Need flexibility in how you schedule workers? Maybe you need to keep a lid on labor costs by avoiding the financial burden of employee benefits. Or maybe you have other reasons for bringing on more workers without hiring traditional employees. Contingent workers may be your answer.
Contingent workers go by many names, such as seasonal workers, temps, short-term workers, and leased employees. The term encompasses workers as diverse as produce pickers hired for the summer and IT workers brought in to work on a single project. No matter what the job, it’s important to understand the different categories of contingents and how the relationship works.
Types of Contingent Workers
Contingent workers typically fall into one of three categories:
- Agency temporaries. The more traditional type of temporary worker, employed through an agency, is still the most likely to be used as a staffing alternative. Agency “temps” tend to perform clerical, secretarial, nursing, accounting, word processing, or light industrial duties to fill in for employees on leave, handle excess or special workloads, or perform short-term assignments. The worker is generally an employee of the staffing agency.
- Directly hired. These workers are usually members of a pool of employees who are available to work as needed. Many large companies have formed their own labor pools of temporary employees, often made up of retirees or former employees. These employees might fill in for others who are out, assist in areas with immediate needs, or participate in special projects. They usually are considered to be employees of the company even though their employment is contingent upon demand.
- Leased employees. Leased employees work for a company that, for a fee, provides temporary or permanent employees and is responsible for their wages and benefits. A leasing company can supply a single employee, a crew of employees, or an entire staff and may take full responsibility for payroll, benefits, and personnel functions. Small employers might turn to leasing companies so they don’t have to provide benefits and so they can save on administrative costs.
Generally, the employer pays the agency a contracted fee for the work, and the agency pays the worker’s wages, deducting taxes and paying workers’ compensation, Social Security, and other charges. This means that if the employee is earning $10 an hour, the employer is probably paying the agency $15 to $20 per hour. Many employment agencies will charge employers a lower hourly rate if the employer can guarantee consistent business.
Sometimes employers choose to hire contingent workers on a permanent basis after a period of time. However, employers that decide to hire the employee on a permanent basis should be aware that the agency may impose restrictions (for example, requiring the employee to work for a certain length of time) or require a “finder’s fee.” Such fees vary, and you should negotiate this with the agency up front.
It’s critical for employers to clarify the specifics of any agency agreement entered into. You’ll avoid legal problems if you obtain a written agreement specifying exactly what the agency is required to do. Here are some tips for choosing an agency:
- Make sure that the agency is reputable. Ask around or call the state Department of Labor.
- Make sure that the agency follows guidelines from the Equal Employment Opportunity Commission.
- Compare fees among agencies and ask about discounted fees for high-volume business.
- Find out the kind of training the agency provides or the tests it administers to guarantee competency.
- Find out if the agency will pretrain workers to company specifications.
- Find out if the agency does background checks. If background checks are not conducted on contingent workers, you could be liable for negligent hiring.
- Ask about the termination process if the employee turns out to be unsatisfactory.
- Ask if any restrictions or fees are associated with hiring the employee on a permanent basis.
- Ask about the size of the agency’s pool of applicants, their availability, and the timeframe associated with having them begin work.