Pace Staffing Network

Contingent Employees… Whats? Whys? And What Nots!!!

The New Economy…Preserving Flexibility and Profits with Contingent Workers

Independent contractors, consultants, freelancers, temporary employees…some estimate anywhere from 5 to 30% of the US labor force is contingent in one-way or another. During periods of economic uncertainty like we have now, this number can accelerate rapidly as companies pull back on their long term staffing commitments and place greater emphasis on staying lean and flexible.

The Bureau of Labor Statistics has been tracking the number of “contingent workers” since 1995 with different results, depending on who gets counted. We know that between the years 1982 and 1998, the number of jobs reported by the companies who provide temporary help increased by 577% compared to a 41% increase in the number of jobs in all other industry categories. .

Why?

The often stated but over-simplified notion that employers are increasing their use of contingent workers as a way to bypass benefit costs or to pay lower wages, avoids the truth that many highly productive and professionally trained temporary employees are often paid more per hour than their “core employee” counterparts, and many, like our employees at the PACE Staffing Network, receive attractive benefit packages.

We find that rather than cost per hour, the driving reason for the popularity of temporary employees is a more powerful cost opportunity…flexibility. Temporary workers allow employers to hire the “right” people at the “right” time and in the “right” numbers to produce a product, provide a service, or complete a project on time and within budget. And when the work is finished, an employer can downsize quickly without the liability of defending termination decisions, paying severance, administrating COBRA, and getting bogged down in the slowness of WARN Act requirements. This elasticity is extremely attractive to today’s employers who need to move in and out of overhead commitments quickly.

“The temporary employee has become like the computer or the cell phone, a business necessity. The smart use of temporary or contract employees has become a strategic advantage for companies who have learned how to take full advantage of its benefits while minimizing its risks.”

The Microsoft Story

Sometimes companies use temporary employees in ways that makes it difficult to distinguish between a temporary employee and a regular (core) employee. If the IRS, who determines taxes owed on payroll wages, or the DOL, who enforces ERISA regulations, uncovers an employer trying to avoid their “employer responsibilities” by playing with job titles or “classifications”, they are quick to threaten penalties, fines, and restitution.

That’s what happened at Microsoft where large numbers of temporary employees working side-by-side Microsoft’s core employees, sued and won entitlement to very expensive stock options offered to their core employee counterparts. While nothing was wrong with Microsoft’s decision to manage their rapid growth using the benefits of a quickly assembled temporary workforce, there were some fairly easy actions that Microsoft could have done differently to protect them from the liability they ultimately incurred.

Making sure that benefit agreements or stock option programs specifically exclude temporary employees is an easy first step, but there are also some important differences in how companies need to recruit for, manage, and set the conditions of work for temporary employees that will maintain their arms length relationship.

For a shortened version of the 20 point list used by the
IRS to determine whether a “contingent worker” is
really an employee, e-mail us.

Avoiding the Pitfalls

One of the best ways for employers to avoid “hidden liabilities” related to the use of temporary employees is to work closely with a temporary staffing company who fully understands their “employer of record’ requirements and can design programs that minimize the risks you assume as an employer.

For example, if you are a small company and make it a practice of hiring your own temporary employees, did you know that they could become part of your headcount when it comes to census taking for benefit contracts? Did you know they could impact the eligibility of your owners or other highly paid employees for tax benefited savings plans like the 401K?

Or, if you are planning a company affair to which you want to invite your temporary employees, did you also think to invite their supervisor at your staffing company to preserve your arms length relationship with your temporary workers?

The PACE Staffing Network can help you design and execute a legally defensible temporary employee strategy. Our programs will produce the motivated committed employees you need, without jeopardizing your “non-employer” status.

For a free consultation on the do’s, don’ts, and
“how to’s” of making the most out of the advantages
available thru temporary staffing, please e-mail
our client services group for an appointment.