Over the past two decades, the use of temporary workers has tripled. Companies large and small benefit from the use of these workers, also referred to as contingent staffing, in various ways. They save on labor and employment benefit costs, avoid workers compensation liability and avoid some taxes and administrative expenses. Aside from traditional administrative and clerical staffing agencies, placement agencies specialize in providing workers for specific professions including medicine, information technology and the financial industry.
Where there are benefits, there are also risks for companies who employ the services of staffing agencies. They may be liable to the contingent worker as an employee of the company. Duration of assignments may range from one day to several years depending on how the worker is treated by the company, the classification of the worker by the company and the relationship between the worker and placement agency. A client company may be held liable to the contingent worker as if they were a company employee. They would be eligible for employee benefits and the company would be responsible for taxes and other employee related costs.
A company may avoid or limit certain types of liability by being cautious of the relationship that is maintained with the worker and by setting clearly defined company policy that distinguishes the rights and obligations of contingent staff. Specifically, employee benefit programs, including health and retirement coverage, should explicitly exclude contingent staff from eligibility. The staffing agency should administer payroll. Contingent workers must understand their status as being employed only by the staffing agency and their tasks and duties should be clearly defined.
Companies should establish the terms of the employment only with the staffing agency, who should then communicate the terms of the employment with the worker. Also, companies may ask staffing agencies to re-affirm with the worker, that they, not the company, have the right to control and actual control over the work being performed by the employee.
Limiting the duration of time that a contingent worker spends with a company may also prove helpful. If the worker completes the project they were assigned to complete or if the employment term has expired, they should be rehired to another position or rehired for another term instead of switching them between jobs or keeping them past the original term date. A company may also execute an agreement with the staffing agency, which provides for indemnification in the event that the company is found to be a joint employer.
Staffing agencies will continue to provide contingent workers to companies because the benefits outweigh the risks. Agencies institute their own company policy and procedure when taking on and assigning a contingent worker. These policies state the terms of the relationship between the three parties regarding the working relationship. In the event of confusion concerning the liability risk of contingent staffing and to avoid the risk, consult an attorney before reaching an agreement with a staffing agency.