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Tim Walker: Hello everyone, this is Tim Walker, an editor with Hoover’s, and I’d like to welcome you once again to Small Business Focus. We’re joined as always by our small-business expert, Katy Ford. Taking care of a company’s staffing needs can require a lot of time and time is a scarce commodity for most small-business owners. But there are companies that will do the hiring for you but when is this strategy right for you? So, Katy, when is it appropriate to hire a third party to handle your business’ staffing needs?

Katy Ford: Well, Tim, there are four situations in which it might make sense to use a professional recruiting or staffing company. The first scenario is if your hiring needs are cyclical. Perhaps you bring in a lot of temporary or seasonal workers on a regular basis. If that’s the case, you might want to delegate that function to a professional agency so you can focus on your business. The second situation is if your hiring needs are confidential. This would be if you are replacing someone on staff and you really want to keep the hiring process under the radar. The third scenario is when you’re making a key hire and this position would demand some expertise that might be hard to find. Let the experts do that for you. The fourth scenario is if you’re an unknown company which is the case for a lot of small businesses. Sometimes when you’re a little known company, it can be hard to generate a buzz and recruit talent. A professional staffing agency will have the connections to generate a steady flow of resumes.

Walker: Oh, so Katy, if you find yourself in one of these situations, where should you turn for help?

Ford: When you just need to fill a temporary or lower-level position, such as like, say, an administrative assistant or a call-center representative, a staffing or temp agency is probably your best bet. These agencies typically charge an hourly rate with a markup. Now let’s say you have a quick hire need to fill a full-time position that pays maybe less than a hundred thousand a year. In this instance, a contingency search firm is probably your best bet.

Walker: And why is that?

Ford: Well, first of all, contingency firms have a deep pool of candidates who are actively job hunting. So they can find potential candidates pretty quickly. Also you only pay a contingency firm if they fill the position which is typically 25 to 30 percent of the new hire’s first-year salary.

Walker: That sounds like a pretty good deal.

Ford: It is. But like with everything there is a down side. Because of the way contingency search firms are compensated, many of them are transaction oriented. Their goal is put as many candidates in front of you as possible to increase the chances of a successful hire. So those candidates might not always be the best matches.

Walker: Well, that’s good to know. So where do you go for help if you’re needing to fill, say, a highly specialized position, maybe a fulltime position, one that pays more than a hundred thousand a year?

Ford: Well, for those needs, you’d want to use either a retained search firm or a contract recruiter. So let’s look at the retained search firm first. A retained search firm operates like a paid consultant. So they are typically getting about 30 percent of the salary plus bonuses no matter the outcome of the search. But the advantage of a retained search firm is that they’re more proactive and understanding of what kind of person would best fit your organization. And they’re going to be more thorough in qualifying the potential candidates before you ever meet them.

Walker: That sounds useful. So what about the contract recruiters? When would you turn to them?

Ford: Well, contract recruiters can save you time and money when you’re trying to fill a niche position because these independents often specialize in an industry. And so they know where the talent is.

Walker: How are recruiters compensated?

Ford: Well, generally, you’ll pay them by the hour. And depending on the market you’re working in, I’d say anywhere from $40 to $120 an hour is the going rate.

Walker: With so many contract recruiters out there, if I’m a small-business owner, how can I find one who’s going to work well with my company’s needs?

Ford: Well, definitely you need to interview your recruiters before you bring someone on board. You’ll want ask them first and foremost, who are their past and present clients, what types of positions have they filled? And then what resources do they use in their search? Are they relying on databases that you could access yourself? And then also, you want to know how long does it typically take them to fill a position? And then how much prescreening will they do for you? And remember, good recruiters will ask plenty of questions about your business as well. They’ll take the time to understand your company’s culture and what you really need in an employee.

Walker: Well, thanks for these insights Katy.

Ford: You’re welcome!

Bjorklund: Thanks for listening to Small Business Focus with Hoover’s editor Tim Walker and small-business specialist Katy Ford.