The staffing industry is very concerned with the looming healthcare changes coming in 2014 - and for good reason. Many of the rules have not been fully written (or published), most states do not have exchanges set-up yet and ultimately, no one is sure how much this will cost. Needless to say, uncertainty is never good for business. But there is an immediate need to understand how this will affect the staffing industry, and to plan for the changes with your clients before your competition does.

Due Diligence is a Must

Owners of independent staffing companies know that change is coming, but many don’t realize the full significance this bill is having on the staffing industry in particular. Staffing companies may need to start providing employee benefits or be subject to a fine. Many questions arise such as:

• How are you going to absorb this new expense?

• Will you, or can you pass it on to your clients?

• What effect will that have on your clients? Will it be more cost effective for them to just hire an employee instead of using your service?

• If I raise the contract price, how is that going to affect the other areas of my business? (Payroll tax, workers’ compensation, etc.)

Again, wouldn’t it be nice to know exactly how much this bill is going to cost, per employee per hour?

Minimum Working Period

There is some question as to whether the minimum working period for health benefits is going to be three months with 30 hours-a-week average. That would cause a problem for a lot of staffing companies. However, I have also heard that the IRS will (may have by the time this is published) issue guidance on the look back period. 12 months and 1560 hours may be the threshold for when an employee is considered benefits-eligible. This measure would be better for most in the staffing industry. Stay tuned.

Healthcare Experts

Companies such as Chicago-based The Horton Group, who provide insurance and health care solutions, are assisting their clients in the due diligence process as more information about the law becomes available. Mike Richmond, head of The Horton Group’s staffing practice, poses this probing question to staffing companies: “Are you sure it’s cheaper to pay the fine instead of providing benefits?” According to Mike, “There are tools to estimate the additional cost associated with healthcare reform, whether you’re paying for coverage or paying the fine. It’s a matter of taking the time to determine these costs. You can determine what’s best for your company and your customers. Additionally, you can strategize to not only remain competitive, but also use healthcare reform to your advantage.” As 2014 nears, the demand for health insurance products will increase, and usually where there is demand for products, suppliers come into the market to meet demand. Bottom Line: Staffing companies should not just accept paying the fine until they have explored other options.

Demand for Staffing

Looking on the bright side, from a demand standpoint, there should be a ton of new staffing opportunities. There’s little doubt about it. Many companies will look at contract staffing as an alternative to hiring full time employees. Businesses that use staffing will consider adding more contract staff. Businesses that may have been averse to using contract staff may have a change of perspective. So put your sales hat on and engage the marketplace!

Talk to Your Customers

The Affordable Healthcare Act is a law that affects both the staffing company and the end user. Use this as a way to engage in conversation with your customer or as an ice-breaker with any potential client. Like with any sale, it helps when your customer feels that he/she is involved in designing a plan that will help their company control costs and increase efficiency. Remember, in sales, when a customer or potential customer invests their very finite time with your company, then you are more likely to win or keep the business.

The Perfect Time for a Price Increase?

With costs going up for all employers, it could be an opportune time for staffing companies to try for a price increase. Again, the same rising costs are going to affect every company with more than 50 employees, not just staffing companies. If you’re a temp company, this may be a good time to make your case and say, “Look, this health care law affects all of us.” If you can demonstrate that your price increase is more cost effective than the price increase the end user faces, why wouldn’t they choose to maintain or add contract staff?

We saw this happen when the cost of unemployment insurance rose over the last couple of years. Staffing companies who played this right were able to pass some, if not all the costs along to their customers. Be bold and unafraid. You always have to take a lemon and turn it into lemonade.

Infrastructure Is Needed, Now More Than Ever

This is 2013. Sales, recruiting, back-office management and now, the hours each employee works cannot be tracked with a pencil, notebook pad and filing cabinet. Small companies will no longer survive doing business this way. They need robust, staffing-specific software.

Luckily, a benefit for a Damian customer is that we provide eEmpact, excellent staffing-specific software our clients utilize. This software package has all of the front-end features you need as well as the ability to track hours for employees. Our clients are able to run usage reports per employee so they can analyze how many employees work 30 hours a week or more. They can also create a report that totals the number of hours each employee has worked year-to-date. The software is included, free with our program.

Be Creative

I’m looking forward to hearing and seeing some of the strategies that our clients and their customers create in order to cost-effectively comply with the healthcare law. About 50% of the staffing market is made up of small and medium-sized independent staffing companies. True entrepreneurs are a creative bunch by nature and will figure out how to survive in the changing marketplace.

There are a number of reasons why gas prices go up.

Typically, prices rise whenever you have a shock to the system, whether it’s cold weather, or a hurricane like Sandy that shuts down refineries.

Another factor is the rate at which the Fed is printing money. Oil is traded in dollars. The more money the Fed prints, the less valuable our dollar becomes, which means the less oil you can buy, so the price goes up. That’s part of the reason you see the price of gold as well as other commodities rise as well.

On the positive side, if the economy were roaring, that would also increase the demand for fuel. This is because you have more trucks on the road, more people taking vacations, etc. – economic activity in general rises. However, I don’t think that’s the case right now.

Impact on the staffing industry

From a staffing perspective, when a client’s expenses go up, they become more likely to cut back on staffing.
Often they’ll do with fewer temps. Unfortunately for the staffing industry , it’s harder for them to cut permanent staff than it is to cut contingent staff. But part of benefit of using a staffing company is the employer does the ability to quickly cut labor expense.

Staffing companies that drive to meet their clients are obviously affected. There are also staffing companies that have offices in different locations; thus it becomes a lot more expensive to travel from office to office.

On the other side is the cost to the temp worker. If they have to drive 10-15 miles to a job, well, the price of gasoline going up 50 cents a gallon definitely affects their ability to afford to drive to the job. The growing cost of commuting often becomes a factor in accepting a temp job or staying on unemployment.

Is there anything that can be done to combat higher gas prices?

A good strategy is the use of robust software that allows you to find and recruit candidates closer to the job site.
In the past, a lot of clients would encourage carpooling. But that kind of fell by the wayside because of all of the liability issues associated with carpooling.

The truth is that there isn’t a whole lot that can be done. The price of gas affects everything and staffing is not immune.

Tough times are not for the faint of heart. Many business contract or close. But as the old saying goes, “When one door closes another opens.” And some of today’s largest employers started up during a recession.

Today’s Big Boys Were Yesterday’s Babies

Multi-nationals weren’t born that way. They started like many of you – with an idea and some courage. According to a 2009 Kauffman Foundation study, more than half of the companies on the 2009 Fortune 500 list were launched during a recession or bear market. That means it’s likely that even during today’s economic slowdown, some of tomorrow’s biggest employers are just getting started.

Tollhouse Cookies (1933), Burger King (1953), Microsoft (1975) and Apple (2001) were all started during recessions. Apple actually started in 1975, but it was after the dot-com bust that it launched the iPod, in 2001, making it the powerhouse that it is today.

Like it is in every other industry survival story, weaker staffing firms exit during the downturn, thinning out the competition. New potential entrants to the industry are hesitant to start up a business. Surviving staffing agencies may not be ready yet to invest more capital to grow. In a nutshell, economic uncertainty creates periods of slow growth, but it also creates opportunity for those who are knowledgeable and willing to take a risk.

Many companies will not hire full time employees even as demand for labor starts to increase. Staffing companies that place contract employees have an advantage during recessionary and slow recovery periods. This is the “sweet spot” of opportunity that savvy entrepreneurs take advantage of.

Real Live Damian Client

Michael Fabian, President of Top Job Staffing in Atlanta, Georgia is one of those savvy entrepreneurs that see opportunity. He had the honor of being involved in starting a staffing company after both the 1992 and 2001 recessions.

In 1992, he took a plunge into the staffing and became the first employee of Right Choice Staffing in Atlanta, GA. He helped the owner build a multiple office success story. Things were going along well until the summer of 2000, when the economy started slowing down.

According to Mr. Fabian, “When the economy was not performing well, I became frustrated with my current position within the firm. Sales had slowed and overhead was high. I started to think that I could do things better on my own. With some encouragement from my current partner and wife, I took the chance and opened up my own business.”

Sensing again that this was indeed an opportune time to venture out on his own, he and his partner Scott Harb opened Top Job Staffing in September of 2001, and they have found success ever since. The recent “great recession” did not stop Top Job. Instead, Michael and Scott stuck to their entrepreneurial roots. They changed their business model to meet the demands of the new marketplace and thrived.

Is Entrepreneurship in Decline?

According to a recent report released by the US Census Bureau, the nation’s business start-up rate declined to its lowest level in 2010, falling to less than 8 percent for the first time on record. The decline has affected the share of jobs created by, and overall employment from start-up companies.

The Census’ Business Dynamics Statistics report shows a steady downward trend in the number of young companies over the past three decades. The start-up rate has fallen from a high of nearly 13 percent in the 1980s to less than 8 percent in 2010.

Still, startups helped shore up overall employment nationwide in 2010. The data shows that 394,000 startups created 2.3 million jobs in 2010. Meanwhile, all of the private companies in the United States saw a net decline of 1.8 million jobs from March 2009 to March 2010.

Employment Climate

Last month, I discussed the different factors that determine the US Unemployment rate (the article appears in Company News Tab www.damianservices.com). The two surveys that are used to factor the rate are the Payroll Report and Household Survey. The Household Survey counts the number of people that are working that may not be included on a payroll report. It’s in this report that self-employed recruiters are counted as “working.” The Household Survey has showed some increased activity in recent months. While not all of these individuals are attached to staffing industry, it could be an indication that many US workers are becoming self employed or that small businesses are hiring.

Self Employed vs. Small Business

These two terms are not synonymous, although some similarities exist. Many self-employed people have formed corporations or have a small office (or the trappings of one), etc. But this is pretty much where the similarities end.

The self-employed tend to be consultants, contractors or freelancers. Within the staffing industry, many of them are executive recruiters with direct hire as their sole line of business. Basically, they work for themselves. In general, they face fewer administrative headaches but their work has a limited financial upside.

Small business owners also work for themselves, but hire others to help grow their company. In the staffing industry, these tend to be more contract (or temporary) placement firms. While there are more administrative tasks to tend to, the upside is much greater here.
Some of the biggest advantages a contract placement firm has are:

• A consistent revenue stream
• A revenue stream that does not depend solely on the owner’s labor
• A saleable asset when the owner is ready to move on

Ready to Grow & Prosper?

My uncle Steve is a successful, self-made business man, and his business philosophy is, “Buy when people are selling and sell when people are buying.” Recently, small business “selling” (whether being acquired or closed) has been strong while small business starts and growth (buying) have been in slow decline for some time. We know demand for contract labor increases before the general economy improves and there is evidence that this is happening. So, this could be the “perfect storm” scenario for the savvy business person to cash in!

For those staffing companies in need of financing or productivity assistance to take your company to the next level, please contact me at nandriacchi@edamian.com.

By - Nick Andriaccchi

If you listen to the talking heads, one side will say the economy is taking off while the other says the books are cooked. Which is it? The answer is: neither.

Here’s my take on this - and I want to approach this in way that details how the unemployment rate is calculated.
The unemployment rate is made up of 2 surveys: the Payroll Survey and the Current Population Survey, better known as the Household Survey.

The payroll survey samples businesses and government agencies that employ about one-third of the nation’s workers. This report counts the actual number of jobs added month-to-month and is adjusted when more data becomes available later in the month. It is the report most often quoted, since it counts employees that are actually on a payroll.

The household survey contacts 60,000 out of the approximately 100,000,000 eligible households in the US. This survey basically tries to determine two things. 1) Is the person working in some form, and 2) if the person is not working, are they actively seeking employment? This survey attempts to collect data on the self-employed, individuals working odd jobs or newly hired employees of small businesses that may not appear on the payroll report.

This survey also calculates the US labor force participation rate. In August, it dropped to 63.5%, the lowest since September 1981. By definition, having less people in the workforce leads to better employment numbers. That’s why the unemployment rate dropped from 8.3% in July to 8.1% in August - the number of new jobs counted in the household survey wasn’t that high.

Economists prefer to base their predictions on the overall health of the labor market on the payroll report. The payroll report consists of a much larger sample size of actual employees, which makes it more accurate and much less volatile. However, over time, both reports tend to rise and fall in tandem with the performance of the labor market.

The latest employment report released on October 5th had conflicting data. The payroll report, which counts actual jobs created, was less than stellar. It reported that the economy added only 114,000 jobs, which would not have had a big effect on the unemployment rate.

The household report showed that an estimated 800,000 people were added, at least marginally, to the workforce, and that over 400,000 stopped seeking employment in September 2012. It is this combination of the large rise in people marginally attached to the workforce and the large number of people that stopped looking for work that caused the unemployment rate to fall to 7.8%.

As I mentioned earlier, the household survey tends to be much less reliable. First, there are 3 big concerns about the 800,000 or so who found work last month:
1. # of hours worked per week
2. rate of pay per hour
3. very small survey sample size

For example, individuals may have taken an odd job because their unemployment benefits expired. Those individuals would now be considered employed even if they worked less than 10 hours. This survey weighs part-time and full-time employment equally.

The rate of pay per hour is another concern. Many of these jobs have rates of pay (especially when factoring benefits such as health care, paid time off etc.) that are much lower than the jobs that are calculated in the payroll report. This usually doesn’t promote a healthy economy.

The household survey is conducted by US Census workers, and they only contact .06% of the households, which can produce an odd statistical result.

So why factor in the household survey at all? The household survey could be a precursor of what’s ahead for the labor market. The self-employed, start-up businesses and small businesses that may have added employees may not show up in the payroll survey right away since that survey tends to focus on more established companies. As previously discussed, it also calculates the labor participation rate. Having less people in the workforce will lower the unemployment rate – which is what happened last month.

All that being said, current economic conditions are not optimal for producing large numbers of jobs.

The initial reading of 3 quarter GDP came in at 2%. The second quarter 2012 GDP was revised downward to 1.3%. That is down from 2.0% in the first quarter. Most economists believe that GDP needs to grow at about 3% to produce large employment increases. Job creation usually happens as a result of increases in GDP, which is not evident here.

Temporary help growth has slowed in the last few months. As a matter of fact, it was flat last month. Temporary help tends to be a leading indicator of job growth, and until those jobs pick up, I doubt we will see much in the way of large job increases overall.

The reality is that the economy is not in a free-fall. Oil and gas are strong, automotive is doing fine and the housing market is finally showing signs of increased activity. The books aren’t cooked but the unemployment rate decline does not tell the full story. Objectively, I doubt that many businesspeople (or anyone for that matter) believe the economy is growing at a breakneck speed, as it would have to be in order for the economy to create large numbers of jobs.

By: Nick Andriacchi

This statement is as true in hockey as it is in business. Businesses need to recognize a changing marketplace and where the next opportunity lies. For example, digital downloads of music and movies have for the most part replaced brick and mortar stores. Remember Blockbuster Video and Tower Records? Those two companies skated on thin ice and lost.
Staffing companies face similar challenges. It’s not just about when the economy will add jobs, but where those jobs will be created.

Leading Indicators

Leading economic may help predict where job growth will happen next. The U.S. Census Bureau lists the following as leading economic indicators:

1. The average manufacturing-worker workweek (from the National Employment Report)
2. Initial jobless claims
3. Manufacturers’ new orders for consumer goods and materials (from the Factory Orders Report)
4. Vendor performance (from the Purchasing Managers’ Index)
5. Manufacturers’ new orders for nondefense capital goods (from the Factory Orders Report)
6. Building permits (from the Housing Starts Report)
7. The level of the S&P 500
8. The inflation-adjusted measure of the money supply
9. The interest rate spread between the 10-year Treasury Note and the Fed Funds Rate
10. The expectations portion of the University of Michigan’s Consumer Sentiment Index

I am going to take the liberty to add an 11th economic indicator to this list – new business start-ups. Most of the job growth in any economic rebound tends to come from new businesses. They are the innovators who create new products and services that consumers want and need.

Money Supply

For this article, the focus will be on #8, the money supply. The money supply is essentially the entire stock of currency and other liquid instruments in a country’s economy at a particular time. The money supply can include cash, coins and balances held in checking and savings accounts. Economists analyze the money supply and develop policies revolving around it by controlling interest rates and increasing or decreasing the amount of money flowing in the economy. Money supply data is collected, recorded and published periodically, typically by the government or central bank. Public and private sector analysis is performed due to the money supply’s possible impacts on price levels, inflation and the business cycle. Typically, the money supply is increased to help expand the economy. Conversely, it is contracted in order to slow the economy, usually to combat inflation.

In the United States, the Federal Reserve’s Monetary Policy is the most important deciding factor in the money supply.
The federal government can also influence the money supply through fiscal policy.

The money supply has been in the news quite a bit over the past three years. It’s reported using different terms, the most common being fiscal policy (stimulus, or dollars that the government spends) and quantitative easing (dollars that the Federal Reserve injects into the economy). Both of these programs have been used to increase the money supply in the United States while keeping borrowing costs low. The purpose is to encourage lending in order to spur economic activity and ultimately create jobs.

I know there is plenty of discussion over how well these policies work. But for this article, I will just stay with what it’s intended to achieve and where employment growth may happen.

Which Industries May Benefit?

Which industries will benefit from this policy and thus create jobs? Manufacturing is one place to look. By increasing the money supply (devaluing the dollar) and keeping interest rates low, common sense dictates that manufacturing would expand and a huge amount of labor opportunities will be created. Right? Maybe, if we were still an industry-based nation, as we were in the past.

Manufacturing is much less important to the U.S. economy as it used to be. According to the U.S. Chamber of Commerce, the manufacturing share of the U.S. economy dropped from 21% in 1980 to 18% in 1990, 16% in 2000 and 13% in 2008. Manufacturing also faces headwinds from countries like China, which pegs the value of its currency to the dollar, and further modernization, which reduces the need for labor.

Banks and other lending institutions are sure to benefit from these policies. Not only do they make money on the interest rate spread (no need to discuss this here), but low interest rates, plenty of money to lend and pent up demand for loans create jobs within these industries.

Construction has been hit hard over the past 5 years. If these policies work to bring consumers back into the real estate marketplace, then construction should see a strong upswing, with hiring to follow.

Last, but not least, is energy. As long as we have population growth, there will be always a demand for energy. Factoring in the “devaluation of the dollar” effect of quantitative easing, our energy should be cheaper to sell around the globe and more expensive for us to buy from foreign competitors.

New Business

Inc. Magazine published the following 11 industries that the smartest entrepreneurs will be targeting this year:
• Big Data
• E-Commerce
• Environmental consulting
• Full-service restaurants
• Internet publishing & broadcasting
• IT consulting
• Mobile & social gaming
• Pet care
• Residential construction
• Supply chain management
• Water conservation

Again, with the policy of low interest rates and plenty of dollars, venture capital should be available for companies, so they can get started and begin hiring.

Benefit for Staffing Companies

Monetary and fiscal policies have also had a positive effect on staffing companies – at least in terms of operating costs. Borrowing and processing costs have come down for staffing companies over the past couple of years. Damian Services, the company which employs yours truly, currently has some very good rates and incentives for existing and start-up staffing companies. So if you have an idea about where the puck is going to be, now is a great chance to score with some great pricing.

Once demand in the aforementioned industries increases, the need for staffing begins. A staffing company needs to in the right position to shoot the puck and score.

How will you use leading economic indicators to determine job growth? Feel free to comment on our blog: http://blog.edamian.com/.

Nick Andriacchi

Nonfarm payroll employment rose by 227,000 in February, and the unemployment rate was unchanged at 8.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in professional and businesses services, health care and social assistance, leisure and hospitality, manufacturing, and mining.

Household Survey Data

The number of unemployed persons, at 12.8 million, was essentially unchanged in February. The unemployment rate held at 8.3 percent, 0.8 percentage point below the August 2011 rate.

Among the major worker groups, the unemployment rates for adult men (7.7 percent), adult women (7.7 percent), teenagers (23.8 percent), whites (7.3 percent), blacks (14.1 percent), and Hispanics (10.7 percent) showed little or no change in February. The jobless rate for Asians was 6.3 percent, not seasonally adjusted.

The number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 5.4 million in February. These individuals accounted for 42.6 percent of the unemployed.

Both the labor force and employment rose in February. The civilian labor force participation rate, at 63.9 percent, and the employment-population ratio, at 58.6 percent, edged up over the month.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 8.1 million in February. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

In February, 2.6 million persons were marginally attached to the labor force, essentially unchanged from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 1.0 million discouraged workers in February, about the same as a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.6 million persons marginally attached to the labor force in February had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

Establishment Survey Data

Total nonfarm payroll employment rose by 227,000 in February. Private-sector employment grew by 233,000, with job gains in professional and business services, health care and social assistance, leisure and hospitality, manufacturing, and mining.

Professional and business services added 82,000 jobs in February. Just over half of the increase occurred in temporary help services (+45,000). Job gains also occurred in computer systems design (+10,000) and in management and technical consulting services (+7,000). Employment in professional and business services has grown by 1.4 million since a recent low point in September 2009.

Health care and social assistance employment rose by 61,000 over the month. Within health care, ambulatory care services added 28,000 jobs, and hospital employment increased by 15,000. Over the past 12 months, health care employment has risen by 360,000. In February, social assistance employment edged up (+12,000).

In February, employment in leisure and hospitality increased by 44,000, with nearly all of the increase in food services and drinking places (+41,000). Since a recent low in February 2010, food services has added 531,000 jobs.

Manufacturing employment rose by 31,000 in February. All of the increase occurred in durable goods manufacturing, with job gains in fabricated metal products (+11,000), transportation equipment (+8,000), machinery (+5,000), and furniture and related products (+3,000). Durable goods manufacturing has added 444,000 jobs since a recent trough in January 2010.

In February, mining added 7,000 jobs, with most of the gain in support activities for mining (+5,000). Since a recent low in October 2009, mining employment has increased by 180,000.

Construction employment changed little in February, after 2 consecutive months of job gains. Over the month, employment fell by 14,000 in nonresidential specialty trade contractors.

Overall, employment in retail trade changed little in February. A large job loss in general merchandise stores (-35,000) more than offset an increase in January (+23,000). Employment in motor vehicle and parts dealers continued to trend up in February.

Government employment was essentially unchanged in January and February. In 2011, government lost an average of 22,000 jobs per month.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in February. The manufacturing workweek edged up by 0.1 hour to 41.0 hours, and factory overtime was unchanged at 3.4 hours. The average workweek for production
and nonsupervisory employees on private nonfarm payrolls edged up by 0.1 hour to 33.8 hours.

In February, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents, or 0.1 percent, to $23.31. Over the past 12 months, average hourly earnings have increased by 1.9 percent. In February, average hourly earnings of private-sector production and nonsupervisory employees rose by 3 cents, or 0.2 percent, to $19.64.

The change in total nonfarm payroll employment for December was revised from +203,000 to +223,000, and the change for January was revised from +243,000 to +284,000.
______________

The Employment Situation for March is scheduled to be released on Friday, April 6, 2012, at 8:30 a.m. (EDT).

…. a lot of things to a lot of people. Ok, that answer sounds a bit flippant but when companies are passé about defining “service,” flippant is the way it will come across to your customers. For you independent staffing companies reading this, remember you need something tangible to define your company while competing against the nationals. Hopefully this article will generate some ideas on how to improve and sell your staffing “service” to your customers.

Leadership Starts at the Top

The leader of the office sets the standard that the rest of the staff tries to meet or exceed. In many independent staffing offices, the owners are the leaders since they are on site and hands-on performing day-to-day duties. Owners usually have some extra passion for their company which has a huge impact on the rest of the staff.

Leaders (current and future) - Let’s look at customer service from 10,000 feet. Leaders create the atmosphere of the office. A leader can nurture a culture that excites the staff to come to work. Only then will they have a passion for your company and servicing your customers! Ultimately, that passion will go a long way in retaining your customers.
Personal Experience(s)

Past experiences contribute to the way you feel about customer service. For example, travel is a requirement of my role at Damian. We are based in Chicago so I have the luxury of choosing between 3 airlines at O’Hare and Midway airports that have major hubs here. Years ago, I used to fly exclusively on one airline that flew out of O’Hare. They had the most flights that serviced the cities I visited most.

As the years went by, the price of the ticket remained competitive but their service declined. Examples of this were abundant throughout the organization. Lost baggage, no notification or misinformation of cancelled flights, rude customer service agents, frequent flyer points that basically were impossible to redeem etc. After about a year of this, I switched to another carrier that operated out of Midway Airport and have used them almost exclusively for the last 12 years. The price is usually about the same and they don’t service as many cities, but the customer service is fantastic which doesn’t temp me to switch.
Focus on the Customer Experience

Our customer service formula at Damian originates from the perspective of the customer. Basically we put ourselves in their shoes. What are their needs and how would they like their needs to be serviced? What internal and external challenges are they facing? In the rare case that mistake is made, how will it be handled to ensure that the trust level between us and the customer remain high? The point is - It is important to provide service as defined by the customer. As an independent staffing company, your reputation is your biggest asset. Everything else usually favors the nationals, so you don’t want to lose your one true competitive advantage. As demonstrated in the personal experience section, once customers are lost you may never get them back.

Speak with One Voice

Leaders in the organization typically know what to say in order to defuse tense moments between the organization and its customers. Referring to the previous section that addresses the customer experience, has your staff been trained to respond to the disgruntled customer the same way you would? Again, the advantage should go to the small independent staffing company where the leader is visible most of the time.

Ability to Deliver

The road is usually paved with good intentions. As leaders, you should be able to excite the staff to service the customer. But do you have the ability to deliver what was promised?

For example, one of your best customers suddenly presents your company with an exclusive contract and open positions need to be filled quickly. Great opportunity, but can your infrastructure (excluding personnel) handle the order?

Does your company have web-based, robust applicant tracking software to quickly search, contact and place candidates? Can your company gather and approve time, distribute payroll, reports and invoicing electronically? Does your company have the financial ability to fund payroll until the invoices start getting paid?

Infrastructure of this kind takes a large investment of capital. I hate to say this but this is primarily why the “big boys” win these types of contracts even though the customer prefers the service of an independent.

Level the Playing Field

Independent staffing companies do not need to cede good business to the nationals. Full service funding companies can provide the necessary infrastructure that an independent needs to compete without a large capital investment.

So what is customer service? My definition is to focus your entire organization around one goal and that is to show leadership and build a service organization as defined by the marketplace (i.e. your customers).

Access to capital is the single most important item to a staffing company that place assignment employees. Most staffing companies need at least six weeks worth of accounts receivable financing just to pay its assignment employees and direct payroll costs. They also need 2 – 3 months worth of working capital to pay office salaries and fixed expenses. Since most entrepreneurs want to grow their businesses, the will need even more capital to fill additional open orders.

Figuring out where to get the cash to fill open orders is a good problem to have. Figuring out where to cash to pay for stagnant payrolls and expenses isn’t so good. Either way - finding the right solution to the cash-flow problem takes some common sense and an open mind.

In this economy, plenty of staffing companies – as well as other businesses - are being forced to choose who gets paid when there isn’t enough cash to meet all obligations. Obviously, you must pay your assignment workers because they are the ones that will generate profits. And you definitely want to use available cash for additional profit-generating employees. So who will get the short the stick?

When short on cash, can you make your lenders wait for the next payment? How about your suppliers? These are tough choices, but if you’re the one calling the shots, there’s one item you definitely want to put at the top of the list to be paid: payroll taxes.

Uncle Sam is the Owner

Employers are required to withhold income tax and social security tax from paychecks and pay that money over to the IRS. The employer is considered to hold that money in trust for the government. This rule doesn’t apply to other payments, such as income tax. Payroll taxes are special, because they’re required to be withheld. As a result, this tax debt is in a different category from others. The employer may owe money to many other creditors, but it doesn’t hold money in trust for them. When it comes to payroll taxes, the government is considered the owner of the money even before it has been paid over. If you don’t pay it over, you’re doing a bad thing, and you can expect something bad to happen.

Granda Hills Community Hospital Case

That’s what happened to James Doulgeris in a recent case. He was appointed interim president and CEO of a hospital that was in bankruptcy. According to a district court opinion, the hospital was already delinquent in its payroll taxes when he took over. Yet he had authority to sign checks, and in fact signed checks totaling millions of dollars to other payees while the payroll taxes remained unpaid. Despite his argument that the CFO was the person in charge of deciding whom to pay, the court found that Doulgeris was a “responsible person” and entered judgment against him in the amount of nearly $2 million.

It may be tempting to suppose that a different rule would apply if the business never had the cash to pay the taxes in the first place. For example, a business might have a $100,000 payroll obligation that includes $15,000 of withholding. If it has only $85,000 on hand, it might pay $85,000 to the employees and plan to come up with the $15,000 required for the payroll tax later. The pay stubs will indicate it withheld $15,000, but in reality that additional money never existed. If the additional $15,000 never appears, the responsible person penalty can apply even though the business never had the money. The reason: if it had only $85,000 on hand, it was not in a position to pay that amount to employees, because any amount paid to employees has to be matched with the appropriate amount of withholding.

Trust Fund Recovery Penalty

The IRS can hit you with this penalty even if you aren’t an owner or someone who otherwise might benefit financially from the failure to pay these taxes. If you could have caused the employer to pay the taxes and you failed to do so, you can end up on the hook for the entire amount.

How can the government collect the tax from you, when you weren’t the person who owed it in the first place? The answer: they don’t collect the tax from you. They collect a penalty, and the penalty happens to be equal to the amount of the tax that wasn’t paid by the employer. It’s a harsh result, but that’s the law as written by Congress. The lesson: when your business is in trouble, make sure the payroll tax is paid, even if other creditors are screaming for their money.

Solution: An Outside Payroll Processor and Funder

An outside payroll processor like an ADP or Paychex will take away the temptation of diverting money due the IRS to other expenses. Payroll processing companies accrue for all payroll taxes the week they are incurred. While these type of companies “keep things straight” with the IRS and other government taxing agencies, they will not help grow your business.

For a complete solution, turn to a full service payroll funding company. They will not only process payroll and deposit tax money, they will fully finance payroll growth due to an increase in business. Increased business equals larger profits for your company without having to rely on Peter’s money.

Simply put: a payroll funder will supply an infusion of cash that gives a staffing company the ability to pay Paul while staying on Peter’s good side! And when Peter is the IRS that is the only side you want to be on.

Staffing companies are currently faced with the cost and administration of workers compensation and employee benefits. Some have considered moving their employees to a Professional Employer Organization (PEO) in order to reduce their costs and headache’s. But in the end, did those who chose to go that route really solve anything? Were they fully informed be making the decision?

There may be a perceived savings – but at what cost. A reduction in workers comp. cost is the main motivator and the item most owners consider the most in making their decision. There may also be benefits that staffing companies can offer their temps.
Before moving your employees to a PEO consider the following:

• Cost
• Control
• Brand

Cost
Yes cost. Before counting the dollars you’ll be saving on workers compensation (w/c), calculate all the other costs you’ll be incurring.
• Administrative – Most PEO’s bundle this in total percent charged on payrolls – remember they have to make a profit too.

• Float – How soon in advance do they debit your account for payroll? Does that inhibit you from growing your company?

• SUTA - Is their State Unemployment Tax % greater than yours?

FUTA & SUTA Cap - Do they cap FUTA & SUTA once your employees reach the limits? In other words do they reduce the amount they charge you once your employees reach the limits? For example an employee earns $28,000 during the year. Your FUTA & SUTA costs are 4.0% of payroll. Assume the taxing limit is $8,000 in wages. If your PEO doesn’t reduce their percentage this alone just cost you an extra $800. And that’s just on one employee.

• If at some point you choose to return the employees to your company you will be treated essentially as a star-up since you have no experience rating. This may limit your w/c option to the state pool – thus raising your cost.

• Are you paying for services you don’t want or need?

• Any other charges besides the percentage of payroll

Control
This is another big issue you need to consider. Since the PEO is now the employer of record they may:

• Limit the types of jobs your company can place. This may really hinder your ability to grow your business.

• Have very little ability to control w/c modifier. A PEO does business with many staffing companies and have little control over injuries & w/c claims. One company that does not have a good workplace safety program in place can cost you a pretty penny the following year in higher w/c premiums.

• Employee benefits. Most PEO’s require minimum number hours worked before temps can take advantage of the benefits. You may not have the ability to adjust the number in order for you to really offer these benefits to your employees.

• How is their payroll processing procedure? What hoops does the PEO make you jump through when a w/c or unemployment claim is filed? Is it more work to explain to them what happened than it is to deal directly with the insurance or government agency?

• A PEO is a potential competitor of yours. Are you comfortable giving them your client list.

• Like an adjustable rate mortgage that you can’t control, how much will your percentage rise and savings decrease next year?

Brand
As an independent staffing company you need to have your name in the marketplace as much as possible. Most (ok…all) independents do not have the dollars to advertise and build there brand names as the nationals do. Part of the branding process is word of mouth. A lot of that is done by your employees.

Ask yourself the following questions:
• When your employees see the PEO’s name on the checks they will view them as their employer – not you.

• When they speak with their supervisor or other prospective employers, will they name the PEO company as their employer or your company?

• Will the decision makers at the work site view your company or the PEO as the company they do business with?

When all is said and done, an independent staffing company cannot afford to give this valuable (and free) piece of market exposure?

At first blush, switching employees to a PEO maybe an option for an independent staffing company to consider. But don’t make a hasty decision – it can cost your company plenty in the end.

The Employment Situation - October 2011

Nonfarm payroll employment continued to trend up in October (+80,000), and the unemployment rate was little changed at 9.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment in the private sector rose, with modest job growth continuing in professional and businesses services, leisure and hospitality, health care, and mining. Government employment continued to trend down.

Household Survey Data

Both the number of unemployed persons (13.9 million) and the unemployment rate (9.0 percent) changed little over the month. The unemployment rate has remained in a narrow range from 9.0 to 9.2 percent since April.

Among the major worker groups, the unemployment rate declined for blacks (15.1 percent) in October, while the rates for adult men (8.8 percent), adult women (8.0 percent), teenagers (24.1 percent), whites (8.0 percent), and Hispanics (11.4 percent) showed little or no change. The jobless rate for Asians was 7.3 percent, not seasonally adjusted. In October, the number of long-term unemployed (those jobless for 27 weeks and over) declined by 366,000 to 5.9 million, or 42.4 percent of total unemployment. The civilian labor force participation rate remained at 64.2 percent in October, and the employment-population ratio was little changed at
58.4 percent.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) decreased by 374,000 to 8.9 million in October. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

In October, 2.6 million persons were marginally attached to the labor force, about the same as a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 967,000 discouraged workers in October, a decrease of 252,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.6 million persons marginally attached to the labor force in October had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

Establishment Survey Data

Total nonfarm payroll employment continued to trend up in October (+80,000). Over the past 12 months, payroll employment has increased by an average of 125,000 per month. In October, private-sector employment increased by 104,000, with continued job growth in professional and business services, leisure and hospitality, health care, and mining. Government employment continued to contract in October.

Employment in professional and business services continued to trend up in October (+32,000) and has grown by 562,000 over the past 12 months. Within the industry, there have been modest job gains in recent months
in temporary help services and in management and technical consulting services.

Employment in leisure and hospitality edged up over the month (+22,000). Since a recent low point in January 2010, the industry has added 344,000 jobs.

Health care employment continued to expand in October 2011 (+12,000), following a gain of 45,000 in September. Offices of physicians added 8,000 jobs in October. Over the past 12 months, health care has added 313,000 jobs.

In October, mining employment continued to increase (+6,000); oil and gas extraction accounted for half of the increase. Since a recent low point in October 2009, mining employment has risen by 152,000.

Manufacturing employment changed little in October 2011 (+5,000) and has remained flat for 3 months. In October, a job gain in transportation equipment (+10,000) was partly offset by small losses in other manufacturing industries.

Within retail trade, employment increased in general merchandise stores (+10,000) and in motor vehicle and parts dealers (+6,000) in October. Retail trade has added 156,000 jobs over the past 12 months.

Construction employment declined by 20,000 in October, largely offsetting an increase of 27,000 in September; both over-the-month changes largely occurred in nonresidential construction. Employment in both residential and nonresidential construction has shown little net change in 2011.

Employment in other major private-sector industries, including wholesale trade, transportation and warehousing, information, and financial activities, changed little in October.

Government employment continued to trend down over the month (-24,000), with most of the October decline in the non-educational component of state government. Employment in both state government and local government has been trending down since the second half of 2008.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.3 hours in October. The manufacturing workweek rose by 0.2 hour to 40.5 hours, and factory overtime remained at 3.2 hours.
The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged up by 0.1 hour to 33.7 hours in October.

In October, average hourly earnings for all employees on private nonfarm payrolls increased by 5 cents, or 0.2 percent, to $23.19. This increase followed a gain of 6 cents in September. Over the past 12 months, average hourly earnings have increased by 1.8 percent. In October, average hourly earnings of private-sector production and nonsupervisory employees increased by 3 cents, or 0.2 percent, to $19.53.

The change in total nonfarm payroll employment for August was revised from +57,000 to +104,000, and the change for September was revised from +103,000 to +158,000.

______________
The Employment Situation for November is scheduled to be released on
Friday, December 2, 2011, at 8:30 a.m. (EST).