From take-your-dog-to-work days, to in-office massages, today’s businesses are always looking for new ways to attract and retain the best talent. Part of that strategy for many organizations is leveraging the power of a temporary workforce. There are serious competitive advantages, from extra support and flexibility to manageable labor costs, it’s the right solution for more companies each year and the trend is on the rise.
But when it comes to engaging temporary employees, it’s not a cake-walk; there are co-employment risks and tax exposures, and significant precautions that companies must take to stay in compliance. Some companies implement tenure limits to address some of these issues, but are they really helpful? Read on for insights.
Tenure Limit Overview
Tenure limits are implemented to mitigate co-employment risks for working with temporary W-2 Employees. After engaging a temporary employee for a given period, employers use a break period to protect themselves against potential co-employment risks or claims a worker may raise related to co-employment (think health insurance, retirement benefits, FMLA liability, etc.). The issue is, these arbitrary limitations do little to protect the employer against such claims.
Refresher: What is Co-Employment?
Co-employment is defined as “a relationship between two or more employers in which each has actual or potential legal rights and duties with respect to the same employee".
Co-Employment Relationship Overview
The Staffing Company
- Pays the employee
- Pays and withholds payroll taxes
- Provides workers compensation
- Provides benefits and pension plans
- Ensures civil rights compliance
- Has the right to hire and fire
- Hears and acts on complaints from the employee about working conditions
- Supervises and directs day-to-day work
- Controls working conditions at the worksite
- Ensure a safe worksite, including civil rights compliance by employees
- Determines length of the assignment
Common Tenure Limit Misconceptions
Many companies think that tenure limits will help eliminate co-employment risks, particularly against potential W-2 common law employee claims, which would make the employee eligible for client sponsored benefits.
But any time you hire a temporary employee these risks are on the table, regardless of contract language and acknowledgements signed by the worker. It comes down to how you actually engage the worker. That’s why it’s so important for companies to properly engage their contingent workforce. Working with an employer or agent of record can help to create the right policies and procedures to minimize risk so you can get the most of this workforce strategy.
The Cost of Tenure Limits
A huge problem with tenure limits is turnover cost. When a trained W-2 employee hits a tenure limit, the cost to recruit, on-board and train a new employee can be significant. In addition, there’s a significant opportunity cost of all the loss of skills and experience during this process.
FMLA, ADA and Benefits—Oh My!
The most important thing for employers to remember when it comes to FMLA benefits, etc. is that waiting periods won’t eliminate whether a temporary employees is or is not eligible for benefits. For example, if they temp is engaged through a supplier, they may already be eligible for FMLA, and limiting their tenure will have no effect on that.
So what should employers do? The most important thing is having consistent and specific policies and procedures to limit co-employment. That will mitigate risk much more effectively than a tenure limit.
Alternatives to Tenure Limits
The best way to mitigate co-employments risks is to work with a supplier who has the experience and processes in place that will avoid exposures, without the opportunity cost of tenure limits.
To stay competitive in today’s marketplace, many organizations leverage the power of a temporary workforce. While this a great way to create more strategic advantages and flexibility, it does have significant co-employment risks. While tenure limits were created to mitigate these risks, there are much more effective ways to do this, without the burden and costs of tenure limits.