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Countdown to ACA Compliance – Part III

by Jeanne Knutzen | October 28, 2014

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The PACE Staffing Network has been preparing for the employer mandates of the ACA for well over two years. As members of the American Staffing Association (ASA), we provided input into several areas of proposed regulation, and attended countless hours of ACA related training. With the ACA’s employer mandates ready to launch January 1 2015, we wanted to share information on the specifics of how the ACA impacts your use of temporary/contract employees. For ideas on how to better manage your needs for staff in light of new ACA mandates, contact a member of our Partnership Development team by contacting infodesk@pacestaffing.com or calling 425-637-3312.

In what ways has the ACA already impacted your temporary and contract workers?  

The Individual Mandate has been in effect since 2014, requiring all temporary and contract workers to purchase ACA qualified insurance for themselves and their dependent children. While we do not know what percentage of temporary/contract employees complied with these mandates in 2014, we suspect that number will increase in 2015 as penalties for non-compliance increase.

What changes go into play in 2015?

The Shared Responsibility component of the ACA, known as the Employer Mandate, goes into effect on January 1, 2015. This provision requires that all staffing companies employing 100 or more employees offer affordable and ACA qualified insurance to 70% of its eligible employees or pay significant fines and penalties. The taxes/fines/penalties for not offering insurance are $2K/year ($167/month) per eligible full time employee—excluding the first 80; if the insurance offered does not meet ACA requirements or isn’t affordable, the fine/tax penalty is $250/month (up to $3K annually) for any employee going to the exchange for insurance and receiving a subsidy. This mandate will impact most but not all staffing companies in 2015.

Are most staffing agencies already offering insurance?

The short answer is YES. PACE along with most staffing agencies has been offering some form of health insurance for well over a decade. Unfortunately these health insurance products do not meet ACA requirements, so new products for our industry had to be developed over the last year.

What requirements must be met in order for a temporary or contract employee to become eligible for ACA benefits on January 1st, 2015?

There are several ways an employee can be qualified for coverage as of January 2015. Using a look-back period, any temporary or contract worker of a “large” staffing agency who has been on assignment through their staffing agency for at least 1560 hours during 2014 must be offered insurance. These look-back periods will continue on through 2015 so that all employees meeting the full-time requirement must be offered insurance within 30-days of the end of their look-back. For all full-time employees hired after October 1, 2014 they will become eligible for insurance on the first day of the month following the completion of their administrative period—no later than the first day of the fourth month from date of hire. Full-time employees are considered any employee intended to work 30-hours per week or more at the point of hire.

What must a staffing company contribute to the employee’s insurance costs in order to ensure “affordability?”

Staffing firms must contribute to the employees’ premium so that no employee is required to pay more than 9.5% of their base pay for their own personal coverage. For example, if an employee earning $10/hr. is offered an ACA compliant insurance plan that costs $400/month, the employee cannot be required to pay more than $123.50/month for their own coverage, requiring their staffing firm employer to pay $284.80.

How will newly assigned temporary and contract employees become eligible for coverage in 2015?

Starting in October, 2014, PACE will categorize all new hires as one of the following:
  • Full-time – working 30 or more hours per week and projected to work at least 1560 hours in the coming 12 months,
  • Part-time – working less than 30 hours a week, or
  • Variable hour – employees whose status as either full- or part-time can’t be determined at point of hire.
  • Seasonal – employees working 6 months or less at specific times throughout a calendar year.
While you might assume that all the employees we hire are either Variable Hour or Seasonal, there are very specific rules staffing companies must follow to put an employee into those categories. What’s at stake is that for employees categorized as Variable Hour, they are allowed to work for their employer for a defined “measurement period” (typically 12 months) without the benefit offer requirement. The IRS is not going to give this classification away easily.

How will most staffing companies decide to become compliantwill they pay or play?

To be ACA compliant, a staffing agency can either offer benefits or pay the $2000 per employee “did not offer” penalty. They can also offer a qualified benefit but not participate in its costs, running the risk of incurring the $3000 per subsidized employee penalty for not making their plan “affordable.” Each approach to ACA compliance has offsetting costs and risks, requiring each staffing agency to choose a strategy that meets their customer’s needs for cost containment and their positioning in the marketplace.  The American Staffing Association commissioned a study by Towers Watson (2014) which provides insight into the choices likely to surface over the next 60 days. According to the TW study, 54% of staffing companies will be offering some level of insurance to its eligible temporary and contract workers. The remaining 46% are either planning to pay penalties or are too small to be covered during the transition year. A popular compliance strategy used by many staffing agencies, including PACE, will be to offer two insurance options:
  • A plan that meets both the “minimum value” (MVP) and the “minimum essential coverage” (MEC) definitionswith a 60% actuarial value covering core services. This plan will meet all the requirements of the employer mandate.
  • A plan that meets only the “minimum essential coverage” (MEC) definition – A less costly plan that meets only individual mandate requirements.
This strategy provides a low cost way for our employees to become compliant with the individual mandate (avoiding their own fines and penalties), while protecting PACE from penalties stemming from employees taking subsidies because our plans don’t meet ACA requirements or are unaffordable.

Do you need to know if and how a company providing temporary or contract staff to your organization is ACA compliant?

Theoretically no. Provided you have the right contracts and agreements in place you will have no responsibility for your staffing vendor’s decisions regarding how they will get and stay compliant with ACA mandates. Thinking more pragmatically, the expertise your staffing vendor brings to the table to not only ensure their own compliance with the ACA but to help you with yours, can be invaluable. First of all, a vendor who hasn’t prepared to become compliant can easily find themselves facing fines and penalties of a size that can end their business. Secondly, like most overly ambitious legal undertakings, the ACA contains opportunities for smart employers to use the provisions in the ACA to create new and more competitive ways of doing business. If staffing agency does not understand the ACA and its nuances, they likely won’t be able to offer fresh ideas on ways to lower your ACA related costs!

What will be the” added costs” for staffing agencies to become compliant with the ACA in 2015?

There are two categories of costs associated with ACA compliance:
  • The increased costs of ACA related administration which will be considerable—starting with changes in point of hire administration, monthly reporting, annual reporting to both employee and the IRS, etc.
  • The increase in direct costs associated with either offering the required insurance coverage or paying the penalties associated with not offering.
The direct cost increases will be agency specific, depending on several factors:
  • How many "full-time" employees they have in their workforce relative to their total workforce?
  • What percent of their eligible full-time employees will take the insurance once offered?
  • The eligible employees rate of pay to arrive at the costs the agencies will incur to make their plan "affordable."
  • The costs of the insurance products they are offering.
Based on the costs we are currently projecting, PACE is anticipating a 3-5% increase in our direct costs with another 15% increase in our current administrative costs.

For staffing companies who elect to “pay,” are they subject to taxes/penalties on all their temporary employees?

No. The application of taxes and penalties for “not offering insurance” only applies to full-time employees (minus 80 in 2015). Excluded from penalties for unaffordable insurance are employees who either reject an offer of coverage, elect coverage that isn’t affordable or delivering minimum value, or who are enrolled in state Medicaid programs.

What ACA related costs are still unknown/unclear?

Historically, the staffing industry has faced serious challenges finding a health insurance product that will serve their high turnover, low participation workforces. Six months ago there were no insurance products available to the staffing industry that would meet ACA actuarial standards. We now have insurance products, but it is not clear if these products will be attractive enough to our temporary and contract workers to incent their participation. We’ll all know much more in six months than we know now about what percent of the people being offered insurance will chose to take it.

How will the individual staffing company deal with their cost increases?

There are as many different pricing philosophies and strategies as there are staffing companies—with the key factors being geography, local business and government taxes, employee type, market positioning, and service offerings. While the pricing structures of staffing companies providing long term professional staff typically have room for premium level healthcare benefits, for staffing companies working in more competitive markets, there is little room to absorb any increased in direct costs. Some staffing companies will offer only the low cost MEC plans, taking the chance that the employees electing their insurance will not go out to the exchange and seek subsidies for better plans. We consider this strategy risky. The ASA study by Towers Watson study revealed that 91% of the staffing firms polled are planning on passing their ACA costs (penalties or insurance costs) back to their clients in the form of across the board increases in bill rates. Most (38%) are planning 2-5% increases. 9% are looking to increases of 16% or more. 19% are still not yet sure how much they will increase bill rates.

How will the price increase be handled?  

Most of the pricing programs we have viewed are designed to smooth out the costs of providing insurance to all eligible employees and spreading those costs across an entire workforce and customer base.
The Towers Watson study indicates that employers can expect their price increase to come in a number of forms. Some will simply do an across the board increase in bill rate; others will see increases in mark ups; some will be adding a line on each invoice for ACA Costs.

How will the increased costs of temporary and contract workers compare with the increased costs associated with the ACA for other types of employees?    

Since the passage of the ACA, actuarial firms have been predicting increases in overall employee costs to be in the area of 5-8%. If this projection plays out, the per hour increase in costs for a temporary or contract employee may end up being much less than the increase in costs associated with the same employee, hired directly. For example, an employee earning $15/hr. hired directly may cost an additional $3.25-3.75/hr. in healthcare benefit costs in 2015 compared to 2014. The same employee provided by a third party staffing agency, might cost $.45-.70 more per hour than they did in 2014. For a more detailed discussion of ACA related “staffing math” and to compare the relative costs of employees hired directly with employees placed through a third party employer, contact our Partnership Development Team at 425-637-3312.

What other cost increases will employers experience in 2015?

We anticipate ACA related cost increases will touch just about every part of our customers’ businesses in 2015. Administrative cost increases alone could be staggering.
Part of the services and costs savings we are delivering to customers in 2015 and beyond is full administration of ACA related compliance.

When it comes to managing staffing providers, are there other elements of the ACA that employers should be paying attention to?

Yes. It may be time to review your staffing contract or agreements. The ACA has its own common law provisions, reinforcing the notion that it is the common law employer who is responsible to offer and pay for ACA mandated benefits. In most temporary or contract staffing arrangements, there is clear legal precedence for the staffing company to be the common law employer, accountable for ACA compliance. That said, we recommend that employers consider adjusting agency contracts to clearly spell out each party's respective roles in managing ACA mandates. PACE is happy to provide language recommendations upon request. For employers purchasing payroll services from their staffing provider, the law is less straight forward and the need for contractual adjustments more important. Again, we recommend that the role of your third party payroll service provider be spelled out clearly and contractually in any ongoing payroll services agreement. We recommend that specific indemnifications related to the ACA liability should become standard clauses of all payroll service agreements and contracts. NOTE: A nuance of the ACA regs specifically requires that if there is a chance or a reason for a payroll agent to not be considered the common law employer, the costs of providing insurance to an ACA benefit eligible employee should be passed back to that client as an increase in rate for the particular employee. Between now and early January, PACE will be speaking with all clients to ensure the proper ACA compliant contracts are in place.

Do we need to be concerned about “abuse” clauses?

The IRS has been very clear that it will be looking closely at staffing firms and their clients to ensure that ACA benefit requirements are not purposefully skirted. For example, an employer who turns their entire 50 person workforce over to a staffing firm, so as to avoid falling into the “large employer” category, would be highly suspect. An employer who employees 48 people and regularly uses a staffing company to provide 5-10 employees for its peak busy periods, on the other hand, is likely not suspect, even though their use of temporary staff keeps them below the 50 employee benchmark. The difference? Their temporary staffing strategy was designed to address a business need—not to avoid offering benefits. Splitting employees between a staffing company and their client or between two staffing companies so that no one “employer” reaches the 50 employee benchmark has been specifically prohibited. While PACE will continue to be strong advocates for all of the business reasons to use more flexible staffing strategies, we will only recommend changes that are based on business need, not ACA avoidance.

Is there future ACA stuff that we should be thinking about for 2016 and beyond?

Yes.
  1. Discrimination Issues. Current thinking is that all the ACA specific regulations related to discrimination will come out in 2015 and be implemented in 2016. The ACA is clear that any plan or employer contribution that provides a differential benefit in favor of highly compensated employees will be specifically disallowed. This means that once discrimination regulations have been written and put into play, employers will no longer be able to provide special plans or higher levels of contribution to their higher paid employees—short of making them available via post-tax dollars.
  2. Special tax on Cadillac Plans. In 2018, employers will be taxed on Cadillac benefit that cost more than $10,200 ($850)/month per individual. The tax on Cadillac plans is 40%—making these plans prohibitive for most employers. Employers with Cadillac plans will likely look for alternative approaches.
We hope you have benefited from reading this primer on the ACA and how it will impact your use of temporary and contract workers after January 1, 2015. For more personalized consultation, please contact our infodesk@pacestaffing.com or by calling 425-637-3312 to arrange an appointment with one of our ACA Specialists.
jeanneThis article was prepared by Jeanne Knutzen, CSC, the President and Founder of the PACE Staffing Network. PACE remains committed to full compliance with the ACA and offers a variety of staffing products and services designed to ensure that our clients have options for containing the costs associated with ACA compliance. For a confidential discussion of how these services might be applied to your workforce, particularly your temporary and contract employees, contact a member of our PSN partnership team at infodesk@pacestaffing.com or 425.6376.3312.    

The Number of Employees Testing Positive for Marijuana Is Up Significantly

by Jeanne Knutzen | October 21, 2014

0 Blog, Legal Issues - Staffing, Management.Supervision drug testing, Employment Agency Bellevue, Employment Agency Everett, Employment Agency Kent, Employment Agency Seattle, Employment Agency Tacoma, Employment Agency Washington State, hiring, Hiring Bellevue, Hiring Everett, Hiring Tacoma, Marijuana testing, Marijuana testing Colorado, Marijuana testing Washington, Temporary Staffing Bellevue, Temporary Staffing Everett, Temporary Staffing Kent, Temporary Staffing Seattle, Temporary Staffing Tacoma, Temporary Staffing Washington

As reported by Allen Smith, Manager of Workplace Law for the Society for Human Resource Management (SHRM), in a mid-September announcement. Using data provided by Quest Diagnostics for calendar years 2012 and 2013, the increase reported represents the FIRST INCREASE in marijuana positives since 2003! After reaching a high of 13.6% in 1988, positive drug testing outcomes had been steadily decreasing. In 2013, positive test results were up 3.7%, following a 3.5% increase in the positive rate the year prior. The connection between this increase and the legalization of recreational marijuana in Colorado and Washington did not go unnoticed. Positive results for marijuana use in Washington increased by 23% and in Colorado 20%, compared to a 5% increase among the US general workforce covering all 50 states. The PACE Staffing Network has been offering and then administering drug testing on our client’s behalf since the early 1990s. Initially, our clients got a lot of push back on their drug testing policies, but today, both pre-hire and random drug testing practices are considered the norm with only an occasional challenge from the ADA related to screenings for prescription drugs. While “for cause” testing is more frequently contested, according to Quest, it is the most common reason why workers are drug tested. At the current time, our clients range from zero tolerance employers who require all applicants for either permanent or temporary employment to be rigorously drug tested, to employers who openly request that we not drug screen, concerned that recruiting results will fall short of the numbers of employees needed—particularly when the workers are being used for short term, temporary assignments where product out the door is the driving factor in HR policy. Some employers claim that while some of their workers are known weekend marijuana users, they are amongst their best workers and don’t want an unnecessarily “restrictive” HR policy to interfere with their “business as usual” mentality. The type of drug testing our clients ask us to administer provides some clue as to their level of “tolerance” they are willing to enforce and at what cost. Employers who are serious about eliminating any type of drug use from their workforce typically require hair testing over urine or saliva testing because of its ability to uncover signs of drug use for up to 6 months. Unfortunately, we anticipate these will be the first types of drug testing methods to be legally challenged. While at the current time employers in both Washington and Colorado retain the right to restrict the recreational use of marijuana by employees and can impose sanctions on employees testing positive for marijuana whether it was ingested during a work day or on the weekend. Many believe that the court test of these “one size fits all” types of drug testing policies and sanctions are just around the corner.

Countdown to ACA Compliance

by Jeanne Knutzen | September 23, 2014

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Part II. ACA Requirements and Penalties - 2015! Yes, the 2,300 pages it took to write the law, followed by the 10,000+ pages of regulatory interpretation can be daunting, but with the January 1st launch of our transitional year just around the corner, we are taking the time to boil down the complication into the “critical few”—things our clients MUST KNOW about what lies ahead. In Part I, we provided a complete glossary of ACA terms—just so you would have a playbook. In Part II, we are providing a simple outline of employer and employee requirements for 2015.

  • Employer (Shared Responsibility) Requirements: In 2015, employers with 100 or more full time employees (or full time equivalents) must offer a healthcare insurance plan that provides Minimum Essential Coverage (MEC) to 70% of its full time employees and their dependent children or be subject to “failure to offer” penalties described below.
  • Individual (Shared Responsibility) Requirements: As in 2014, individuals must enroll in a healthcare plan that provides themselves and their dependents with MEC level coverage. If they do not obtain MEC insurance, either through their employer or Medicaid, they are required to purchase an ACA approved plan through a State or Federal Exchange—in Washington we have a “working” Exchange.
  • Employer Penalties: It is important for employers to distinguish between two important differences in mandated plans:
    • MEC/Minimum Essential Coverage plans are typically very low cost plans that meet both the individual and the employer mandates.
    • MVP/Minimum Value Plans are most costly plans that must meet ACA actuarial value standards in addition to “affordability” standards. Most MVP plans will meet MEC requirements, but not vice versa, making employers subject to two types of penalties.
1. Failure to Offer Penalties. Employers who fail to offer a MEC plan to 70% of their eligible employees (and their dependent children) will pay a monthly tax/penalty of $167 or $2,000/yr.—for each eligible fulltime employee. This tax/penalty is calculated on your entire eligible workforce and will include all those employees who have been offered and accepted coverage. Deductions: In 2015, you can deduct 80 employees from your count of eligible employees. In each year after 2015, you can deduct only 30. For example, in 2015 if you have 100 employees working for you in a month and do not offer coverage to at least 70 of those employees, your monthly penalty will be based on 20 employees (100 minus 80) calculated at $167 each for a total of $3,340 tax or penalty each month you fail to offer. 2. “Inadequate Plan” Penalties. If the plan an employer offers is either “unaffordable” or does not provide “minimum value” (MVP) the tax/penalty per month for employers increases to $250/month (up to $3K annually). This penalty is unique and much more complicated to administrate in that it is applied only to those employees who seek and are granted a government subsidy as a result of applying for insurance on a State Exchange. If an employee is offered both a MEC and MVP plan and EITHER refuses both, or ELECTS only the MEC option, they WILL NOT BE ELIGIBLE FOR A SUBSIDY. NOTE: Most employees are not aware of this special provision of the law and may enroll in a low cost MEC plan believing that by enrolling they will become compliant with the individual mandate while preserving the option of receiving subsidies at a later date. An employee who has been offered both MEC and MVP coverage and elects the lower cost MEC coverage, loses their eligibility for subsidy. 3. Individual Penalties/Taxes/Fees: For your employees, the penalty (technically referenced as a tax or fee) for failing to obtain the required insurance coverage is either a flat dollar amount per person or a percentage of household income. These penalties are already in effect for 2014, but go up significantly in 2015.
  • In 2014: the penalty is $95 per person, $47.50 per child (up to $285 per family) or 1% of household taxable income, whichever is greater.
  • In 2015: the penalty is $325 per person, $162.50 per child (up to $975 per family) or 2% of household taxable income, whichever is greater.
  • In 2016: the penalty is $695 per person, $347.50 per child (up to $2085 per family) or 2.5% of household taxable income, whichever is greater.
  • In 2017 and beyond: the penalty will be the same as 2016 with Cost of Living increases.
4. Your Employee’s Eligibility for Subsidies: Individuals with household incomes determined to be 100-400% of federal poverty levels may be eligible for government funded subsidies to buy their insurance. Employees become ineligible for these subsidies if:
  • They are already on Medicaid.
  • They have been offered and refused an employer’s offer of a healthcare plan that is both affordable and meets MVP requirements.
  • They purchase insurance through venues other than a “qualified” Exchange—in our case the Washington Exchange.
In 2014, the poverty level for an individual is $11,670, which means that for families of four, subsidies will likely be available if the family earns anywhere from $23,050 and $92,200 annually. The eligibility boundary for 2015 is not yet available, although current estimates are that in 2015 over 26 million people will be eligible for subsidies. 5. Discrimination. The regulations relating to the new discrimination provisions embedded in the ACA have not been written and the IRS has promised it will not enforce any of its discrimination provisions until regulations have been published. We know that sometime in the near future employer funded plans will become subject to tests ensuring that differential treatment not be awarded to highly compensated employees, but it is the nature of these tests that has not been determined. Employers need to be paying attention to these regulations likely to be published in 2015 as the challenge of avoiding discrimination will be a significant cost management issue for employers with diverse workforces and an historical pattern of providing unique benefit options to their highly paid employees. In the meantime, in 2015 employers will be able to offer different plans to different employee groups and can contribute differently to employees based on “their group.” If the plans offered meet MEC, MVP and “affordability” tests, typical tiered/pay up plans are allowable in 2015 without risk of penalty. 6. Record Keeping. 2015 adds several new layers of administrative and reporting requirements for ACA defined “large” employers (50 or more employees), regardless of whether or not you are subject to the employer mandates in the 2015 transitional year. Notices to Employees. Since October 2013, all “large” employers have been required to provide new hires with a statement of their eligibility for coverage that they can either obtain through you or the Exchange. The IRS has made this compliance requirement easy to administer by providing samples of required letters. They are available for download via the IRS website: http://www.dol.gov/ebsa/healthreform/regulations/coverageoptionsnotice.html Forms 1095 C. In accordance with section 6056 of the IRS code, employers offering a self-insured MEC plan AND employers considered “large” under ACA standards will be required to report annually on all employees who worked for them as a full time employee for at least one month during 2015 and each reporting year thereafter. These reports, using Form 1095-C need to be prepared monthly throughout 2015, but will not be submitted to the IRS until March of 2016 (if filed electronically). Form 1095-C must be submitted to employees by end of January 2016.
  • The data required, organized by month, includes:
  • The number of full time employees (each month).
  • The name, address, and SSN of each full-time employee (each month).
  • The months during which coverage was available.
  • A certification, month by month, of the employer size.
  • A certification, month by month, as to whether the employer offered the full time employee (and his or her dependents) the opportunity to enroll in employer-sponsored coverage.
  • The amount the employee would need to pay if they accepted the lowest cost monthly premium (for self-funded programs only).
  • The months, if any, during which the employee was covered.
Forms 1095 B. The ACA also added section 6055 to the IRS Code, requiring all insurers and self-insured employers providing minimum essential coverage (MEC plans) to submit annual reports (Form 1095-B) identifying the costs of their plan and who was covered. If you are an employer who offers a fully insured group health plan, your insurance issuer is required to submit the returns, but if you offer a self-insured plan, you are required to submit the returns (even though a third party may prepare the return). Employers are generally subject to penalties for failure to file Forms 1095 -B and C; although the IRS has said that in 2015 they will not impose penalties for incomplete or incorrect information if the employer made a good faith effort to comply. W-2 Reporting. The requirement to include the costs of certain healthcare benefits on the employees W-2 at the end of each year has been in effect since 2012, but has only been loosely enforced. From 2013 on, employers filing 250 or more W-2 forms annually are required to report the total value of certain employer-sponsored health benefits to all employees receiving this benefit. The amounts reported are strictly informational and have no impact on the employee’s taxable income. In Part III of our Countdown to ACA Compliance, we will be discussing the special provisions of the ACA that apply specifically to temporary and contract workers—our specialty. There are provisions in the law that you should know about to protect yourself from unforeseen fines and penalties. jeanneThis article was prepared by Jeanne Knutzen, CSC, the President and Founder of the PACE Staffing Network. PACE remains committed to full compliance with the ACA and offers a variety of staffing products and services designed to ensure that our clients have options for containing the costs associated with ACA compliance. For a confidential discussion of how these services might be applied to your workforce, particularly your temporary and contract employees, contact a member of our PSN partnership team at infodesk@pacestaffing.com or 425.6376.3312.    

Retain Employees. Manage Turnover. Which Is It?

by Jeanne Knutzen | September 9, 2014

0 Blog, Flexible Staffing Strategies, Management.Supervision Employment Agency Bellevue, Employment Agency Everett, Employment Agency Kent, Employment Agency Seattle, Employment Agency Tacoma, Employment Agency Washington State, hiring, Hiring Bellevue, Hiring Everett, Hiring Seattle, Hiring Tacoma, Temporary Staffing Bellevue, Temporary Staffing Everett, Temporary Staffing Kent, Temporary Staffing Seattle, Temporary Staffing Tacoma, Temporary Staffing Washington

Okay…while not a pure play contrarian, I’m finding myself reacting less than enthusiastically to all the talk on employee retention that has been hitting the airwaves lately—apparently the hot topic in the staffing world. For me, the mandate that companies do what is necessary to retain their high value talent is HR 101. So when I read all the hoopla on the value of retention, I want to make sure our readers also hear the other side of the story—that for some jobs, the goal can’t always be about reducing turnover/improving retention, but needs to be more about better managing the turnover they have—smartly, proactively! MANAGED TURNOVER is a different sort of staffing strategy that I believe has a legitimate place in any hiring manager’s arsenal of staffing options.    Most (but not all) of the MANAGED TURNOVER staffing models we put together for our clients are developed in response to scenarios involving what we call High Impact/Low Appeal (HI/LA) jobs! You know those jobs—ranging from that pesky front office job that was crafted from all the work no one wants to do, to the folks in your warehouse doing that boring, repetitive assembly type work that no one could pay you enough to do. No matter how great the manager’s motivational skills or generous the company’s pay programs, the nature of HI/LA work lends itself to workforce issues—increases in absenteeism, accident rates, and other workplace mischief that makes HR shutter. Sooner or later most HI/LA jobs suffer from high levels of voluntary or involuntary turnover, directly impacting team or company performance. When asked to find employees for HI/LA jobs, one of the first things we explore is the option of ending the uphill battle for retention, and replacing it with a staffing model involving a strategically rotating group of temporary workers. Here’s why:

  • New temporary workers can come to HI/LA jobs fresh, ready to perform at high levels when their motivation to meet a new challenge is at its highest.
  • Temporary workers are easily rotated out of HI/LA jobs when the work is no longer new; the employee is no longer fresh.
  • Turnover (for the client) goes away, replaced by assignment starts and ends,
  • …as does the costs and hassle of recruiting and vetting new employees. That work is shifted to a third party staffing agency.
MANAGED TURNOVER programs are built around statistically measured cycles of performance that exist for all jobs, all employees. While specific timelines and measurement units (ex. productivity, attendance, etc.) vary, each employee’s performance in an HI/LA job usually comes out in some version of a bell shaped curve. When the employee is new, they are motivated to learn and fit in with the team. Productivity increases until the newness wears off and the signs of boredom or discontent start to surface in the form of issues with attendance, carelessness, and other forms of worker misconduct. Chart for Blog The goal of a MANAGED TURNOVER staffing model is to optimize the number of workers in the earliest, most productive, stages of the performance cycle, while systematically cycling out employees just before they start into the downward cycle. When done proactively, the employee’s temporary assignment begins and ends at predetermined times, most correlated with optimized worker performance. One of the important benefits of a MANAGED TURNOVER staffing model is that it side steps all the negativity embedded in a core employee staffing model applied to HI/LA jobs. Employers no longer spend time outlining their defense of a decision to terminate a core employee. Employees no longer struggle with a job that is no longer challenging. Assignments begin and end in accordance with a custom designed staffing plan based on the performance cycle typical of that particular job or workforce. Minimal hassle, minimal complication. The heavy lifting of replacing departing employees is assigned to a third party staffing agency, reducing if not eliminating internal recruiting costs. Another side benefit of a MANAGED TURNOVER staffing model is that your temporary workforce becomes an always-available pool of candidates for hire. As all hiring managers know, when it’s time to hire the ramp up time, costs to find, screen and hire a new employee can be significant. And there is no guarantee that who your hire will work out. Having a large number of auditioning workers continuously available for hire allows employers to hire in a timely way, selecting only the very best to become a part of their core team, reducing the costs and disruption of hiring errors. Not to worry, a MANAGED TURNOVER model doesn’t mean your entire workforce becomes "temps." Depending on the work to be performed, there are identifiable ratios of core and non-core workers that optimize overall performance. Too many temps and stability suffers. Too many core workers and your operational costs will eat away at your bottom line during your less busy periods. Ratios of temp to core workers can range anywhere from 10-15% to a high of 85-90%, depending on your business cycles and the nature of the work. Here are two examples where one of our PSN partnership teams implemented “managed turnover” staffing models that improved worker outputs, dramatically reduced recruiting costs, and/or improved overall team performance and morale: Some of our earliest converts to a managed turnover staffing model were call center clients who were hiring large numbers of entry level employees for service roles. One particular call center was facing a serious issue with first year turnover which was both increasing their internal recruiting costs, while also impacting service levels. 1. In partnership with our client’s HR team, our call center recruiters augmented the client’s recruiting team, reducing our client's internal recruiting costs. We worked in partnership to implement a uniform staffing process where all employees, sourced either by the client or our own recruiting teams, were screened and onboarded in the same way. All new call center reps were employed by PACE during the first 90-days of their employment. This “audition period” allowed employees who were unable to meet the client’s expectations to be systematically removed from their assignment so that at the end of the audition period, the client offered employment only to those employees who were able to meet the full scope of their expectations. Those not measuring up were either given an extended “audition” period or their assignment was ended. Using this “managed turnover” staffing model in effect transferring most of the first 180-days of turnover to PACE, the client’s first year turnover rates were cut in half. Employees whose assignments were ended during the audition period became available to be placed on other PACE assignments, better suited to their personality or skill sets.  2. A second example is provided by one of our large healthcare clients who were experiencing turnover, attendance and workplace injury issues in their laundry area. After viewing the work, it was easy to see the classic HI/LA profile—physically demanding, repetitive, and ultimately boring work. While the client initially asked us to help them improve their hiring outcomes (i.e. reduce turnover), our recommendation was that they focus instead on better managing the turnover we suspected was there to stay. With the client’s guidance, we implemented a MANAGED TURNOVER staffing model.  As each core employee left we replaced them with a temporary employee, whose assignment varied in length depending on our client’s anticipated needs. The employer’s workforce was soon “mostly temps” who were hired for specific work performed for a specified time period—and were oriented and managed accordingly. The PSN partnership team set up a performance management system which, with our client’s help, was used to manage the employee’s performance. When an employee started to fall below defined standards, PACE, not the client, invested its recruiting resources to find a replacement candidate. For this client, the MANAGED TURNOVER staffing model delivered a level of orderliness and predictability to their staffing process they hadn’t experienced in the past. It eliminated the negative impact of unexpected turnover, as well as taking away the pressure on their internal recruiting teams to staff a high turnover workforce. For our temporary employees, it provided them with assurance that when their assignment ended, their performance would earn them the opportunity to be placed elsewhere.   Workplace injuries were reduced by cycling temps in and out of the performance cycle, avoiding the burnout that had been a contributing factor to both attendance and workplace accidents.             Obviously this MANAGED TURNOVER staffing model can’t be applied to all jobs and all work environments. And even if you determine that one of the HI/LA jobs you manage would lend itself to a MANAGED TURNOVER staffing model, there are some basics that need to be in place: The Right Staffing Partner. A staffing agency who only knows how to recruit people is not the partner you need to implement a MANAGED TURNOVER staffing model. Look for an agency who knows how to address productivity issues, has tools and systems in place to help you manage employees, and can bring you ideas about how to implement a managed turnover staffing plan. Look for a staffing partner as interested in solving your operating challenge as you are. The Right Financial Model. You will need to keep your CFO aware of what you are doing and why as you will be purposefully expanding your budget for temporary staffing while decreasing the monies you spend on high cost core staff. While the per hour costs of temps and core employees is almost identical (by the time you factor in all the regulatory and benefit costs of core employees), depending on how your company organizes its budgets and expense allocations, the costs of these two different types of employees can end up in different places on your financial reports and may trigger questions from “up the chain.” You will likely need at least one senior manager on your team who understands the shift you are making in how you are doing “staffing,” and why. The Right Mindset. Most of the MANAGED TURNOVER staffing models we implement with clients tend to migrate into very objective, data driven, staffing processes. Even though you are no longer managing core employees, the need for clear performance standards, transparent metrics, and fair administration does not go away! jeanneThis article was written by Jeanne Knutzen, the founder and CEO of the PACE Staffing Network. The PSN partnership teams are well versed in a variety of flexible staffing strategies, including MANAGED TURNOVER programs. For a complimentary consultation on what flexible workforce recruiting and staff strategies might work in your organization, contact us via our InfoDesk at infodesk@pacestaffing.com or by calling 425-637-3312.

47 is the NEW 40!

by Jeanne Knutzen | September 3, 2014

0 Blog, What's New in Staffing? Employment Agency Bellevue, Employment Agency Everett, Employment Agency Kent, Employment Agency Seattle, Employment Agency Tacoma, Employment Agency Washington State, Hiring Bellevue, Hiring Everett, Hiring Seattle, Hiring Tacoma, Temporary Staffing Bellevue, Temporary Staffing Everett, Temporary Staffing Kent, Temporary Staffing Seattle, Temporary Staffing Tacoma, Temporary Staffing Washington

The 2013.14 Gallup Work and Education Survey (just released) suggests that the average number of hours worked a week by US employees is almost one day more than the 40 hours typically considered full time. In fact, only 42% of the employees reported working only 40 hours—with 47 hours being the average of the 1,271 adults polled. While 39% reported they worked more than 50 hours a week, with 18% reporting their work week got stretched to 60 hours or more. While 40 hours is widely regarded as the standard for full time employment, salaried employees reported working an average of 49 hours a week, while hourly employees reported working an average of 44 hours per week. Our readers should note that the hours of work reported were based on employee’s self reports—not data pulled from payroll records. Our experience is that employees typically over estimate the number of hours they actually work each week. Issues with self reporting set aside, it is clear that the 47 hour/week average is clearly the perceptual norm—being the consistent average being reported by the Gallup survey for well over a decade. While most state and federal employment laws define full time employment as 40 hours/week, the ACA defines full time employment as 30 or more hours/week—that point where the employer’s mandate to provide healthcare benefits kicks in. Critics of the ACA are predicting that more employees formerly considered full time will be converted to part-time status to avoid benefit eligibility. The Gallup poll noted that in their study, 43% of the employees polled were employed full time, down from 50% reported prior to 2007 and the “Great Recession.”