Adding a temp or contract desk can help recruitment agencies serve more of their clients’ needs and build a steadier flow of revenue. But the opportunity needs to be backed by funding, reliable processes and a clear understanding of the risks.

In our Recruitment Smarts Live session, Louise Triance spoke with Peter O’Donnell, Senior Business Development Manager at QUBA Solutions, about starting, scaling and strengthening a temp and contract business. Peter brings seven years of experience in contract recruitment and around twelve years in recruitment invoice finance.

The discussion explored why agencies can be reluctant to move beyond permanent placements, what they need in place before taking on contractors, and how to avoid letting growth outpace their financial and operational capacity.

Look for demand among the clients you already serve

For an agency that has always worked in permanent recruitment, temp and contract can feel unfamiliar. There are different payment arrangements, more administration and a new set of questions to ask. That can make it tempting to postpone the move until there is more money in the bank.

Peter challenged the assumption that agencies must build a permanent business first and only consider contracts later. The starting point is understanding demand in your market and finding out what support you need to meet it.

There is also a client relationship to consider. If an existing customer needs temporary cover or a contractor and you cannot help, they will have to go elsewhere. That gives another agency the chance to build a relationship that may extend to permanent recruitment too.

“You want to be able to service your clients as well as possible.”

That does not mean every niche will support a substantial contract desk. Peter noted that demand varies by sector and can be cyclical or seasonal. Ask your clients what they use, when they need it and where their current recruitment arrangements fall short.

Understand the difference between turnover and margin

One attraction of temp and contract recruitment is the regular invoicing that follows an active placement. Depending on the arrangement, that may be weekly or monthly, providing an ongoing revenue stream alongside permanent fees.

It can also increase headline turnover substantially. However, Peter pointed out that contract invoice values include workers’ pay as well as the agency’s margin. A larger turnover figure therefore needs to be understood in the context of what the agency actually retains.

Having both permanent and contract services can also give an agency more flexibility as client demand changes. Peter described how some employers become more interested in temporary or contract resources when they are cautious about permanent hiring. The balance will depend on the market you serve.

Plan for the gap between paying workers and getting paid

The funding question is central. An agency may need to pay its workers before the client settles the corresponding invoice. As the contractor book grows, the amount needed to bridge that gap grows with it.

“Generally with contract temp, you’ll pay the workers before you get paid by the client.”

Peter explained that invoice finance can help bridge this timing gap. He also noted that even agencies with available cash may prefer to preserve it for other uses, such as hiring another consultant.

Before agreeing to a placement, understand when workers will be paid, when the client is expected to pay, and how the intervening period will be funded. Discuss the arrangement with a provider that understands recruitment rather than assuming the first invoice will arrive in time to cover payroll.

Check the client risk as well as the funding

A funding facility does not remove the need to consider client creditworthiness. With contract recruitment, an unpaid invoice can leave the agency exposed to costs it has already incurred.

Bad debt protection was a recurring theme in the discussion. Peter explained that it is included in QUBA’s offering, while other providers may offer it separately. Agencies need to establish what their own arrangement includes and understand its terms and credit limits.

Client concentration matters too. A large contract with one customer may look like a breakthrough, but dependence on that customer can create risk and may affect the funding available. Peter highlighted the importance of understanding concentration limits and the consequences of exceeding an approved credit limit.

When assessing a potential partner, useful questions include how client limits are set, what happens as the contractor book grows, and what protection applies if a customer becomes insolvent.

Build processes your team can rely on

Peter identified timesheets, invoicing and payroll as the operational foundations of a contract desk. These need to work smoothly for the worker, the client and the agency.

The discussion also covered appropriate business insurance, relevant tax and payroll registrations, worker arrangements and access to advice on contracts and compliance. The requirements will depend on the way the agency operates and the workers it supplies.

Clear processes help recruiters concentrate on winning and delivering business. Without them, the administration can become a source of uncertainty that discourages consultants from developing the desk.

Peter also stressed awareness of fraud. When asked about AI-enabled contractor fraud, he said QUBA had not encountered the specific scenarios discussed, while emphasising the need to remain vigilant about fraudulent activity more generally.

Give the desk deliberate attention

Completing a contract placement is not the same as building a contract business. Consultants who are comfortable with permanent recruitment may return to familiar conversations and habits unless the new service gets deliberate attention.

“If you’re not picking up contract roles, it’s not asking the question.”

Peter described an agency with two directors where one began focusing on temporary recruitment after an initial opportunity. It eventually became the largest part of the business. His point was that focus and confidence in the process can make a significant difference.

Some recruiters will be comfortable running a dual desk. Others may work more effectively with separate responsibilities. Choose an approach that suits your people and market, and make sure business development conversations include temporary and contract needs.

Start with the market before committing to expansion

International placements also came up in the session. Peter said QUBA funds placements in US dollars and euros, with the same broad need to arrange funding and suitable bad debt protection. Overseas opportunities still need to be assessed for their particular worker, client and local requirements.

His final recommendation for a permanent agency considering contracts was to research its market and speak to people already working in it. Establish whether the opportunity is there, then put the support and processes in place to pursue it.

For agencies already making occasional contract placements, the next step may be to ask what is holding the desk back: limited client demand, a lack of dedicated attention, funding constraints or uncertainty about delivery. Understanding that will help you decide where to invest your effort.

Temp and contract recruitment can become a valuable part of an agency’s business. The strongest starting point is a clear client need, backed by an operation that can deliver reliably as the desk grows.

Find out more about QUBA Solutions and explore its recruitment finance resources at quba.solutions.