Contingent Workforce—Who’s a ‘Temp’?

The temporary or contingent workforce is the fastest growing segment of the national workforce, with almost 75 percent of employers in all industries using them, according to a survey by CyberShift.

It’s important to sort out the status of your relationship with each type of contingent worker before issues arise. For insights, we turned to Compensation.BLR.com.

Defining Contingent Workers

Contingent workers are those who are hired through staffing firms or leasing companies and whose jobs are structured to last only a certain length of time. The contingent workforce may include part-time temporary workers, independent contractors, consultants, contract employees, leased employees, and direct hires.

Other than some leased long-term employees, most contingent workers are considered “temporary,” and therefore the terms “contingent” and “temporary” are often used synonymously. While most companies hire only a few contingent workers at a time, some may lease their entire workforce on a quasi-permanent basis.

If a company does not clearly define what is a contingent worker, who is an employee, and who is not an employee, managers may start using contingent workers to fill regular positions. For example, if there is a hiring freeze on regular employees but not on contingent workers, those workers may end up as long-term employees.

Benefits of Contingent Workers

Employers using contingent workers have potential advantages in both flexibility and cost savings. Workforces can be expanded and contracted as needed. Employers may also achieve reduced labor costs through lower hourly wages and the absence of benefit payments. Employers find that the use of contingent workers allows them scheduling flexibility, alleviates overloads, accommodates onetime projects, and prevents a succession of expensive hires.

Of course, the staffing vendor’s markup of 25 percent to 30 percent must be included when calculating whether the cost of contingent workers is indeed lower than hiring permanent employees. Cost-effectiveness doesn’t depend just on savings in salary and benefits; it also depends on output. A contingent worker whose productivity is lower than a similarly situated permanent worker may not be a bargain. It may also be less expensive to outsource the job.

Are class action lawyers peering at your comp practices? It’s likely, but you can keep them at bay by finding and eliminating any wage and hour violations yourself. Our editors recommend BLR’s easy-to-use FLSA Wage & Hour Self-Audit Guide. Click here for details.

Types of Contingent Workers

There are many types of contingent workers:

Agency temporaries. Agency “temps” tend to be used in 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.

Contract employees. These are workers who, by contract, perform professional, production, or administrative support activities. Generally, the employer and employee deal directly with one another, but sometimes there is an outside service firm that negotiates the contract. Typically, contract employees include lawyers, doctors, security staff, cleaning and maintenance staff, editors, and computer technicians.

Directly hired. These 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. They are usually considered to be employees of the company, even though their employment is contingent on 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.

Part-time employees. These are employees who generally work fewer than 30 hours per week, but are still on the employer’s payroll and are entitled to certain benefits of employment.

Independent contractors. Independent contractors are self-employed people who work on an agreed-on product or service, to be delivered at a certain time, for a set fee. They may be considered contingent workers in the sense that their services are not needed on a permanent basis. Independent contractors have control over when, how, where, and in what way they work.

Temps, contingents, part-timers, overtime, regular rate. Wage and hour should be simple, but it’s not. And your supervisors may be trying some inventive approaches like working people off the clock or through their unpaid lunch period. How can you tell if they are doing it right or being “inventive”?

There’s only one way to find out what sort of wage/hour shenanigans are going on—regular audits.

To accomplish a successful audit, BLR’s editors recommend a unique checklist-based program called the Wage & Hour Self-Audit Guide®. Why are checklists so great? It is because they’re completely impersonal, and they force you to jump through all the necessary hoops, one by one. They also ensure consistency in how operations are conducted. And that’s vital in compensation, where it’s all too easy to land in court if you discriminate in how you treat one employee over another.

Experts say that it’s always better to do your own audit and fix what needs fixing before authorities do their audit. Most employers agree, but they get bogged down in how to start, and in the end, they do nothing. There are, however, aids to making the FLSA self-auditing relatively easy.

What our editors strongly recommend is BLR’s Wage & Hour Self-Audit Guide. It is both effective and easy to use, and it even won an award for those features. Here are some reasons our customers like it:

• Plain English. Drawing on 30 years of experience in creating plain-English compliance guides, our editors have translated FLSA’s endless legalese into understandable terms.

• Step-by-step. The book begins with a clear narrative of what the FLSA is all about. That’s followed by a series of checklists that utilize a simple question-and-answer pattern about employee duties to find the appropriate classification.

All you need to avoid exempt/nonexempt classification and overtime errors, now in BLR’s award-winning FLSA Wage & Hour Self-Audit Guide. Find out more.

• Complete. Many self-audit programs focus on determining exempt/nonexempt status. BLR’s also adds checklists on your policies and procedures and includes questioning such practices as whether your break time and travel time are properly accounted for. Nothing falls through the cracks because the cracks are covered.

• Convenient. Our personal favorite feature: a list of common job titles marked “E” or “NE” for exempt/nonexempt status. It’s a huge work saver.

• Up to Date. If you are using an old self-auditing program, you could be in for trouble. Substantial revisions in the FLSA went into effect in 2004. Anything written before that date is hopelessly—and expensively—obsolete. BLR’s Wage & Hour Self-Audit Guide includes all the changes.

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