Hire Contract Programmer

							       Companies Want
         Flexibility…
      Can You Provide It?


NAPS – 2010     Debbie Fledderjohann, President
St. Louis, MO   www.TopEchelonContracting.com
            Next 60+ Minutes . . .
   Client Trends – Flexibility
   Comparison Data : Direct vs. Contract Staffing
   Business Demographics for Contract Staffing
   Why Companies use Contractors: Flexibility, Cost, Risk
   IRS and DOL Compliance
   Candidates’ Perspective
   Recruiters’ Perspective (Why? How?)
   Back-Office Component
   Tools to Help Recruiters Make Money - $$$$$
   Questions and Answers
Special Report – Workforce Management

“Flexibility has become one of the most important
    initiatives and priorities as companies look to future
    planning and forecasting.”

Company Survey:
   Looking for ways to maintain more efficient workforces
   Contractors provide flexibility:
      Increase staff for new projects, start-ups, critical deadlines
      Decrease staff when workloads decline
   73% - increase use of contractors in the next 18 months
          - 35% planning an increase of 50% or more
        Feature Article             - USA Today
Recovery
“An  encouraging jobs report focuses on the growing
    prominence of contract workers.”

   Half the jobs created in the recovery will be filled by
    contractors.

   Contractors provide a flexible workforce that follows the flow
    of a recovery.

   Cautious employers hire contractors in a recovery BEFORE
    bringing on full-time staffers.
    U.S. Department of Labor
Special Report:
“Companies that have flexibility in adjusting their
staffing levels have a competitive edge over traditional
human resource and hiring policies.”
Bureau of Labor Statistics (BLS) found temp/contract
hiring in 2009 at its highest since 2004.

                      Cindy Stephens earned $463,167 in 2009
                       Contract staffing business was up 200%
                  On track to earn another $400,000+ in 2010.
       We all work for Sales . . .
             And MONEY!

Recruiters: Things to Consider

?   Is flexibility important to your clients?
?   Are your sales high enough?
?   Is contracting an option to increase your sales
    and your income?
?   What’s holding you back?
      Top Echelon Contracting
FACTS:
 Established in 1992 to help direct (perm) recruiters
 Back-office… and the legal W-2 Employer of Record
 We don’t recruit!
 Technical, professional, and healthcare
 Set-up to do business in 49 states
 Experienced growth in 16 out of 18 years
 Paid $3.2 Million to recruiters in 2009
 Paid over $46 Million since 1992
         Tell me about you . . .

   Do you currently place contractors?

   Have you placed contractors in the past?

   Do your clients use contractors?
     Direct Placements
Past Four Years: 2006 through 2009
    Contract Placements
Continued Growth – Past Four Years
  $11, 540,131 - Paid to Recruiters
          2010 - Placements
         Direct versus Contract
1st Quarter
   Direct – Down – Rough Start
   Contract – Up – Average of 6.3%

2nd Quarter
   Direct – Up – Average of 24%
   Contract – Up – Average of 8.4%

3rd Quarter
   Direct – Up – Average of 4%
   Contract – Up – Average of 10.5%
                 Cash Flow
      Direct vs. Contract Placements
Direct
     Monthly cash flow is unpredictable
     No financial “safety net”
     TREND: Clients are asking recruiters to reduce fees

Contract
     Consistent cash flow
     Growth – Compounding each month (6.3% to 8.4% to 10.5%)
     Average Placement is 8 months
     TREND: Clients are asking for contract-to-direct hire
Demographics: Which industries
      use contractors?
         Recent 100 Placements
Engineering/Manufacturing              Information Technology
   Quality Engineer                      EDI Coordinator
   Field Engineer                        Access Programmer
   Design Engineer                       Global Non-SAP Application Dev.
   Testing Engineer                      SQL Server DBA Developer
   Tooling Engineer                      Web Developer
   Controls Engineer                     CNC Programmer/Design Specialist
   Resource Efficiency Manager           Access Developer
   Linux Device Driver Engineer          Systems Analyst
   Mechanical Design Engineer            Senior Systems Analyst
   Production Planner                    Meditech LIS Consultant
   Quality Control Test Analyst          Systems Manager
   Design Verification Engineer          SQL Database Administrator
   Senior Process Controls Engineer      NET Developer
   Quality Inspector                     Network Administrator
   Senior Electronics Engineer           Programmer Analyst
      Demographics: What size
     companies use contractors?

Fortune Magazine Survey Results:
(Based on number of employees)


     30.3% - Large companies (More than 10,000 EE’s)
     30.6 % - Mid-sized companies (2,500 to 10,000 EE’s)

     39.1% - Small-sized companies (Less than 2,500 EE’s)
                Small Companies

American Express, Small Business Forum
“Small business owners have dramatically increased their use of contractors.”
“Over a nine-year period the money spent on contract staffing has doubled.”

Top Five Advantages for Small Businesses:
1.   Flexibility – Contractors can be added or subtracted easily
2.   Specialized Skills - Not available with core in-house staff
3.   Test Drive – Evaluate a candidate prior to a direct hire
4.   Stay Lean – Only pay for what you use - Keep costs down
5.   Benefits – Available to candidates at no cost to small business
      More than just Flexibility. . .
             Cost Savings
   No Workers’ Compensation premiums
   No unemployment costs
   No expenses for holidays, vacations, sick time, etc.
   No administrative costs for hiring new employees
   No hidden costs for a “poor hiring decision”
   No benefit costs: medical, dental, vision, life, 401(k)
    (Benefits should be available through the Back-Office)

      Contractors come out of different budget than direct-hires.
                   Operating budget instead of a capital budget.
     More than just Flexibility. . .
             Risk Factor
Legal Exposure - Lawsuits on are the Rise
 Negligent Hiring:      Failure to screen – violent acts
 Negligent Retention:   Failure to act upon knowledge
 Negligent Supervision: Failure to monitor performance
 Layoff Lawsuits:       Improperly notified / terminated

Employer Liability
 Workers’ Comp Claims
 Discrimination Issues
 Compliance – Federal and State
 IRS: Audits
 DOL: Overtime Issues
                  IRS Crackdown
                 Priority is AUDITS
Worker Mis-classification:
1099 Independent Contractor or W-2 employee?
    Behavioral control
    Financial control
    Type of relationship

   Going for “punitive enforcement”
   Not “compliance assistance”
   Focus on unpaid tax revenue
   Communicate findings with other federal and state agencies
 Mis-classification Indicators
Potential Independent Contractor (IC) Red Flags

     IC is taking direction from customer (client/employer)
     IC has a single customer
     Contract-to-direct hire
     IC doing same work as in-house employees
     IC performing production-related work

  IRS Form SS-8: Determination of Worker Status for Purposes of Federal
    Employment Taxes and Income Tax Withholding
 Compliance: 1099 IC or W-2 EE

CRITICAL Questions:
1.   Who is controlling the daily work scope?
2.   Who is supplying the tools of the trade?
3.   Does the contractor have multiple sources of income?
4.   Will this convert to a direct hire?
5.   Are in-house employees doing the same task?
6.   Who is providing the workers’ compensation coverage?
7.   Who is providing the liability insurance?
                   DOL Compliance
September 17, 2010 – Department of Labor

   According to the DOL, more than 80% of companies are out
    of compliance with federal and state wage and hour laws.

   Wage and hour class action lawsuits outnumber all
    discrimination suits combined.

   #1 Violation: Mis-classifying NON-EXEMPT employees
       Employees are being classified as Exempt when they really should be
        NON-exempt.
       If EXEMPT – Employer is NOT paying an overtime premium for
        hours worked over 40.
        Technical and Professional
               Exemptions
   Executive:
    http://www.dol.gov/whd/regs/compliance/fairpay/fs17b_executive.htm


   Administrative:
    http://www.dol.gov/whd/regs/compliance/fairpay/fs17c_administrative.htm


   Information Technology:
    http://www.dol.gov/whd/regs/compliance/fairpay/fs17e_computer.htm



Note: Links for DOL Fact Sheets
 Two-Part Test for an Exemption
Part One – Salary Level Test (Method of Payment)
 Can NOT Be Paid HOURLY
 Must be at least $455 per week
      (NOTE: IT Pay Rate of $27.63/hour or higher )


Part Two - Job Duties Test          (Actual Job Functions)

   http://www.dol.gov/whd/regs/compliance/fairpay/fs17a_overview.htm
    Recruiters and Compliance?
   Know the rules
   Understand the common errors
   Be prepared to offer guidance
   Be prepared to offer solutions
   Flag IRS and DOL links as “Favorites” for client
    references.

                 Position yourself as the staffing expert.
       Candidates’ Perspective

   Flexibility in lifestyle – Work/life balance
   Earning potential – Paid for every hour worked
   Benefits – Medical, dental, vision, life, 401(k)
   Increase technical and professional knowledge
   Opportunity to travel and enjoy new experiences
   Get their foot in the door of a specific company
   Overqualified and want to get their foot in the door
   Housing market alternative to relocation
                             Placing fresh grads to retirees!
               Retiree Re-staffing
80 Million Americans (Baby Boomers) were born between 1946 - 1964 and
   they started retiring four years ago.

Candidate Advantages
 Supplement their retirement income
 Flexibility to control their own schedules
 Opportunity to travel
 Access to benefits


Company Advantages
 Utilize the skill and expertise of the retirees
 Only pay for what they need (pay as you go)
 Don’t have the huge overhead burden


     According to AARP, 60% of companies bring retirees back on contract!
        Recruiters Perspective
   Increase your sales
   Consistent cash flow
   Sole-source provider to clients (Convenience)
   Contract-to-direct conversion fees
   Overcome hiring objectives/budget constraints
   Build a stronger client relationship
   Meet your clients needs
     How much can you earn?
Example:
 $15.54 per hour profit

 Average contract length 8 months

 8 months x 173 hours/month = 1,384 hours

   1,384 hours x $15.54 per hour = $21,507.36

    10 contractors per year = $215,073
        What are the differences
       between contract & direct?

   Contract placements happen quicker
        (Dating vs. Marriage)
   Work with the hiring manager
        (Not Human Resources)
   Consistent cash flow to the recruiter
        (Paid weekly based on client invoice payments)
   Sellable business with an inventory
        (Retirement)
                       74% of contract phone interviews become placements
      How much start-up time?

Front-Office = Recruiter
  Same task as direct hire
    Get the Job Order
    Find the Candidate

Back-Office = Employer of Record (Two Options)
  Handle the legal, financial & administrative issues
  1. In-house: (1-3+ months)
  2. Outsource: (Immediately)
              Back-Office Tasks
Legal
     Client contracts (Your own and/or end client)
     Conversion fees (Contract-to-direct)
     Employment contracts and paperwork
     Immigration Authorization (I-9 and E-Verify)
     IRS compliance (1099 vs. W-2)
     Per diem (expenses) and mileage regulations
     DOL Prevailing Wage directives
     COBRA Compliance
     Court orders (garnishments, medical support)
     Certificate of Insurance coverage
            Back-Office Tasks
Financial
   Funding (line of credit)
   Credit check on companies
   Weekly payroll processing (direct deposit)
   State & Federal taxation (FIT, SUI, SS/Med)
   Unemployment insurance (SUI, FUTA)
   Workers’ Compensation insurance
   Invoicing and collections
   Tax jurisdictions deposits & filings (W2, 941’s)
            Back-Office Tasks
Administrative
   Background checks
   Time sheet collection & verification

   Benefits (health, dental, vision, life, 401k)

   Workers’ Compensation claims processing

   Payroll & Accounting support

   Employee terminations

   Human Resources (employee relations)
          Back-Office Tasks
Medical Placements
  Drug screening
  License verification
  OIG/HHS (Medicare Fraud)
  Bloodborne Pathogen training and testing
  Immunization verification
  Skills checklists
  Continuing education
  CPR training/tracking
  FBI fingerprinting (children)
  Outsource the Back-Office
 You can start doing contracting next week . . .
 . . . and NOT change anything in your office
 . . . and NOT increase your operating budget

Survey Statistics:
 87.5% of contract placements come from “perm” clients


                           Tools to Help Recruiters
Business Model Considerations

Should you consider contract staffing in
 addition to direct hire?

What about:
   Contract-to-Direct Hire
   Payrolling Services

   Retiree Re-Staffing

   1099 to W-2 Conversions (*Increased DOL Audits)
GOAL for Corporate America
In today’s economy…

  Staffing for a Better Bottom Line!
     Companies want Flexibility
     Workers need Flexibility
     Recruiters provide Flexibility
           Questions and Answers
Debbie Fledderjohann
President, Top Echelon Contracting, Inc.
(330) 454-3508 Ext 422
(888) 627-3678 Ext. 422
(330) 454-8891 (Fax)



Email:      Dfledderjohann@TopEchelonContracting.com

Blog:       http://blog.TopEchelonContracting.com

LinkedIn:   http://www.linkedin.com/in/dfledderjohann

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            www.TopEchelonContracting.com