We are sometimes given a hard time by independent contractors who feel that agencies “take money out of their pockets” or are making money off their backs, bringing little value to them. There are countless benefits that contractors get when working with staffing agencies, but perhaps the single biggest benefit is access to jobs that are not available otherwise.
The fact is that most (almost all) large companies in Canada will avoid direct contractual relationships with independent contractors. Thus, in order to work at those companies, the independents need to contract through one of the agencies on the preferred supplier list.
There are two primary reasons companies choose this route: Cost and Risk. Plus a third factor not as important, but still relevant: Hassle!
Agencies can supply contractors cheaper than companies can get them themselves. Generally, agencies have large databases and existing networks so spend less time finding the right people and can provide more options. Companies also tend to have less negotiating power when contracting directly with independent contractors and are in a better position to “squeeze” their suppliers. Finally, when working with an agency, the client saves administratively. This is especially true for clients who may have many contracted resources. Instead of creating hundreds of contracts and hundreds of payments each month, the client has only one contract with a few agencies and pays one cheque (with long payment terms).
The big risk to clients is for an independent contractor to be deemed an employee. Agencies manage this risk for them, create a degree of separation contractually and create a difference between how contractors are treated and how the client’s own employees are treated. As we’ve mentioned in past posts, there are significant implications to both the client and the independent contractor if an employee/employer relationship is deemed to exist.
Clients use contractors for lots of reasons but a primary one is the access to flexible labour, with minimum commitment. By employing an agency to manage the relationship, the client is freed of many “hassles” (hiring and firing, payment, management issues, personal issues etc.) If there is an issue, they tell the agency, who then deals with it.
The benefits to clients working through agencies are compelling and, therefore, the only way to gain access to contract jobs with those companies is often through their supplier agencies.