The Benefits and Challenges of Hiring US Contractors: What Recruiters Should Consider
Many international recruitment companies are successfully expanding into the US and capitalizing on the thriving contingent workforce. With the right strategy and partners in place, engaging US contractors can be an extremely profitable and scalable approach to growing your recruitment business and increasing company resilience.
The Benefits:
Increase flexibility and company resilience
Recruiters can benefit from hiring US contractors because they’re typically hired for a specific project or period, providing recruiters with the flexibility to meet fluctuating customer demand. Recruitment companies can adapt to changing market conditions by choosing from 50 US states to do business in, and scaling their contingent workforce up or down.
Hiring US contractors also allows international recruiters to increase company resilience by gaining access to an entirely new market, which will decrease reliance on a single region for recruitment demand. Hiring in the US can help a recruitment company gain a competitive advantage by diversifying their talent pool and accessing a larger, skilled talent market. The US recruitment market is not only larger, but it’s less mature and saturated than others, such as the recruitment market in the UK, which is a plus for international recruiters trying to break into the US market.
Capitalize on growing demand
By hiring US contractors, international recruiters have a huge opportunity to capitalize on the growing gig economy in the states. With the gig economy growing in the US due to advances in technology, business demand, and flexibility, it’s a great time to enter the US market and engage contractors.
LinkedIn data found that “the share of US job posts for contractor roles increased 26% year/year, while full time roles only grew by 6% year/year.” Businesses in the US are relying more on contingent workers as economic uncertainty grows. Hiring contract workers allows employers to increase flexibility and potentially reduce the admin burden and costs associated with onboarding and payroll.
According to the American Staffing Association, “Around three million temporary and contract employees work for America’s staffing companies during an average week. During the course of a year, America’s staffing companies hire 16 million temporary and contract employees.” Contractors work in virtually all industries throughout the US, and each of the 50 states has a varying demand for contract workers, allowing recruitment companies to diversify their workforce to meet their needs. With margins often being higher in the states than in other countries, such as the UK, there is a lot of profit to be made by hiring US contractors.
Access US contractors with specialized skills
Contractors are often highly skilled because they typically work on a project-by-project basis and are hired for their specialized expertise in a particular field. US contractors have most likely worked with multiple clients, exposing them to a variety of technologies and projects, which can further broaden their knowledge and skillset. These skills are highly valued by US employers and make contractors an attractive option for organizations looking to bring in specialized talent for short-term or project-based work.
Many US workers are turning to freelance and contract work as a way to improve their work-life balance, income, and opportunities. According to Upwork’s Freelance Forward 2022 report, “The volume of professionals who freelance hit an all-time high in 2022, increasing to 60 million Americans.” This could be another indicator that US contingent talent is on the rise and it’s a good time for recruiters to get involved in the market.
The Challenges:
US compliance
Hiring contractors in the US can be complicated for international recruiters due to the complex web of federal, state, and local laws and regulations governing employment relationships in the US. With evolving employment laws that vary on the Federal and state level, workers’ compensation, and a unique tax system, it can be hard for recruiters to keep up. Employee misclassification is another part of compliance that is crucial to get right when hiring in the states. US compliance can feel like a significant barrier for international recruiters looking to hire contingent workers in America. Good news; it doesn’t have to be!
The best way to ensure compliance in a new market is to work with local professionals (e.g., US compliance, legal, and accounting experts). Working with an employer of record to hire contractors in the US can be extremely helpful, as EORs can ensure compliance with all local laws and may even automate the collection of necessary compliance documents.
Admin and contractor payroll
The administrative burden that comes with hiring US contractors can be both costly and time-consuming, as it can require resources and internal infrastructure to do everything in-house. Running compliant payroll also adds to the challenge of hiring in the US because regulations can vary at the state level for paid sick leave, minimum wage, PTO, and more.
A simple solution for international recruiters is to outsource payroll and administrative services to third party service providers. Along with compliance, EORs can run payroll for US contractors, handle the preparation and submission of payroll tax forms such as W-2’s and 1099’s, withhold taxes, and much more to ensure compliance and mitigate a recruitment company’s legal risk.
Interested in working with an EOR? Learn more about Lead & Gain’s full-service EOR solution
Disclaimer: This post is provided for informational purposes and should not be considered legal advice, the final word on this topic or a political opinion.