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  • Writer's pictureNick Andriacchi

Payrolling Can be a Profitable Offering

The subject of payrolling comes up from time-to-time and many staffers ask if its good business. First, let’s define. Payrolling is the process of engaging with a temporary worker and placing them on someone else’s payroll. Simply put, a company may choose to “move” its employees off their payroll to that of the staffing company.

There are many legit reasons for this. The client can save on the cost of hiring a full-time employee plus “try before they buy”. They will also have more flexibility with staffing levels. Those are some good reasons to do the deal.

However, there are some warning signs that could dictate that a particular deal may not be right. Here are the main four.

Loss Runs – Staffers need to know the safety protocols at the jobsite. If the site is prone to injury, staffers should steer clear. Ask for loss runs. Remember, injuries at the payrolling site affect next year’s modifier for the entire payroll, not just the “payrolled” employees.

Employee Turnover – If the client experiences high turnover, they maybe looking to move those employees onto a staffers payroll to save on unemployment costs. Ask for the turn-over ratio. Remember, the state calculates individual State Unemployment Insurance or Tax (SUI, SUTA) rates on the number of claims. So just like workers comp modifiers, the more claims the higher the SUTA.

No Recruiting – Margins are usually very slim on these deals. In fact, so slim that there is not enough margin for staffers to spend time and money recruiting. Onboarding, payroll, taxes, and burden take up almost all the profit. Staffers don’t need a time suck for little money. So if not turnkey – turn away.

No Credit Terms – This is the last item but its so important to understand. Again, these are not traditional temporary placements where the margins are such that a staffer can extend terms. Payment should be made to the staffing company the day they receive the invoice. If the client insists on credit terms, it could be a sign of financial / cash flow problems and is looking to float the payroll. Perform due diligence on the company. Try this motto: No check, no service.

Payrolling can be a nice profit center for a staffing company under the right terms and conditions. Please feel free to contact me for more insight.

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