Risks of Operating a Staffing Agency

Staffing agencies provide an excellent service for their employees as well as the companies where employees are placed. A staffing agency, also referred to as a temporary agency, helps companies find the staff they need. Sometimes, it is only a temporary position for a few days or weeks. Other times, the company is looking for a full time, permanent employee, but doesn’t have the time to go through the interviewing and hiring process. While this is a great profession to be in, it’s not without its business risks.

Maintaining Skilled Professionals

One risk has to do with needing to maintain a large number of  ready, willing and able-to-work employees at any given time. This is a tricky balance game, because you want to have a supply of skilled employees for future positions that become available, but employees won’t stick around unless you place them with a position quickly. So there’s a challenge finding the balance between having a bounty of talented candidates and an equal amount of companies looking for employees.

Competitive Salaries and Rates

In order to run your business, you need to earn a profit. Depending on your referral fee structure, you earn money by getting a percentage of what the employee is paid for every hour worked, as well as a fee for finding employees for the employers. However, if other staffing agencies charge less or pay their employees more, you risk losing both due to their rates. This means you need to have a competitive rate, but also still earn a living.

Screening Employees

Some of your business risks are in the skills and traits of your employees. You need to worry about more than what a traditional employer does. You are responsible for these employees and trusting them to do a good job when you send them on their assignments, particularly when you are a temporary staffing agency. If any issues arise, likely bear some consequences and it can even hurt your reputation as a staffing agency. So, screening your applicants goes above and beyond, including verifying references, running pre-employment background checks, and performing skill assessments.

Proper Licensing

If you fail to have the right business license for your city, you run the risk of paying high fines, and even risking losing your business. Make sure you pay close attention to all the legal requirements of owning and operating a staffing agency. You need to register your business, have a business license, abide by local business codes, and have the required insurance as well.

Employee Injuries

Like all businesses, you have the risk of your employees getting injured. But because they aren’t working in your offices, but out at job sites, there is a higher risk since you can’t watch them and be sure they are taking safety into consideration. Be sure to educate employees on safety hazards in the workplace.

Employment Practices

Finally, you have the risk of being sued for violating the rules of employment practices. This includes sexual harassment, discrimination and wrongful termination. Having employment practices liability coverage for this type of lawsuit is essential.

These risks should be as a warning sign for you to get business insurance.  It doesn’t mean you will face them, but protection with insurance like workers comp, general liability, and professional liability is a good idea.