Client Non-Payment in the U.S. Staffing Industry

Introduction. Staffing firms operate on a delicate financial balance: they pay temporary employees weekly, while clients might not pay invoices for 30, 60, or even 90+ days. In this model, non-payment by clients (credit loss) poses a serious risk. Even a small percentage of unpaid invoices can squeeze cash flow and profits. In fact, as one industry expert notes, delayed or defaulted client payments can lead to significant financial strain for staffing companies​

Over the past decade, however, credit losses in the U.S. staffing industry have remained relatively low. This article examines ten-year trends in credit loss, compares staffing to general business bankruptcy rates, and shares how staffing firms mitigate non-payment risks. We’ll also explore the crucial role of an employer of record (EOR) – such as Ascen – in funding payroll, managing collections, and keeping credit losses to a minimum.

Credit Loss Trends and Key Metrics

When it comes to bad debt from client non-payment, the staffing industry has historically outperformed many other sectors. General business bankruptcy filings in the U.S. have been modest relative to the number of companies – on the order of around 1% or less of businesses per year. For example, about 18,926 U.S. businesses filed for bankruptcy in 2023​ (uscourts.gov)

, a tiny fraction of all active firms. By comparison, staffing firms typically see credit loss rates of roughly 0.5% or lower of revenue. In other words, only a very small portion of staffing billings end up uncollectible:

• General U.S. business bankruptcy rate: ~0.5–1% annually. (Nearly 19,000 business bankruptcies in 2023​ (uscourts.gov)
• Staffing industry credit loss rate: ~0.3–0.5% of revenue. (One large staffing firm’s bad debt was 0.3% of revenue in 2021–2022​ (insurancenewsnet.com)
• “180-day” delinquency threshold: Invoices 180+ days past due are usually deemed uncollectible and written off (staffing invoices rarely reach this stage).

Why are losses so low? Simply put, most clients pay their bills unless they’re in serious financial distress or have a major dispute. Staffing agencies can suspend services if a customer falls behind on payments, which pressures clients to stay current. True write-offs tend to occur only when a client goes bankrupt or is otherwise unable to pay at all. Barring those scenarios, clients typically settle what they owe.

Best Practices to Mitigate Non-Payment Risk

Staffing agencies use proactive strategies to keep non-payments to a minimum. Industry best practices for credit risk management include:

• Credit checks and client vetting: Before onboarding a new client, perform business credit checks and reference checks​ 
• Verify the company’s payment history and financial health. Set appropriate credit limits or require shorter payment terms for higher-risk customers.
• Ongoing aging analysis: Don’t “set and forget” invoices. Generate accounts receivable aging reports regularly (at least weekly) and review any invoices creeping past 30, 60, or 90 days overdue​
• Early identification of slow-paying accounts allows you to send reminders or put accounts on hold before they become severely delinquent.
• Proactive and persistent collections: Have a defined process for overdue invoices. Start with courteous payment reminders and follow-up calls or emails​–often a polite nudge resolves the issue. For chronically late payers, consider late fees or even small early-payment discounts to incentivize timely payment​
• If an account becomes seriously delinquent (e.g. 90+ days past due), escalate efforts. A senior team member might negotiate a payment plan, or a third-party collection agency can be engaged to pursue the debt​
• Lawsuits should remain a last resort​ as they are costly – but with proactive steps, issues are usually resolved long before legal action is needed.

By applying these practices – from careful client selection and credit terms to diligent monitoring and follow-up – staffing companies can catch issues early and keep bad debt levels extremely low. Over the past 10 years, such measures have become standard operating procedure at successful firms, ensuring that credit losses remain just a tiny blip on the radar.

The Employer of Record Advantage

Many staffing firms partner with an employer of record (EOR) provider to handle back-office functions and help shoulder non-payment risk. An EOR like Ascen essentially steps in as the legal employer for the temporary workers and manages the administrative and financial tasks on the agency’s behalf. This model can significantly reduce a staffing agency’s exposure to credit losses. In fact, EOR services such as those offered by Ascen cover onboarding, payroll, compliance, timesheets, invoicing, funding, and collections in one integrated platform​

Here are a few ways an EOR helps mitigate non-payment issues:

• Payroll funding and cash flow: The EOR pays the temporary workers each pay cycle even if the client’s invoice is still outstanding, essentially financing the payroll and shielding the agency’s cash flow. By advancing funds to cover payroll, the EOR relieves the staffing firm’s weekly cash burden while awaiting client payments.
• Invoicing and collections support: An EOR also takes charge of invoicing and collections​ handling high volumes of accounts receivable across many staffing firms, EORs have specialized processes for pursuing late payments and negotiating solutions. They will often negotiate a workout (e.g. an installment payment plan) with a delinquent client to recover payment without litigation.
• Compliance and dispute prevention: The EOR also handles all worker onboarding, timekeeping, and compliance (tax filings, insurance, etc.)​
• With accurate timesheets and legally compliant practices, clients have little excuse to delay payment. If a billing dispute does arise, the EOR helps resolve it quickly, keeping the issue from escalating.

In essence, an EOR acts as a financial safety net and process optimizer for staffing firms. Agencies can concentrate on recruiting and sales, while the EOR handles the heavy lifting of payroll financing, billing, and collections. With an EOR like Ascen providing white-label back-office support – from onboarding and timesheets to invoicing and funding – even smaller staffing firms can operate with the back-office strength of a much larger organization​. Crucially, the EOR’s involvement means that if a client struggles to pay, experts are on the case to navigate workouts or settlements, and the staffing firm itself is far less likely to end up in a costly legal dispute.

Conclusion

Over the past decade, credit losses in U.S. staffing have consistently remained very low – generally under 0.5% of revenue – even as agencies front large payrolls on credit to clients. This resilience is no accident: staffing companies employ rigorous credit controls, closely monitor receivables, and act swiftly at the first hint of a payment issue. Only a tiny minority of customers fail in any given year, and with diligence, a staffing firm can usually avoid losses except in those rare bankruptcy scenarios.

Ultimately, the combination of sound internal practices and, when needed, external support from an EOR creates a robust defense against non-payment. And when the unexpected does happen, having expert partners and processes in place ensures that one client’s non-payment won’t derail the business. In short, credit risk management is an integral part of running a successful staffing firm – and the industry’s track record of minimal bad debt speaks for itself.