Are you familiar with the concept of term limits in staffing? Some consider them a safeguard against co-employment issues, but the reality is that they can end up limiting access to your next great hire.
Eliminating term limits can open up new opportunities, such as augmenting your full-time staff with a contingent pool, which you can pull from to hire full-time as needs arise.
The Trouble with Term Limits
Organizations typically enforce a 12-month term limit to mitigate risk when using contract resources. While this is an admirable attempt to solve a serious problem, term limits don’t usually resolve the issues they’re meant to resolve. All too often, there are unintended consequences that have a negative impact on the project and business. The following are just two examples.
Gone Too Soon
According to Gallup, it can take 12 months for a new hire to reach full productivity. Maintaining continuity on teams and achieving business goals becomes more difficult when contingent workers familiar with proprietary software programs, stakeholders, and project management practices cycle out after one year. Companies that do not impose assignment limits or non-compete clauses have an edge competing for the best technical resources with in-demand skillsets. When everything else is equal, contingent workers will usually select the assignment with the longest duration and greatest earning potential.
Unintended Costs
Limiting the length of assignments can drive up recruiting fees, bill rates, and the overall cost of contingent labor. Since both the cost of hiring and TriCom’s portion of some payroll taxes are capped, we can offer discounts or rebate programs for companies engaging contractors on long-term assignments, reducing those expenses and securing major savings for clients. Tenure limits also drive costs up for HR and line managers. Both parties end up handling more requisitions and spend hours interviewing, monitoring compliance, and screening resumes instead of engaging in value-adding activities.
Alternatives to Term Limits
If you still have legal concerns around term limits, TriCom suggests adopting other risk avoidance tactics—for example, holding back benefit plan eligibility from any employees that came from the staffing agency. The IRS upheld that companies can use exclusionary language in their benefit plans if it is non-discriminatory. Companies can get around this by rewording benefits documentation to exclude temporary staff or mandating certain benefits be nonqualified. All wording, however, should be reviewed by legal counsel.
The Little Things
In addition, organizations should train hiring managers and supervisors on the finer points that are important to preserving a staffing agency’s common-law employer status:
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- The staffing agency should communicate with temporary employees as opposed to the supervisor or hiring manager.
- Staffing vendors must be permitted on-site to drop off checks, talk to employees, and other one-on-one interactions.
- Temporary and contract workers should be left out of office-wide communications; you’ll need to craft outreach specifically for them.
- Monetary discussions (pay rates, checks, benefits, etc.) should remain between the agency and its employees.
How TriCom Helps You Avoid Term Limits
Everyone involved with TriCom—be it an employee or a contract worker—waives their claim to compensation or benefits from a client by way of our onboarding process, which is of course allowed by both the courts and the IRS. The ASA claims this to be the one most effective things employers can do to protect themselves from unanticipated benefit costs.
Taking Care of Fundamentals
In addition to offering comprehensive benefits, we also play an active role in maintaining primary employer status. We are financially sound, up-to-date with all workers’ compensation and unemployment coverage, and knowledgeable about all aspects of our business.
Handling Our Business
Our business model is built specifically to control certain tasks and maintain our employer status. While client day-to-day supervision may be unavoidable in the staffing firm/client relationship, we minimize it when possible. Thus, in addition to issuing paychecks, withholding employment taxes, and providing required insurance, TriCom handles the following:
- Assignment and reassignment
- Setting pay rates and benefits
- Negotiating with clients about assignments, hours, project duration, and working conditions
- Supervising responsibilities regarding performance, discipline, and complaints
- Conducting performance evaluations and counseling
- Training workers on baseline abilities
Reinforce Employer Status
It is natural for supervisory lines of control to become blurred on long-term assignments. For that reason, TriCom offers on-site supervision when hiring a large number of contractors for an extended period. Contract workers are more inclined to get training through the client, attend status meetings, and so on, and supervisors are more likely to give direct feedback and administer performance reviews. To minimize this risk, TriCom can provide a project manager or supervisor on-site to supervise the contract workers. This drastically reduces co-employment risk, as it reinforces that TriCom is the primary employer, and it is a better option than limiting the contract workers’ tenure.
Recently, term limits have become more of a practical concern of workforce management than an outright legal roadblock. And temporary employees are still included among the entirety of the workforce when deciding how particular laws will be enforced. But bear in mind: because most employers have outsourced their contingent staffing operations to third-party employers, they have mitigated their exposure to certain laws that could otherwise impose significant hardship, including an unintended expansion of benefit eligibility.
