Tools to Screen the Best!
How to Select a Staffing Agency
Using temporary staff is a great resource for companies of all sizes. Temporary employees fill voids in the work force everyday. The American Staffing Association defines a “temporary staffing service” as:
“A service whose business consists primarily of recruiting and hiring its own employees and assigning them to other organizations to support or supplement their workforces, or to provide assistance in special work situations such as employee absences, skill shortages, and seasonal workloads, or to perform special assignments or projects.”
When a company determines that a temporary employee is needed, how should they select a service? Clearly, a major factor is based on who can deliver the best candidates, and second is commonly the “likeability” of the recruiter. However, your business relationship with a staffing agency should be reviewed more carefully given that clients/users of temporary employees are typically in a “co-employment” relationship with the staffing agency they choose. Is the recruiter you like the most working for an agency that is prepared to handle the risk management issues that are inherent in staffing? Is your agency’s workers’ compensation insurance adequate in the event of an accident? Does your agency have adequate new hire materials to protect your organization? What are your agency’s qualifications regarding human resource education and training?
Matura Farrington Staffing Services has provided the following information and guidelines to assist companies in evaluating their current and future staffing agencies. This information is provided for general informational purposes only. It is not intended to constitute legal advice.
Employment Status of Temporary Employees:
Do you know the employment status of your temporary workers?
W-2 Employees: In general, a temporary employee who performs work at a client’s site on behalf of a staffing agency will be considered a W-2 employee by the Employment Development Department (EDD) of California. With W-2 employees, the employer (in this case the staffing agency) must perform all payroll functions and tax obligations for the employee, including handling expense reimbursements, and providing workers’ compensation insurance. This is the ideal co-employment relationship between a staffing agency and a client because the staffing agency has established itself as the primary employer thus aiding the client in the reduction of risks and liabilities.
1099 Independent Contractors: Some staffing agencies are set up as “referral services” and are not the employers of the temporary workers (“the referrals”) they send to a client’s work site. These agencies classify their “referrals” as 1099 Independent Contractors and pay them an hourly rate, but do not pay wage related costs such as FICA, MEDI, SUTA, and FUTA. Nor do these staffing agencies withhold state and federal taxes on behalf of the “referral.” In addition, these staffing agencies are not providing workers’ compensation insurance for the “referral.” Therefore, employment liability issues regarding workers’ compensation and payroll taxes could become the responsibility of the client in the event of a work related accident, or if the EDD determines that the “referral” should have been classified as a W-2 employee.
Employer of Record: Some staffing agencies use an independent payroll service to pay their temporary employees and function as the official “employer of record.” Staffing agencies that use these resources do so because they lack the operational structure and financing to maintain these responsibilities in-house. When these payroll services are used, the client of the staffing agency may be adding an additional co-employer – the payroll service. This means employment liability issues are now shared by three parties – the client, the staffing agency, and the payroll service. It is also important to note that payroll services vary greatly and may or may not comply with California labor and employment laws. In addition, the time cards used by some payroll services include disclaimers to absolve their companies from liability for the actions of their temporary employees. Simply put, third party payroll services may increase the client’s co-employment responsibilities, risks and liabilities instead of reducing and minimizing risk exposure – a major objective for using temporary employees in the first place.
Clients/users of temporary services should always confirm a staffing agency’s employment status with their workers. If the status is 1099 Independent Contractor or a third party payroll service is the “employer of record”, a client should consider a full assessment and evaluation of the risks and liabilities associated with using temporary employees or “referrals” from these staffing agencies.
Matura Farrington Staffing Services is the employer of record and classifies all temporaries as W-2 employees.
American Staffing Association Membership:
Is your staffing agency a member of their industry’s associations?
The American Staffing Association (ASA) is the voice of the U.S. staffing industry. Along with its affiliated chapters, ASA promotes the interests of the industry through legal and legislative advocacy, public relations, education, and the establishment of high standards of ethical conduct. A staffing firm that maintains membership does so because they are committed to their industry and believe in providing the best possible service according to the standards set by this organization.
The California affiliate of the ASA is the California Staffing Professionals (CSP); a non-profit membership organization which provides products and services to its members within the staffing services industry. CSP promotes and maintains high standards of services and business integrity through the dissemination, application and enforcement of the CSP Code of Ethics and Standards of Professional Responsibility.
Matura Farrington Staffing Services is proud to be a continuing member of both organizations for over 10 years.
Certified Staffing Professional – CSP:
Does your staffing agency have a designated “Certified Staffing Professional” (CSP) through the American Staffing Association (ASA)?
This certification program pertains to labor and employment law and ethical practices as they relate to the staffing industry. Professional certification helps a staffing firm avoid legal missteps that could result in court action, and protects the rights of candidates, employees and customers. CSP is a distinguished
credential that demonstrates a staffing firm’s commitment to its customers, high level of professionalism, and dedicated efforts to comply with co-employment obligations and responsibilities. Matura Farrington Staffing Services continues to have a designated Certified Staffing Professional since 2005.
Do you know if your staffing agency’s new hire process protects its clients?
A staffing firm should maintain all employment-related records and provide a handbook and training to its employees regarding key labor and employment issues. The following essential materials should be included in the hiring process and should be available for review by clients:
- Confidentiality Agreement – Temporary employees are exposed to sensitive and confidential material while on assignments. This agreement allows the agency to address with the employee the importance and seriousness of maintaining confidential information, and can assist with the risk management requirements of a client, such as liability and malpractice insurance coverage criteria.
- Harassment Policy and Training – State and federal employment laws require employers to have a policy against harassment. A staffing firm should have a strict policy against harassment in addition to a training program for new hires.
- Safety Policy Compliance – State and federal employment laws require employers to have a formal safety policy known as an Illness and Injury Prevention Program. New hires should be given a complete written program that addresses safety and accident reporting procedures.
- Arbitration Agreement – In the event of a claim, the arbitration agreement can help to manage the cost of litigation.
- Client Benefit Waiver – This document acknowledges that the employee is solely an employee of the staffing service for benefit plan purposes and that the employee is eligible only for such benefits as the staffing service may offer to its employees.
Matura Farrington Staffing Services provides all of these documents for our clients’ review.
Is your staffing agency adequately insured to reduce risk?
Insurance coverage types and limits carried by a staffing agency are critical for protecting its clients. Before a company does business with a staffing agency, it is important to know if they are fully and properly insured by a carrier that is nationally recognized for covering the unique exposures of staffing firms, including liability exposures at the client’s site. In order for a staffing agency to qualify for limits that are adequate, they are required by insurance underwriters to meet stringent criteria regarding; financial stability, risk management procedures, best practices of their operation and policies, and general business philosophy. Standard coverage requirements a client should insist upon:
General Liability: $1 mil per claim/ $2 mil annual aggregate
Professional Liability/Errors and Omissions: $1 mil per claim/ $2 mil annual aggregate
Umbrella: $1,000,000 or higher
Employment Practices Liability $1 mil per claim/ $2 mil annual aggregate
Employee Dishonesty Bond: $250,000 per claim
Matura Farrington Staffing Services carries insurance that meets the standards listed above.
Workers’ Compensation Coverage:
Does your staffing agency carry adequate workers’ compensation insurance?
Did you know that if a staffing agency doesn’t carry workers’ comp insurance, their clients may be forced to take responsibility for some, if not all, of any claims that arise from an injured temporary employee? Temporary employees, like all employees, must be covered by workers’ compensation insurance under the law. However, there are staffing agencies that do not carry this coverage or have inadequate coverage. So what happens when an accident occurs and it is determined the staffing agency has no coverage? By law, the injury must be reported against the client’s workers’ compensation policy. The claim could become part of the client’s loss history and workers’ compensation insurance modification factor – this affects rates! In extreme cases, it could affect the client’s ability to purchase workers’ compensation coverage in the future.
Matura Farrington Staffing Services carries workers compensation coverage in amounts no less than required by law, and is underwritten by Zurich American (“A” rated).
Does your staffing firm offer a healthcare benefit program to their temporary employees?
Healthcare benefits have become a major concern for everyone, including temporary employees. Staffing firms that offer a true health plan for their employees have been shown to significantly increase the retention of their temporary staff. What does that mean for their clients? It means that temporary employees who are offered and participate in their staffing agency’s health plan are more likely to stay working for that staffing agency and commit to assignments for the entire duration.
Matura Farrington Staffing Services healthcare plan, provided by Essential StaffCare, includes: medical, accidental death (term life), dental, vision, and prescription drugs. It is a true health plan. Most plans offered by staffing firms are “indemnity” plans, “supplemental” plans, or “cash reimbursement” plans offered by life insurance companies. Essential StaffCare is a true group health plan with deductibles and co-pays, and coinsurance just like regular health insurance. (Note: Benefits are subject to change with or without notice).
Who is your staffing firm’s trusted legal advisor?
The daily business of a staffing firm, which is managing employees and the employment process, has many challenges that often require legal counsel. A staffing firm should be ready at any time to speak with counsel for advice on events that pose potential risk, even those that may seem minor. Customers of staffing firms should seek out the name of their agency’s counsel and consider, “Is this a lawyer I would select to represent my company?” Who a business selects for legal representation is a good indicator of their commitment to manage and reduce risk for themselves and their clients, in addition to how they run their overall business operation.
Matura Farrington Staffing Services retains an AmLaw 50 national law firm known for their outstanding labor and employment law practice.