Setting the Record Strait on the Use of Temporary and Contract Employees

Setting the Record Strait on the Use of Temporary and Contract Employees

by Sara Bennett | June 28, 2020

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Over the years we’ve talked with hundreds of employers about the value that temporary and contract workers  can bring to their business.   

And yes, we do field a good amount of misinformation about the kind of employees who work in temporary or contract roles, the rules regarding how to use these types of a employees from a legal or “best practices” perspective, and, of course, a lot of miscues about what they cost, particularly when compared to employees doing the same or similar work but hired direct.   

As we move into an economic period where employers will likely increase their use of flexible staffing solutions driven in large part by an increased reliance on temporary and contract staff, we wanted our readers to be armed with the facts.

To set the record straight, we’ve made a list of the most common myths associated with temporary staffing models and added the  facts that debunk these myths.

Myth #1.  The best use of temporary employees is for entry level roles. They aren’t skilled, motivated or experienced enough to take on more responsible roles.

My guess is that this a mythe our readers have already debunked on their own given their own experience with very high level temporary and contract workers.  If, not, let me just say that any concerns our readers might have about the range or quality of talent available for interim work, needs to be put to bed fast.

As a recent survey done by the American Staffing Association stated recently, the temporary workforce, which now includes over 3 million employees,  is as every bit as diverse as workforce in general.  Demographically – they’re millennials, retirees, at the beginning middle or end of their careers.  They’re teachers, engineers and nurses. Some practice law, others drive forklifts. ASA data indicates that over one third are college degreed.  The average age is 37.   From this data alone, you can conclude that there is no lack of skill or experience in the employees who populate the temporary workforce.

As for motivation, we find that the temporary employees we represent choose temporary employment for one of two reasons – 1) they see temporary work as a great way to get their  “foot in the door” of an employer of choice;   and/or 2) they have a longer term preference for more flexible work arrangements.  They are motivated to perform at high levels by the same things that motivates core workers – they want to make a difference.

In fact, many employers report that when they take the time to orient their temporary employees to their shorter term work assignments in the same way as they orient their core employees to their longer term jobs – they often out perform their core employee counterparts.  Think about it – they are not distracted by “office politics”; they are fresh – energized (not burned out) by new challenges; they don’t have a reason to resist change.

 

Myth #2. Temporary employees can only be kept on assignment for short periods – never longer than 12 months. 

This is a very old belief that,  while having bonafide historical roots,  by today’s legal standards has no basis in reality. Temporary employees can work as “temps” indefinitely given two conditions  – 1) the employer elects to keep them working as a temp (likely for business reasons) and 2) the employee is willing to work in a role categorized as “temporary” (in most cases foregoing certain benefits or privileges of a core employee).

We have several employees who have been working in the same role for the same client for over 3 years and are happy to do so.  Other employees will leave our employment after 2-3 months in the same assignment either to be hired by our client directly or to pursue another opportunity.  How long an temporary employee remains on assignment has no legal limits – determined only by business or personal needs.

Tip:  To learn more about the myths surrounding “length of assignment” and why some employers voluntarily decide to limit “length of assignments” today, check out our blog on this topic…     

 

Myth #3.  If I get my “temp” from a staffing agency, we eliminate our exposure to legal workplace issues.    

Unfortunately, this myth is simply not true.

Staffing agencies and their customers are recognized by most courts as co employers which in many situations can create some unexpected liabilities for employers who mistakenly believe that only their staffing agency is accountable.  Regardless of who is considered their “real employer”,  temporary employees have the right to work in a non-hostile, safe work environment and both an employer and their staffing agency partner are responsible to make sure that happens.  Additionally, decisions that impact the conditions of a temporary employee’s assignment, decisions that most often are made by the staffing agency and their client in collaboration, must be made without consideration of race, age, sexual identification, religion, or ethnicity or both the employer and their staffing agency are vulnerable to a complaint and the costs of an eventual settlement.

Tip:  Select your temporary staffing partner carefully.  Like it or not, you are co employers and what they do, how they communicate with your shared employees, can impact you!  

  

Myth #4.  By hiring a “temp” as an “independent contractor” I don’t have to worry about paying payroll taxes or benefits.

 Again, this is another myth based on a lack of information about the legal issues surrounding how workers are classified – as W2 temporary workers or as independent contractors.   Even if a worker presents themselves as an independent contractor and claims to be paying their own wage related taxes, employers should not forfeit their legal responsibility to ensure that how you treat them ensures that they stay truly independent – not really an employee in disguise.

The outcomes of worker misclassifications are not inexpensive. If the IRS does an audit and determines that your “independent contractor” is actually an employee, you are liable for all back taxes and substantial penalties.

Tip:  Issues with the misclassifying of workers as independent contractors has been a big deal with the IRS for over a decade.  PACE has a solution for unforseen misclassification issues which is our Employer of Record service.  This service allows your worker to be employed by PACE, not you, but be re assigned to your workforce to perform work under your full control.  Employer of Record services ensures that any worker attached to your workforce has a bonafide employer, even if that employer is not you.  

If you’d like more information on the difference between an employee and an independent contractor, check out this companion blog. 

 

Myth #5.  If a temporary employee is doing the same work as a fully exempt core employee, they are not eligible for overtime pay.

Any employee paid on an hourly basis (temporary or core) is considered nonexempt unless they are considered a computer science professional and earn $100,000 or more annually.  This means that if your high level temps working in accounting, marketing, and other professional services are paid and billed on an hourly basis, they need to be paid overtime pay to stay in compliance with FLSA regs.

Tip:  When negotiating bill rates with your staffing agency, don’t forget to negotiate your bill rate for overtime hours which can be a different mark up rate than what you are billed for regular hours of work. It doesn’t have to be 1.5 times the regular bill rate. Most staffing agency rate cards allow considerable discounts on hours over 40. 

You might also inquire if your staffing agency would be willing to quote a weekly bill rate for a temporary employee (instead of an hourly bill rate), eliminating the hourly pay rate restriction.    

                  

Myth #6.  Temporary or contract employees cost a lot more than an employee we would hire direct to do the same work.

Surprises are in store for many employers who automatically assume that temporary employees cost more than employees hired direct. It’s an easy conclusion when you compare your staffing agency’s bill rate with what you know the employee is paid.  What many hiring managers don’t realize is the true costs of an employee hired direct – costs that aren’t always visible unless you actually sit down and calculate the dollar and cents costs of an employee you hire direct.

Tip:  While the cost analysis needs to be made on a case specific basis, check out this link to one of our recent blogs on the topic of employee costs.

 

Myth #7.  I can’t hire a temporary or contract employee direct.

Whew – this myth always surprises me in that one of the most important benefits employers earn from a decision to hire a “temp” rather than hire a core employee is the how quickly and easy it is to convert the temp to your own payroll.   In fact, for PACE, our temp to hire staffing solution is one of our most popular service options because of the flexibility it offers employers to hire whenever they are ready.  

Tip:  Each staffing agency has its own rules about when and how much it charges its customers to convert one of their temporary employees to your payroll.  Its always a good idea to negotiate those conversion agreements up front.      

 

Myth #8.  It’s more cost effective for us to create our own pool of temporary employees rather than pay agencies to do that for us. 

We field this comment often – not so much now as we do 5-6 years ago.  But here’s the scenario – a new manager or director level employee joins the HR team and is anxious to make a difference.  After taking a closer look at the invoices they’re getting for temporary staffing, they decide to save their employer these staffing dollars by forming their own temp pool – “get rid of the high costs of using a third party staffing agency.”

While the motive is admirable, and in fact an internal “temp pool” may deliver some unique benefits not available thru an external resource, the cost savings benefit almost never surfaces.   By the time all the costs it takes to recruit, field requests for staff, do reach outs and dispatch employees and then manage the timekeeping and payroll administration of temps on assignment, paying an agency to do all that work starts to look like the more cost effective option – particularly when there is a big committment to additional fixed costs.   Recruiting costs alone can soar as the team uncovers that employees hired to be in a temporary or on call basis don’t last long.

Tip: If you’re considering bringing “temporary services” in house, we encourage you to first compare the services and costs you would incur to manage a temp pool internally compared to equivalent outsourced temporary agency services. Almost always that apples to apples comparison will make the case to outsource, not insource, the temporary staffing function.    

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PACE Staffing Network is one of the Puget Sound’s premier staffing /recruiting agencies and has been helping Northwest employers find and hire employees based on the “right fit” for over 40 years.

A  4 time winner of the coveted “Best in Staffing” designation , PACE is ranked in the top 2% of staffing agencies nationwide based on annual surveys of customer satisfaction.

PACE services include temporary and contract staffing, temp to hire auditions, direct hire professional recruiting services, Employer of Record (payroll) services, and a large menu of candidate assessment services our clients can purchase a la carte.

To learn more about how partnering with PACE will make a difference to how you find and hire employees,  contact our Partner Services and Solutions team at 425-637-3312, email us at partnerservices@pacestaffing.com or visit our website at www. pacestaffing.com/employers.

 

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