Staffing Your Business: Alternate Types of Employees in Today’s Workforce
By Paige McAllister, SPHR, HR Compliance – Affinity HR Group, Inc.
The composition of the U.S. workforce has been changing and will continue to evolve. Whereas regular employment used to be almost the only classification of worker, now more and more in the “gig economy” people are hired as temporary employees or independent contractors.
According to the latest job report from the Bureau of Labor Statistics, almost 157 million employees were participating in the workforce. This includes 27 million part-time employees (those who work less than 35 hours per week) and 4.7 million who are “involuntary part-time” (those who would like to but cannot find full-time employment). Unemployment rose slightly to 3.9% with about 6 million people actively looking for employment and 6.9 million job openings.
Shifting job trends, employment costs and employee availability have required business owners to look for alternative ways to fill open positions and meet work demands. Two of the more popular options include hiring temporary employees or hiring independent contractors. In the craft industry, there are many pros and cons to consider when looking to staff your craft business.
Temporary Employees (“Temps”)
Temporary employees fill a need in the workforce that regular employees cannot. Businesses use temporary employees for several reasons, including:
- to fill a short-term need (i.e., sudden or occasional increased client demands),
- to assist regular employees who are under work stress,
- to complete a specific project (i.e., to scan hard-copy records into electronic storage),
- to “try out” a person before hiring full-time,
- to meet seasonal demands (i.e., sales people just for Christmas shopping season),
- to cover a regular employee out on extended leave,
- to reduce employment commitments in an uncertain economy, or
- to avoid the costs associated with regular employees (i.e., benefits, insurance).
According to a report by the American Staffing Association, 3 million temporary/contract employees are placed by staffing companies each week and over 15 million temporary/contract employees are hired by staffing companies each year. Workers may choose to be placed as temps to give them flexibility, because they believe it is a good way to find a regular job (which it can be) or out of necessity.
- Do not keep a temp for too long – Retaining a temp for a long time with no intention to terminate their services or bring them on as a regular employee may be seen as avoiding mandated employment obligations. While extending a temp beyond the initial project deadline is fine, do not indefinitely employ a temp without converting to regular employment at some point. If they are good, hire them so they won’t leave to temp for someone else who can provide them stability.
- If you use a staffing agency, do not blindly trust them – Implement practices such as doing reference checks on a new staffing agency and viewing all paystubs the agency issues to your temps to make sure everything is handled correctly. If the agency is not processing payroll correctly, you could be found liable for back wages and taxes. On another hand, hiring without an agency calls for similar protocol with more time needed by owner/manager.
A business may choose to hire independent contractors for several of the same reasons they would a temp: staffing flexibility, reduced employment costs or to meet a temporary need. Independent contractors can also fill a specific, more regular role that the company may not need full-time, such as marketing, IT support, HR or bookkeeping. This can be helpful to business owners who might be new to taking on these larger, possibly unfamiliar roles. While there may be a higher cost up-front, hiring a contractor ensures those aspects of the business are taken care of thoroughly.
The CPA Practice Advisor explains that small businesses hire independent contractors more than regular employees. Since small businesses need to be more streamlined in their operations and are more impacted by client demand and budget fluctuations, independent contractors give business owners a way to fill part-time or occasional workforce needs without the expense of hiring a regular employee.
Many people are choosing to leave the regular workforce and work for themselves as an independent contractor. The trend of self-employment is increasing with expectations of 42 million people working as self-employed independent contractors by 2020 as compared to 126 million regularly-employed workers. That means 1/3 of the workforce will be classified as independent contractors in the next year or two. This is something to keep in mind as the way people work will change in tandem with this trend.
- Do not misclassify true employees as “independent contractors” –A few areas of consideration to demonstrate the true “independence” of a contractor include:
- Does the person control his/her/their work hours, methods, tools, etc.?
- Can the person work independently without oversight or supervision from management?
- Can the person work for other businesses doing similar work?
- Is the person given expectations and can meet them however they wish or does the business dictate every procedure?
- Is the person expected to follow company policies such as attendance and progressive discipline?
- Can the person gain a profit or suffer a loss from the work arrangement?
- Do not be surprised by an audit of the relationship – Utilizing independent contractors can create increased exposure to federal and state government audits. These agencies focus on companies with independent contractors to make sure they are not misclassifying workers in order to avoid paying taxes, minimum wage and overtime, as well as not providing required benefits such as health and workers’ comp insurance.
Regardless of the makeup of your business’s workforce, it is important to remember there are regulations to follow for all types of workers, and the penalties for employee misclassification or failing to follow those regulations can be very costly. In today’s workforce, it’s important to hire accordingly and keep up with the ever-changing demands.