Obamacare and it’s Effects on the Recruiting Industry

The Affordable Care Act, better known as Obamacare, is rolling out, and having some interesting effects on the recruiting industry. Contract hires have traditionally been a way for a company to “try before they buy” an employee because onboarding employees is an expensive process:

  • Direct costs of background checks to drug screens, time spent training are all drains on the company. Payroll, IT, HR all need to process the employee and get them up to the same standard as every other employee
  • Indirect costs of senior staff working to grow the employee, reduced morale from high turnover and sharing the workload that the new hire will soon be carrying all indirectly slow down the ship.

These two sides work together to show that the 30-90 day ‘probationary’ periods employers have can make it easier to take a chance on an employee. With the new Obamacare rule requiring employers with over 50 full time employees to provide health insurance, businesses are trying to find ways to lessen that impact.

One way is to use contract staffing back offices to absorb the employer’s mandate by subcontracting . These W-2 employees are technically not employees of the company they spend time at every day. Although this has been common practice for seasonal bursts in hiring, now is an unusual time in history when it’s happening to avoid having many employees year-round. According to the Bureau of Labor, year-over-year contract staffing growth was 7.5%, while the regular economy’s jobs increase was only 1.56%. This means that companies are hiring just under five times as many contract workers as full time workers.

So, what does this mean for the recruiting industry?

It means that, at least for the near future, contract hiring is the place the tide is rising the fastest, and might be a good place to be focused.

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