I often get asked by clients how long they can keep someone on as a temporary employee. The short answer, there is no specific time limit on how long a worker may be classified as “temporary.”
The now infamous Microsoft settlement awarded 97 million dollars to temporary workers who were re-classified as core (common law) employees (instead of temps). This reclassification class ruling resulted in thousands of “temps” immediately becoming “benefit eligible” with Microsoft. Unfortunately, this settlement propelled the issue of assignment length into a perplexing period for companies that are users of temporary employees.
Much of this confusion remains today. Some employers erroneously think that by creating internal policies that limit the length of time an employee could be “temporary”, they are minimizing their exposure to “reclassification” issues or retro-benefits. Companies that use term limits, tenure thresholds, and break-in-services for temps to avoid the retro-benefits problem may be unnecessarily doing so. Many companies that use contingent workers maintain policies that limit the duration of those workers’ services. Under these policies, when a contingent worker reaches a prescribed time limit, that person’s services must be terminated automatically, regardless of the person’s job performance, and often times at a high cost because a replacement worker must be found and trained. While such term-limiting policies may be well intended, they are not grounded in well-defined legal rules.1
Here we are, two decades after the Microsoft case, and there is a lot being debated lately about the gig-economy and use of and length of time companies are engaging temporary employees and freelancers/independent contractors. According to a recent New York Times article about Google’s use of temporary employees, a group of U.S. democratic senators sent a demand letter to Google’s CEO, Sundar Pichai, that the internet giant should convert its more than 120,000 temporary and contract workers to full-time employees. The senators pushed for several changes to how the company treats temps and contractors, including moving them to full-time status after six months as well as equalizing their wages and benefits with permanent staff. In the article, Eileen Naughton, Google’s Vice President of People Operations, replied to the senators:
The company strongly disagreed “with any suggestion that Google misuses independent contractors or temporary workers.” She said the company’s practices “accord with the highest industry standards.” Ms. Naughton said Google worked with staffing companies that had a particular expertise and could offer a “career path to employees.” She added that using contingent workers was a common practice in almost every industry in the United States and the government.2
A paradigm shift is occurring. So many workers are opting for freelance/independent contractor opportunities that provide flexibility. Talent Acquisition professionals need innovative solutions for attracting and maximizing each skillset from non-traditional labor pools. Companies have shifted to hiring relatively few permanent staff and opting instead to engage temporary and outside contract workers, creating an agile workforce.
Since the 2008 financial crisis, the landscape of American business has changed dramatically. But during that period, we experienced an unprecedented downturn in wages and jobs that paralyzed many workers and left companies scrambling to keep their organizations up and running while watching their budgets. Hiring managers were more willing to bring temporary contractors onboard to support their businesses, avoiding the financial burden of paying a full salary and benefits on their already strained operating budgets.
In the past, most working people wanted stability; a meaningful place to go during the day, a steady paycheck to provide for one’s family. What motivates workers today is different. Millennial-focused professionals drive what it means to be a self-employed person. It turns out that the gig economy, as well as a prevalence of the side–hustle in younger, mid and older professionals’ careers, is what is defining today’s freelancing economy. For many Boomers, GenX, Millennials, and GenY’ers, independent contracting isn’t just a means to earn a living, it’s a lifestyle that many are embracing with passion and enthusiasm.
So, what is a company to do if they want to use long-term contractors and temporary employees? If “length of assignment” isn’t the only factor that determines if an employee is a core employee or a temp, what are employers doing to protect themselves from unexpected liabilities related to how they use and manage non-core employees?
Employers of Record (EOR)
Many employers are now obtaining their non–core, interim, contract or temp employees through third-party employers. Companies such as ClearPath Workforce Management are low-cost Employers of Record (EORs) and provide payroll solutions for employers who have a need for third-party employer services for the self-sourced workers they have recruited directly. A policy requiring hiring managers to use a third-party staffing or payroll company to onboard and pay any worker not formally attached to their core workforce has become a best-practice to avoid the risks associated with the employee classification process.
ClearPath can help you design a solution pertaining to your contingent workers. We can help relieve this burden by outsourcing your back-office Human Resources and Payroll functions to our Employer of Record service. Contact us to learn more about how our expert personalized service can let you get back to focusing on your business goals. Work with a leader in the industry for outsourced Human Resources and Payroll functions associated with W-2 and 1099 contingent workers. Let ClearPath be the path to your peace of mind. For other questions about assessing your workforce or conducting a review of your current hiring processes, the ClearPath team can assist you.
This blog article is for general information purposes only and does not provide an in-depth review of employment laws. It should not be solely relied upon or substituted for legal or professional advice. Use of the information provided is at your own risk.