The Pitfalls of Payrolling Temporary Workers
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The document discusses the risks companies face when utilizing temporary and contingent workers. It outlines the history and growth of the contingent workforce. Some of the pitfalls discussed include improper worker classification, failure to comply with regulations regarding payroll, taxes, and worker management. The presentation provides recommendations for avoiding these pitfalls such as properly qualifying workforce suppliers, establishing agreements that define responsibilities, implementing best practices for worker management, and gaining greater visibility of the contingent workforce.
The Pitfalls of Payrolling Temporary Workers
- 1. The Pitfalls of Payrolling Temporary Workers The Pitfalls of Payrolling (and Employing) Temporary Workers 1
- 2. The Pitfalls of Payrolling Temporary Workers INTRODUCTION Emergent employs the contingent workforce. The Emergent family of companies, founded in 1976, is one of the largest U.S. employers of contingent labor. EMERGENT CORPORATE HEADQUARTERS, BURBANK, CA ABOUT WWW.EMERGENT.COM TWITTER: @EMERGENTDOTCOM 2
- 3. The Pitfalls of Payrolling Temporary Workers PRESENTATION OVERVIEW Temporary and project-based contingent worker usage is increasing for all types of companies. Many companies have a limited understanding of the risks that accompany utilizing these types of workers. This presentation explores: • Temporary/Contingent Workforce Overview (History, Growth, and Segments) • Avoidable Contingent Workforce “Pitfalls” and Worker Payrolling & Worker Risks. Classification Regulations Management OVERVIEW 3
- 4. The Pitfalls of Payrolling Temporary Workers DISCLAIMER Nothing on this presentation is intended to create any contractual or other legal relationship between the presentation viewer and Emergent or any of Emergent's staff, and should not be construed as legal advice or professional opinion for handling a specific factual situation. Emergent cannot guarantee or warrant the accuracy or completeness of posted information in any way. Readers should not act upon any information from this presentation without consulting with the appropriate legal, financial, or other business professional for guidance and advice. LEGALESE 4
- 5. The Pitfalls of Payrolling Temporary Workers CONTINGENT WORKFORCE HISTORY Prior to this point temps a "stop gap“. After a Corporate "Restructuring" standard staffing strategy Wave. 3.1M Full-Time Demand Increases William Russell Kelly Jobs Eliminated Provides Office Temps Temps = 1 of 13 at Client Site CA Grants Temp Firms Employer Status New Jobs. Manpower Temp Labor passes GE. US Contingent Workforce Professionalized Recession Employment Estimated to be $164B Recovery, Led by 2X 2009 Figures Contingent Labor 1940 1950 1960 1970 1980 1990 2000 2010 2020 Post WWII Employment Great Recession = Model, Open- Massive Layoffs. US Ended, Single Companies to 'Attack' Employer, EE Protected Vizcaino v. Microsoft Labor Costs Contingent Against Arbitrary Permatemp Suit Labor Expected To Be Up Dismissal Global Competition & 3rd Party Contingent To 50% of Workers Hired Stagnating Profits Labor (MSP/VMS) Back US Companies to 'Attack' Services Increase Labor Costs Contingent Workforce Increased OVERVIEW 5
- 6. The Pitfalls of Payrolling Temporary Workers U.S. CONTINGENT WORKFORCE SIZE TOTAL ANNUAL SPEND & AVERAGE DAILY # OF WORKERS 2018 (Projected) $164 billion 2011 6M Workers $87 billion 2.58M Workers 1999 $17 billion 990K Workers Increased Usage = Increased Risk Source: Staffing Industry Analysts and Bureau of Labor Statistics OVERVIEW 6
- 7. The Pitfalls of Payrolling Temporary Workers SOURCING CONTINGENT WORKERS Outsourcing Staffing Internal Service Suppliers ‘Self-Sourcing’ Providers Project- Previously Temp ICs SOW Based Alumni Used Referrals Workers Workers Workers OVERVIEW 7
- 8. The Pitfalls of Payrolling Temporary Workers CONTINGENT WORKFORCE SEGMENTS Hourly „Temps‟ Contractors Fixed Bid Freelancers SOW OVERVIEW 8
- 9. The Pitfalls of Payrolling Temporary Workers TEMPORARY WORKER CO-EMPLOYMENT When the company that utilizes the contingent worker‟s services (client company) manages the workers on a day-to-day basis they often become a co-employer or joint employer along with the supplier of the contingent worker. Co-employment could mean that the client company may be held liable for the decisions and mistakes of the staffing supplier – and vice versa… “PITFALLS” & RISKS 9
- 10. The Pitfalls of Payrolling Temporary Workers RECENT CONTINGENT WORKFORCE LAWSUITS State Compensation Fund vs. Large Staffing Company Workers’ Compensation ‘Piggybacking’ by One of the Largest U.S. Staffing Company CA Self-Insurers’ Security Fund vs. Staffing Industry PEO Client companies named in lawsuit to pay workers’ comp claims of insolvent company “PITFALLS” & RISKS 1 10
- 11. The Pitfalls of Payrolling Temporary Workers SOME CONTINGENT WORKFORCE EMPLOYER RESPONSIBILITIES • Properly issuing paychecks • HR (discipline & discontinuation) • Withholding federal and state tax • Managing/Evaluating performance • Providing required insurance • Training and development • Sourcing the worker • Workers‟ compensation insurance • Selecting the worker • Documenting right to work in U.S. • Assigning work It takes knowledge and resources • Negotiating pay rate to compliantly employ contingent workers. • Negotiating duration of assignment • Complying with FLSA, FMLA, Immigration and other regulations • Supervising “PITFALLS” & RISKS the worker 11
- 12. The Pitfalls of Payrolling Temporary Workers WORKER CLASSIFICATION • 46% of Independent Contractors are found to be Misclassified • Penalties can be severe • In 2011 the Department of Labor dedicated $25 million to uncovering misclassification • The IRS uses a 20 factor test to determine proper classification “PITFALLS” & RISKS 1 12
- 13. The Pitfalls of Payrolling Temporary Workers PAYROLLING & REGULATIONS • Wage & Hour • OSHA • Meal & Rest Periods • FMLA • Paying Taxes • FLSA • Record Keeping • State Specific Requirements • Right to Work • Background Screening “PITFALLS” & RISKS 1 13
- 14. The Pitfalls of Payrolling Temporary Workers WORKER MANAGEMENT • Accident and Incident • Performance and Procedures disciplinary action • Safety Training • Ending assignments • Recording injuries and • Documented standard OSHA regulations operating procedures “PITFALLS” & RISKS 1 14
- 15. The Pitfalls of Payrolling Temporary Workers AVOIDING THE PITFALLS In order to ensure that your contingent workforce is compliant we recommend: • Workforce Supplier/Employer Qualification • Proper Agreements • Worker Management Best Practices • Gain Workforce Visibility SOLUTIONS 1 15
- 16. The Pitfalls of Payrolling Temporary Workers WORKFORCE SUPPLIER QUALIFICATION • Ensure financial stability of the supplier. • If not using a client agreement then make sure the supplier has well articulated agreements that outline responsibilities for the laws and regulations discussed in this presentation. • Make sure the supplier has proper insurance. • Make sure the supplier has documented human resources and safety policies (ideally outlined in a employee handbook). SOLUTIONS 1 16
- 17. The Pitfalls of Payrolling Temporary Workers SUPPLIER EMPLOYEE HANDBOOK SOLUTIONS 1 17
- 18. The Pitfalls of Payrolling Temporary Workers SUPPLIER AGREEMENT • Consider moving away from timecard only agreements. • Clearly outline responsibilities of each party. • Identify proper insurance limits in the agreement. • Ensure proper indemnification is in place. • Complete a Statement of Work for each new assignment. • Consider consolidating contingent workforce employment under one company. SOLUTIONS 1 18
- 19. The Pitfalls of Payrolling Temporary Workers INTERNAL POLICIES • Mention exemption of contingent workers from regular employee benefits in the employee handbook. • Develop an internal contingent worker best practices manual. • Educate the managers who use temporary contingent labor on procedures. • Understanding what to do when discontinuing an assignment. • How to communicate performance issues and recognition with the supplier. • NOT disciplining the worker. SOLUTIONS 1 19
- 20. The Pitfalls of Payrolling Temporary Workers SOURCING AND SELECTING • Clearly define and document the assignment description for the supplier and contingent worker. • The supplier should screen and select the worker (including performing background checks when appropriate). • Engage a worker with sufficient skills to perform the tasks and who does not require general training. • Clarify that the workers‟ compensation code that the worker will be classified under is appropriate for the role. • It is the responsibility of the supplier to select the worker. SOLUTIONS 2 20
- 21. The Pitfalls of Payrolling Temporary Workers INCREASING WORKFORCE VISIBILITY You can gain more contingent workforce visibility at your organization by: • Centralizing contingent workforce management at your organization. • Using a workforce management system or a vendor management system to track your contingent workforce and their suppliers. • Standardize agreements and processes with staffing suppliers and individual consultants. SOLUTIONS 2 21
- 22. The Pitfalls of Payrolling Temporary Workers SUMMARY • Contingent workforce usage is increasing. • Companies must be strategic about temporary contingent worker compliance because of the co- employment responsibilities that come with managing this workforce on a day to day basis. • By wisely and consistently qualifying and monitoring your contingent workforce, your company‟s risk can be mitigated. SUMMARY 2 22
- 23. The Pitfalls of Payrolling Temporary Workers THANK YOU / Q&A Contact Emergent for a no cost contingent workforce evaluation . TWITTER: @EMERGENTDOTCOM EMERGENT.COM/NEWS INFO@EMERGENT.COM THANK YOU 2 23
Editor's Notes
- #10: consequences
- #14: Properly paying OTPayment of Minimum Wage
- #15: The staffing supplier should have established procedures for accidents. Clients should provide worksite specific safety training for all newly on-boarded workers. Injuries should be recorded in accordance with OSHA regulations. Performance and disciplinary communications to the worker should be made by the supplier. The supplier should discontinue the assignment not the client. Ideally the manager will refer to a contingent workforce best practices manual.
- #21: And if you don’t do that. Imagine if this situation happens.