A Guest Post From Dan Gaffney as originally posted on re: The Auditors
I learned a lot about the staffing business model when I worked from 2001-2003 as the Midwest Regional Vice President for Jefferson Wells, now known as Experis, a division of Manpower. It’s good to see professional services from all sides—the salaried model as well as the hourly model, the permanent employee and the 1099 vendor. It’s that experience that helped me spot the independence issues with KPMG’s tax “loaned staff” to GE and to understand the profound impact a trial win in one of the national overtime class action lawsuits against the Big Four would have on the Big Four firm business model.
Dan Gaffney is a CPA and the founder of VouchedIn.com. He is also an old friend of mine. Dan has more than 20 years of business and financial experience with some of the top audit and consulting firms in the U.S., and served as a chief audit executive for a Fortune 500 company for more than five years. VouchedIn.com is the first online temporary work service genuinely focused on serving the specific needs of employers and contractors; where employers can search for the contractor who best meets their needs, contractors have a resource to promote their services and experience and both can directly negotiate contracts. It’s free to search, register and set up a profile.
Gaffney is also a Certified Internal Auditor and Certified Information Systems Auditor. He is a member of the American Institute of Certified Public Accountants (AICPA), the Illinois CPA Society, the Information Systems Audit and Control Association, and the Institute of Internal Auditors. Gaffney earned his MBA from DePaul University’s Kellstadt Graduate School of Business, and holds a BBA in accounting from the University of Wisconsin-Whitewater.
re: The Auditors and Francine McKenna are not being compensated for this post. This is not a sponsored post.
Sarbanes-Oxley legislation drove companies and staffing firms to hire accounting, finance and internal audit professionals in huge numbers. Salaries reached all-time highs to meet the demand for resources and new skills, which would soon hit the consulting firms’ bottom lines. Then the Great Recession hit and brought massive layoffs across industries and professions, including accounting related jobs.
Along with these job losses, we now have an aging workforce of professionals over 50 years of age that are finding it harder than ever before to re-enter the workforce, and likely can’t demand the same high-level salaries. Companies are seeing the benefits and moving more and more jobs permanently to temporary/contract workers to manage one of their largest costs: payroll. The layoffs of the recession have given way to a growing freelance movement, now the future of corporate finance departments.
And now thousands of accounting and finance professionals are turning to staffing firms just to have some work and income, accepting a lower rate because they have no choice. The challenge is how contractors make a decent living to care for family, plan for retirement and cover their personal benefits like health insurance when they aren’t getting paid their full value.
Contractors (freelancers) typically are paid 30% to 35% of what a staffing firm is paid by an employer. Say an employer needs a staff accountant for a project over a four to six month period. The employer signs a contract to pay the staffing firm $100 per hour for a contractor, and the staffing firm goes hunting to find a contractor that will be sufficient to do the job and then negotiate to the lowest rate, since the difference goes toward the staffing firm overhead and profit. In my experience, the staffing firm shoots for paying 1/3 of the hourly rate to the contractor.
So the contractor is earning just $30-35 per hour while the employer is paying the staffing firm $100.
In many cases the staffing firm doesn’t know the candidate and doesn’t really understand what the employer needs to get the work done. The employer is paying a significant premium for the contractor of up to 300%, and the contractor can’t make a decent living on the discounted rate they’re paid.
It’s the age of the freelancer. According to Freelancers Union, almost one-third of the American workforce is independent. That’s nearly 42 million people and growing and will comprise up to 40% of the economy by 2020.
It’s easy to find platforms/websites that support the freelance economy. So what should employers and contractors look for in a platform? Well, if you’re looking for a variety of freelancers in any field from finance to nannies-many of the platforms will meet your needs. If you’re looking for an extension of a staffing firm, where the firm still takes the majority of the hourly rate paid by the employer, there are plenty of options there too, including Robert Half’s Accountemps. And there are platforms that focus on one industry or range of skills.
What’s difficult to find is a simple interface and transparency in rates that doesn’t require the user to dig through FAQ’s, an About Us or to ‘Become a Member’ of the site just to figure out the pricing model.
Moreover, the staffing industry, which should support the wave of new freelancers, hasn’t adapted since William Russell Kelly founded the Russell Kelly Office Service in Detroit on October 7, 1946. The company was later renamed, famously, Kelly Girl Service in 1957, and became Kelly Services® in 1966, reflecting the growing services of the company. Although Kelly was widely credited with pioneering the “modern” temporary help industry, it’s pretty amazing that there’s been little fundamental change in the staffing firm model in the past 65 years.
Thanks to the Internet, staffing firms are no longer the only link between professionals and employers. They don’t have a monopoly on quality contract workers. These companies don’t have “secret” relationships that are worth any professional feeling held hostage for 60% less than they should be earning.
A new world is popping up online, especially for this growing segment of American workers, who really do want to make a career out of contract work and enjoy the lifestyle it provides them. These new alternatives are also making it easier for employers to find the high-quality professional that best fits their needs, not just get sent someone who “will be fine”. As much as it is the “Age of the Freelancer” it’s also an age where employers can take back the power and control of how they staff projects. They can, on their own, find better contractors who work harder and smarter, performing a higher level of work with little turnover because they feel valued.
That’s something we all want to feel.
I received an email via LinkedIn to see if I had time to talk with a friend of a connection about a project and I said I could make time the following day at 10a.m or 1p.m. as I was at my son’s baseball practice. A few minutes later the staffing guy calls me, after 6 pm, when I clearly told him the next day would be best.
During the conversation, I stopped the staffing guy shortly into the conversation to say that I wouldn’t consider the project for less than $XXX per hour. He said that wouldn’t be a problem and continued on his sales pitch for the project. It was a typical Sarbanes-Oxley (SOx) testing engagement, where an employee moved into another role and the employer now needed someone to step in and do the internal controls testing for a few months.
The staffing guy then proceeded to ask me questions that were part of the project description from the employer, but of which he had little understanding. He started listing some business processes off – revenue, cash, inventory – and I stopped him. He clearly had no clue about my background or the real requirements of the project. I said that I have run projects from beginning to end since the first days of SOx and continue to lead several of these projects.
He asked me if we could meet the following day (typical staffing industry screening process) to see if I looked the part, and, undoubtedly, to coach me on what I need to be prepared to say to the employer to get the project. I said that I couldn’t meet until the following week and he requested my resume, even though he found me on Linkedin, so that he could start his process.
The next morning he called and left a message, and also an email introducing me to his business partner that would also be screening me. ENOUGH ALREADY! Leave me alone! I emailed him to say I was not interested in the project and thanked him for his time. What a mess!
I felt like I needed a shower just from talking with the guy. I decided overnight, and he confirmed that, again, I wouldn’t work with a staffing firm again.
The best part is, if they decide you’re not a fit for the project, they go completely cold on you – won’t respond to calls or emails. In, fact it’s been a few weeks and I still have not heard from the staffing guy – no courtesy call or email, no thank you, no networking, nothing. But, it is what I expect.
It’s not much better if the contractor gets the project either. The staffing firm expects a certain number of billable hours. I’ve actually been nagged about getting my 40 hours in because “we have budgets to meet”.
It’s all about meeting the staffing firm revenue goals. It’s not about the contractor,
the hiring client or the candidate you are paying them to find.
You wonder why it’s hard to find good talent? Because those trying to find it for you are;
- Have little knowledge of the industry they are hiring for
- Lack the knowledge to effectively find the right candidate
- Completely disrespect contractors along the way, because they “own” the opportunities
- The contractor isn’t paid fairly because the staffing firm is taking 50-70% of what the employer is paying
- Staffing firms are putting their revenue goals before the things that really matter such as the contractor’s efficiency, performance or existence as a human, and their client’s (employer’s) needs as well
It’s time for a change. Try VouchedIn it’s completely free and you will get better, happier talent, reduce turnover and see high-quality performance on your project.