Co-employment andManaged Service ProvidersA new way to think about navigating co-employment
The U.S. job market consists of 939,000 accounting professionals; 812,000 people are employed by the publishing industry; another 1.2 million workers in the real estate sector; and just over 1 million professionals work in machinery manufacturing. All of these are examples of sizable, high impact industries within our economy.The U.S. contingent workforce: However, none of these sectors matches the size and scale of the contingent workforce, a portion of the U.S. job market that currently employs almost 1.8 million professionals. As a leading indicator of the economy, the contingent workforce will be the first to expand as the economic picture gets brighter. As companies continue to rely on contingent staff as an important part of their workforce strategy, employers need to be mindful of the intricacies that relate to using contingent labor. While many of the well-known aspects of using contingent staff — flexibility, lower risk, and cost effectiveness — are clearly understood, there are other aspects that have historically lacked clarity and resulted in some less-than-positive outcomes for employers. Perhaps the most significant of these aspects is co-employment.2
Co-employment and Managed Service Providersstrength in numbers.
What is co-employment?Co-employment refers to a circumstance in which a worker hassimultaneous employment relationships with two or more employersfor one work situation. This dynamic typically comes into questionwith contingent workers as the staffing provider and on-site companyboth assume different portions of the responsibility for an individual’semployment situation.
Co-employment and Managed Service ProvidersCo-employment lessons learned What can employers do tofrom Microsoft. protect themselves?Understanding why co-employment has become The Microsoft case caught the attention ofa hot topic for HR and legal professionals requires employers across the United States, all of whichopening a window into one organization in par- were very concerned about learning fromticular: Microsoft. In the early 90s, the company Microsoft’s mistakes and protecting themselves.was involved in a class action lawsuit — Vizcaino One popular stance taken by companies inv. Microsoft Corp. — in which a group of contin- reaction to the ruling was to enlist assignmentgent, contract and independent workers sued limits within their organizations to limit thethe company for access to employee benefits. amount of time a contingent worker could beUpon investigation by the courts, they eventually with the company. This approach limits a contin-ruled in favor of the workers and expanded the gent employee’s ability to make any claims forinitial group of plaintiffs from a few hundred to benefits as a result of a lack of any long-termthousands of former staffers resulting in millions employment within their contingent, contractof dollars of fees. Although this ruling doesn’t or independent contractors. But, is this the right,apply to all employers who rely heavily on strategic response or just a knee-jerk reaction?contingent and contract staff, it did bring to lightmany important missteps that companies need The reality is that mandating assignment limitsto avoid in order to stay in the clear around is not an effective way to avoid co-employment.lawsuits and penalties. The terms of the relationship between the organization and the contingent worker is theOne such misstep, which Microsoft was respon- more important indicator in this scenario — notsible for, was treating independent contractors the amount of time the two parties have beenas though they were part of the company’s working together. Since the Microsoft ruling,permanent colleague base. By providing this much has been learned about how to preventsame treatment, but not access to benefits, penalties from co-employment.this became an unfair balance wavering againstMicrosoft’s case. Also, and almost more impor-tant, Microsoft did not clearly exclude contingent,contract or independent laborers from theiremployee stock purchase program. The exactwording of their program was written such thatall “common law employees” would be eligible,excluding only those workers who put in lessthan five months a year. This generalization intheir employee stock purchase program benefitspackage opened the window for the law toinclude the company’s contingent, contract andindependent contractors. 5
The evolving role of MSPs in navigating co-employment issues. Co-employment is clearly not something Handling the “HR component” employers can afford to get wrong. While most i.e., pay negotiations, insurance coverage, staffing providers are experts on the co-employ- HR issues, on boarding and off boarding. ment subject, finding the right business partner Allowing the MSP provider to manage all aspects to align with your contingent, contract and of your contingent, contract and independent independent labor workers can be a bigger labor workers takes the guess work out of task than just calling a local staffing office. co-employment and keeps defined boundaries Over the past seven years, there has been an between you and the workers. increase in mid- to large-sized organizations looking to managed services providers (MSPs) Establishing clear boundaries. that offer customized and comprehensive In a co-employment situation, in order for the programs. These programs are a blend of staffing provider to be positioned as the primary contingent labor supply chain management employer responsible for the worker, there and technology that are managed by a sophisti- must be clearly outlined roles for each party. cated program management office (PMO) All employer responsibilities such as recruiting, and governance model. What makes an MSP pay negotiation, insurance coverage, HR issues, solution unique is that it provides the expertise on boarding and termination must be handled and guidance that enables organizations solely by the staffing provider with the on-site to avoid co-employment pitfalls by: company only taking responsibility for direction and supervision of day-to-day responsibilities. Leveraging technology. When either party goes beyond their role, it Utilizing technology to manage workers’ assign- becomes unclear which party is the primary ments and hours worked is a key to keeping employer and will make determining employ- up-to-date with your contingent, contract and ment more challenging. Employers must also independent labor workers’ status. be sure that contingent workers are identified differently in their organizations to further illustrate their role versus permanent staff at the organization — issuing separate ID badges, having their email addresses look different, etc. further differentiates the two parties and their place within the organization.Co-employment can be managed [by outsourcing] servicesprovided by a managed service provider (MSP) that managesand controls its own employees directly. Insulation fromthe enterprise is provided by the outsourcer’s on-site supervisor.HRO TODAY MAGAZINE
Co-employment and Managed Service ProvidersHelping you create a clear Helping you stay current.and differentiated benefits plan. Knowing the latest in labor laws and govern-A major issue in Microsoft’s case was their ment regulations can be a tough task whileusage of the phrase “common law employees” keeping up with your contingent workers andin their employee stock purchase program, suppliers. The MSP provides up-to-the-minutewhich only separated employees by length of expertise and guidance around co-employmentservice. This lack of clarity is what really opened and other labor laws that can affect your businessthe organization up for scrutiny and penalty. positively and negatively. Your MSP providerAs organizations put together policies around should always be updating you on current trends,their benefit offerings, it is important to be as laws and regulations and works in a consultativedetailed as possible outlining exactly which manner with you to help mitigate risks.type of employees are eligible for benefits.Clearly detail whether or not contingent,contract and independent workers fall withinthe plans remit. This sort of clarity can helpyou avoid questions and litigation in the future.In addition, another effective strategy is havingcontingent workers sign a waiver that theywill not claim access to benefits from theirassignment company at any point. Managedservice providers will often administer thisas part of the on-boarding process.
The MSP result: less co-employment risk, greater workforce efficiency. In the current recession, employees who have Over the years since the Microsoft case, there survived recent rounds of mass layoffs have has been much debate around the dynamics an increased workload — the demand to do and implications of co-employment. At the “more with less” is more prevalent than ever. same time, organizations have learned how to It is not uncommon for organizations that have successfully engage and define their relationship a growing workload with a shrinking amount of with contingent, contract and independent labor people to “slip” and end up making a contractor workers. With the right guidance, organizations feel like an employee. The delineation becomes can avoid issues with co-employment simply blurry since contractors can begin to take on by applying the appropriate processes, policies critical roles inside an organization. Has your and programs. In the end, what is abundantly organization crossed that line? How can you clear, especially in tough economic times, is be sure? that contingent, contract and independent labor workers are an essential part of any strategic As you engage with contingent, contract and organization’s workforce strategy. The key is independent workers, consider utilizing a to ensure you have the right strategy or program managed services provider with a customized in place for managing these types of workers and comprehensive offering that will handle the and the result is effective and cost-efficient. complete administration of your organization’s contingent labor program. Managing the co-employment framework is what these organizations do day-in and day-out, so they have a unique ability to provide the expertise, guidance and execution that will enable your company to avoid any co-employment pitfalls. For more strategic advice on managing a more productive and cost-effective workforce, please contact your local Adecco representative or visit us at adeccousa.com.8