e.g. 401k) that have to be extended to all employees. Certain IRAs are this way as well (I think it's the SEP, I forget), so they're advantageous for company owners and employees, but not when you need a lot of contractors for a relatively short period of time.

This also doesn't include all the costs associated with adding a new resource. This includes time for many people (HR, security, IT, ...), equipment, training, etc. It adds up, and it's not an assumed expense for contractors.

 

[spidey07]

Originally posted by: KrillBee
so why is it that the better talent is only usually available in the form of contracting/consulting? Because they are so good that people cant pay them enough to work for them full time reguarly?

This is the normal reason. As a consultant you are making money for the the company instead of being an expense (salary, etc). The pay tends to be much higher and hence the top talent normally winds up there. 200-250 an hour is commonplace.

Plus there is a lot more exposure to different cultures that only increases ones soft skills and knowledge.

 

[KrillBee]

Originally posted by: EagleKeeper

Originally posted by: KrillBee
Also, from what i've seen, it looks like helpdesk/desktop-support employees will find better over compensation if they find a long term job at a company, instead of looking for contracts.

Sometimes you can use the agency to get your foot in the door if the client has a long term need.

Show them what you can do and they may be willing to bring you on board. Their costs will then probably will be less than what they are paying the agency for you yet MAY get you extra $$.

good idea. this one recruiter i looked at called "Robert Half" makes a rule that you cant work for a place for a full year after your contract with them, unless Robert Half gives permission.

They want me to work for them contracted for a large company, doing helpdesk. I'd only be making 16 per hour no benefits though With no guarantees that they'd let me work there afterwards if the company wanted to keep me. Or if I did stay, Robert Half may still be my employer and still be paying me 16/hr. wtf?

I think I need to find a better recruiter that doesnt throw out stupid rules like that.

I once went from agency to independent and picked up an extra $15/hr - yet the company ended up saving $10 on top of that.

its insane how much contracting companies charge isnt it?

 

[KrillBee]

Originally posted by: spidey07

Originally posted by: KrillBee
so why is it that the better talent is only usually available in the form of contracting/consulting? Because they are so good that people cant pay them enough to work for them full time reguarly?

This is the normal reason. As a consultant you are making money for the the company instead of being an expense (salary, etc). The pay tends to be much higher and hence the top talent normally winds up there. 200-250 an hour is commonplace.

Plus there is a lot more exposure to different cultures that only increases ones soft skills and knowledge.

200-250 per hour? does that go into the person's own pocket? Or is that how much the staffing firm would charge?

200-250 per hour is crazy, if you could do that consistently you'd be making $400k-500k per year!

 

[spidey07]

Originally posted by: KrillBee
200-250 per hour? does that go into the person's own pocket? Or is that how much the staffing firm would charge?

200-250 per hour is crazy, if you could do that consistently you'd be making $400k-500k per year!

Nice, isn't it? Depends on the contract.

 

[KrillBee]

Originally posted by: spidey07

Originally posted by: KrillBee
200-250 per hour? does that go into the person's own pocket? Or is that how much the staffing firm would charge?

200-250 per hour is crazy, if you could do that consistently you'd be making $400k-500k per year!

Nice, isn't it? Depends on the contract.

that seems too good to be realistic.
are those people are getting paid that much and working 40 hours a week?

 

[AreaCode707]

Originally posted by: KrillBee

Originally posted by: EagleKeeper

Originally posted by: KrillBee
Also, from what i've seen, it looks like helpdesk/desktop-support employees will find better over compensation if they find a long term job at a company, instead of looking for contracts.

Sometimes you can use the agency to get your foot in the door if the client has a long term need.

Show them what you can do and they may be willing to bring you on board. Their costs will then probably will be less than what they are paying the agency for you yet MAY get you extra $$.

good idea. this one recruiter i looked at called "Robert Half" makes a rule that you cant work for a place for a full year after your contract with them, unless Robert Half gives permission.

They want me to work for them contracted for a large company, doing helpdesk. I'd only be making 16 per hour no benefits though With no guarantees that they'd let me work there afterwards if the company wanted to keep me. Or if I did stay, Robert Half may still be my employer and still be paying me 16/hr. wtf?

I think I need to find a better recruiter that doesnt throw out stupid rules like that.

I once went from agency to independent and picked up an extra $15/hr - yet the company ended up saving $10 on top of that.

its insane how much contracting companies charge isnt it?

There's a caveat to the rule usually. You can go directly to work for the company immediately or sooner than a year, but the company has to buy them out.

 

[AreaCode707]

Originally posted by: KrillBee

Originally posted by: spidey07

Originally posted by: KrillBee
200-250 per hour? does that go into the person's own pocket? Or is that how much the staffing firm would charge?

200-250 per hour is crazy, if you could do that consistently you'd be making $400k-500k per year!

Nice, isn't it? Depends on the contract.

that seems too good to be realistic.
are those people are getting paid that much and working 40 hours a week?

Mm, typically a consultant at that rate would be flown out for a few weeks of work at a time. You may pay a consultant $70-150 for a few months. The consultant would likely work out of his or her home between gigs, and hold several gigs a year but not all back to back.

 

[KrillBee]

Originally posted by: HotChic

Mm, typically a consultant at that rate would be flown out for a few weeks of work at a time. You may pay a consultant $70-150 for a few months. The consultant would likely work out of his or her home between gigs, and hold several gigs a year but not all back to back.

even $70-150 per hour is a lot. i mean if you could sustain multiple jobs like that year round, you;d be making 140-300k per year.

 

[ed21x]

alot of scientific staffing firms (Temp Agencies) convert you to full time after a period of months, and is the key resource for new hires. The one that I am currently with functions as the job recruiting department for several large companies in the area.

 

[AgaBoogaBoo]

Originally posted by: KrillBee

Originally posted by: spidey07

Originally posted by: KrillBee
200-250 per hour? does that go into the person's own pocket? Or is that how much the staffing firm would charge?

200-250 per hour is crazy, if you could do that consistently you'd be making $400k-500k per year!

Nice, isn't it? Depends on the contract.

that seems too good to be realistic.
are those people are getting paid that much and working 40 hours a week?

It depends how they work it out, the company might even tell them to only bill for X number of hours per week and go about it that way.