A Need for Transparency In Financial Staffing: A Guest Post From Dan Gaffney
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.