As companies look for ways to mitigate their co-employment risk they often turn to tenure limits as a solution. The rationale is that creating a limit on the time a temporary employee can work for a client, including implementing “break periods,” will provide protection from co-employment claims raised by the worker. The reality is that co-employment is often an element of the client-supplier relationship, regardless of contract language, disclaimers and acknowledgements signed by the workers, and it exists the moment the temporary employee starts their assignment.
While there are many things that can be done to mitigate the risks associated with co-employment, imposing tenure limits is not necessarily one of them. There’s no arguing that the intent of tenure limits is noble, but let’s take a closer look at how these policies could impact your organization and some alternate solutions that could be applied to mitigate co-employment risks.
- The “churn effect.” The increase in turnover is not without its effect on the workforce and the management chain. There is an apparent loss of skills that were gained through months of employment, as well as a loss of credibility in creating an environment of excessive turnover. Tenure limits also run the risk of demoralizing existing workers who may decide to move to assignments that appear more secure.
- Increased costs. As new temporary employees are brought on to replace those who are separated, the additional costs of recruitment, onboarding and training alone can negatively impact an otherwise stable budget.
- Increased claims. Regardless of whether tenure limits create a strong bar for legal claims of wrongful discharge, discrimination, and the like — more separations equal more claims, and even meritless claims have financial costs and create a nuisance for the organization.
The low cost, support and flexibility contingent labor solutions offer organizations far outweigh any co-employment risks, especially when appropriate strategies are used to accentuate the benefits of this skilled and flexible workforce.If the goal of a tenure limit program is to provide protection from co-employment claims, let’s look closer at alternative solutions that help get the job done.
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Properly written benefits plan documents and employment policies. The most effective way to mitigate co-employment risk related to health and retirement benefit plansis to plainly define direct employees of the organization versus contingent workers. This includes documenting clear definitions regarding who is eligible AND who is not eligible. This includes indicating that a contingent worker is not eligible for benefits under the plan even if they were misclassified or later deemed an employee. Your brokers, carriers and legal counsel can help to ensure your plan documents and employment policies are written to provide these protections.
Work with your suppliers to mitigate co-employment risks. The Suppliers’ burden of employment includes responsibility for payment to the worker, payment of employment taxes and providing the appropriate insurances — all which minimize co-employment concerns. Additional protections can be gained by partnering with your suppliers to design processes that provide protections for the less obvious co-employment issues:
- Create policies and processes outlining the on-boarding and off-boarding process. The supplier should be the one ultimately making the offer of employment, and ending the engagement.
- Evaluate supplier documents regarding confidentiality and non-disclosure that contingent workers must sign to ensure continuity with your own policies on these same issues.
- Partner with your supplier to design a performance review process for both disciplinary actions as well as recognition for good performance.
- Review supplier communications and communication plans to ensure Suppliers are providing enough well timed and well-crafted communications to re-enforce that the Supplier is the Employer of Record.
- Design complaint and Investigation procedures with your suppliers to better address and control employment issues such as discrimination or harassment claims.
- Ensure suppliers are properly classifying independent contractors. As the client, you will be exposed to co-employment disputes if a state or federal audit finds any misclassification issues.
Complete the loop of “try before you buy.” Temporary engagements are a great way to see if a worker is going to be a good fit or a valuable addition to your workforce. If you have a W2 contingent worker who continuously has their assignment extended, you could have all the information you need to make a great hire.
Create a monitor and review process with service providers and suppliers based on length of assignments or number of extensions to identify high performing people. Create procedures to work with managers to pinpoint those tried and true performers.
In summary, more and more organizations are including contingent labor as an important element in their overall workforce strategy to address the needs of the organization. Tenure policies do little to limit risk associated with co-employment, causing more harm than good from a productivity and cost standpoint. Rather than hiding from co-employment, address it head on by implementing the solutions suggested above, and take full advantage of the benefits offered by a skilled and flexible workforce.
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[…] As companies look for ways to mitigate their co-employment risk they often turn to tenure limits as a solution. The rationale is that creating a limit on the time a temporary employee can work for a client, including implementing “break periods,” will provide protection from co-employment claims raised by the worker. […]