As your staffing company grows, so do the complexities of managing its operations and costs. And, while labor costs have always been king on the expense sheet for most agencies, there's a close second that has become a significant challenge in staffing. That is insurance and the increasing requirements of coverage established in recent employment trends.
Let's say the sales VP for a staffing firm has just won a significant account. You receive the deal requirements from the client, and wow! There's a hefty dollar coverage requirement. Now, specific previously optional insurances have become mandatory to secure the deal. How will you build this additional cost into your already tight budget? Can you treat it as a passthrough?
The firm has likely reached a pivotal moment. It's time for the CEO to consider how to fund operations strategically. The flexibility and timing of invoice factoring solutions may become a crucial strength for your company going forward.
Read more: 8 Reasons Why Staffing Companies Use Factoring
But what's driving these insurance cost spikes?
One of the biggest insurance issues in temporary staffing today is liability coverage. Since temp staffing agencies place workers in diverse industries and roles, there's a broader range of potential risks related to workers' compensation claims, professional liability, and general liability, impacting your insurance expenses.
With the rise of remote work and the gig economy, uncertainties regarding coverage for remote workers have also emerged. Thus, the insurance policies contracted should adequately address these modern work arrangements to avoid coverage gaps.
Compliance with regulations and laws related to insurance coverage requires constant vigilance to avoid legal penalties that may further strain your finances.
Today's biggest insurance expense issues in temporary staffing often revolve around workers' compensation coverage and general liability insurance. Here's why:
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Workers' Compensation Insurance
Typically, it is one of the most significant expenses for temporary staffing agencies. The nature of temporary work means that employees may be exposed to various job-related risks, leading to higher compensation premiums for workers. Rates can vary widely depending on factors such as the type of work performed, the industry, and the agency's claims history.
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General Liability Insurance
It protects your agency against claims of bodily injury or property damage arising from their operations. This insurance can be costly, especially if your agency operates in high-risk industries or places workers in roles with greater liability exposure.
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Professional Liability Insurance
Depending on the services offered, professional liability insurance (also known as errors and omissions insurance) may be necessary to protect against claims of negligence, errors, or omissions during the placement process, adding to your overall expense burden.
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Cyber Liability Insurance
With the increasing reliance on technology for managing data and operations, cyber-attacks and data breaches are a growing concern for staffing firms. Cyber liability insurance can help with costs associated with this type of risk management.
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Health Insurance and Benefits
While not strictly insurance, providing health insurance and other benefits to temporary employees can also be a significant expense for staffing agencies. Offering competitive benefits can help attract and retain top talent but adds to the overall cost of doing business. Plus, many clients expect the staffing firm to provide health insurance, making it a smart business decision.
Managing Insurance Costs and Maintaining Growth
Managing insurance expenses is a critical aspect of running a temporary staffing agency. The constant challenge lies in balancing adequate coverage with cost control.
Now is probably a good time to mention the leverage payroll funding would provide staffing firms to manage these new cost environments. Here's the thing: growth can't be stopped, companies must cover these new escalating costs, sales and marketing require funding, and of course, conduct a timely payroll.
Factoring your invoices unlocks their value, empowering you to grow, manage costs, and approach the market from a position of strength. Payroll funding offers this and many other benefits, which you can learn more about here.
Why Summar Financial is the Funding Solution for Staffing Firms
With 20 years of experience in the staffing industry, Summar Financial provides fast and flexible funding solutions specifically designed for staffing agencies. Our facilities start at 100k and scale as your business grows, so you'll never have to worry about meeting your payroll or managing your rising insurance costs. With Summar, you avoid unnecessary debt and gain insight from an expert partner who believes in your potential, along with the ability to invest in growth opportunities without financial constraints.
Contact Summar Financial Today! From the very 1st call, we'll discuss solutions and establish a strong partnership that fuels your growth.