Staffing agencies provide a vital service to businesses and employees. These firms help workers find suitable jobs faster and give employers (host organizations) access to a qualified, scalable workforce to meet the fluctuating demands of their business. But companies that rely on staffing firms to provide labor often run into trouble when using temporary workers on a decidedly non-temporary basis. Here is what you need to know about staffing firms and perma-temping.
Perma-temping Creates Friction and Sparks Lawsuits
This issue has been festering for quite some time. Organizations such as the National Employment Law Project have brought attention to the practice of bringing in temp workers for long-term work in low-wage jobs in the hospitality, retail, and restaurant industries. At the white-collar end of the scale, companies like Microsoft have settled multi-million dollar claims in lawsuits brought by temporary workers. In a Washington Post article by Brigid Schulte, a perspective from a “perma-temp” hired by one of Microsoft’s many contractors highlights the ongoing disparity between temps and the rest of the workforce. There is a growing sense of resentment in the community of temp and freelance workers about being second-class employees, toiling away with no benefits or hope for betterment.
Staffing Firms and Perma-temping: Using Temp Workers the Wrong Way Creates Liability
According to Lalita Vempati, writing for DCRWorkforce.com, “Maintaining a worker in a ‘perma-temp’ relationship violates the tenets of the US Department of Labor and of the Internal Revenue Service (IRS).” She goes on to point out that a perma-temp may be considered a “Common Law Employee” for the purposes of wage and hour laws, taxation, workers’ compensation, health benefits, and other rights. In fact, perma-temps may qualify as employees in class-action lawsuits as well.
Four Warning Signs That Perma-temping Is an Issue within Your Workforce
When does a temp worker become a perma-temp? Are you blurring the lines? Here are signs to watch for in your use of temps:
1. They are hired for seasonal work that somehow turns into year-round work. Keeping a great temp on staff instead of hiring someone new is tempting. But keeping temporary workers in long-term assignments is unfair.
2. They perform the same tasks as traditional employees for less pay. If a person is being trained on the job with a prospect of full-time employment, a temporarily lower rate of pay might make sense. But creating a class system in the workplace for people who are all doing basically the same job will always lead to strife.
3. They work the same number of hours per week as traditional employees, but with no benefits. Even temps hired on a part-time basis often end up working full-time hours. They also work a significant amount of overtime as needed by the host organization. It’s flexibility that makes temp labor attractive in the first place. But if this becomes a pattern, it’s a problem.
4. An employee of the host organization supervises their day-to-day activities rather than the staffing firm. According to the IRS, “Under common-law rules, anyone who performs services for you is your employee if you have the right to control what they do and how they do it.” This is one reason host organizations function as “co-employers” with a staffing agency or PEO. It may not be possible to avoid supervision of temps. But they should ultimately be reporting to the staffing agency rather than your organization.
Ways to Keep the Work Relationship Temporary
These tips will help staffing firms and perma-temping employers to keep the working relationship temporary. Ensure that the staffing agency is clearly listed as the “Employer of Record” and that they are keeping an eye out for temporary assignments that run too long. Make sure contracts list both a start and an anticipated end date for each assignment. Have a clear process in place for determining how you will use temporary labor. This includes filling different types of roles and how these workers will be supervised.
Decide on the maximum tenure for a temp (such as less than a year).
Include a clear decision-path to whether the contractor will be temp-to-perm or if they will be released to the staffing agency for reassignment with a different host organization. Determine a minimum length of time before the same temp can be placed in your organization again without it being considered a continuous assignment.
If the main sticking point is benefits, consider working with staffing firms that offer benefits to their long-term contractors. This still doesn’t protect against the liability of being a co-employer. However, it may serve to reduce the sense of lesser status and reduce the likelihood of resentment and even litigation.
When dealing with staffing firms and perma-temping, the most important thing to keep in mind is the spirit of the law. Temp workers should be used for temporary needs and not to create a sub-class of employees to save money. If you are treating temp workers fairly and keeping them from falling into perma-temp limbo, they can serve you well.
Onboarding: Staffing Firms and Perma-temping
When you do choose to transition temporary workers to full-time employees, consider our onboarding solution. It’s a favorite for both traditional employers and staffing agencies to make the hiring experience as simple as possible. Contact our sales team for a free demo.