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Contingent Worker Guidelines

Returning to our story about Elasticity, as CEO you have been able to get your leadership team focused on the requirements for establishing an effective contingent worker strategy. They have accomplished this to your satisfaction.

Does that mean their work (or yours) is finished and you can start bringing on contingent workers? Not yet! Their next task must be to establish contingent worker guidelines to follow as they implement the program. These guidelines will cover the responsibilities of everyone involved in this process, including the staffing agencies providing workers. They can become very specific, even granular, to avoid any misunderstanding or confusion concerning each party’s roles in managing these contingent workers in your organization.

Because Elasticity has multiple job sites and facilities, you may need to develop a comprehensive set of guidelines for each to adequately address all your contingent worker programs’ objectives. For example, in some of your smaller facilities, it might be impractical for a staffing agency to provide its own direct supervision. However, in larger operations this would be possible and desirable for reducing your company’s potential liability for these workers.

You plan to review the concept of contingent worker guidelines at your next staff meeting and establish accountabilities for developing guidelines specific to the organization’s needs. You want your vice president of human resources to coordinate this effort, but want others on your leadership team to be involved in this important initiative as well.

Establishing Guidelines

A contingent worker strategy establishes the “what” concerning your contingent worker program, but the contingent worker guidelines explain how these objectives will be accomplished. They’ll provide clarity on what is permissible and not permissible in each step of the contingent worker process. Many decisions must be made about who will be responsible for certain critical employment processes—that is, the staffing agency or your organization, depending on your overall strategy and objectives. Understanding the potential implications of who assumes responsibilities for these critical functions is important to the success of your contract worker program.

The initial decision you make concerning who is to be responsible for supervising contingent workers will dictate how you’ll implement your contingent worker program going forward. Remember, as discussed earlier, you may intend to establish one type of contract worker relationship, but ineffective implementation can create a different one, leading to potential problems and liabilities for your organization. Having the proper guidelines will help avoid these pitfalls.

Some organizations opt to have both company-supervised and agency-
supervised contract workers depending on the circumstances. This works best if everyone is aware of the distinctions and requirements of each. Generally, this decision will be determined by the job functions assigned to contract workers and the extent that you use contract workers in your organization. If you have a larger number of contract workers, the option of having the staffing agency supervise them may make more sense and justify the cost of the agency providing its own supervision and administration. In other situations, the limited number of contract workers may preclude such an arrangement.

Similarly, you may elect to assume responsibility for the direct supervision of contract workers who by the nature of their function cannot be effectively directed by a third party. For example, a company may need its internal IT department to manage supplemental IT workers during systems maintenance activities.

Again, either option may be perfectly fine so long as everyone clearly understands the implications of the decision and follows the guidelines applicable to the option selected.

The following is an example of how such guidelines might be developed. Note that in this example, this company has been using both contract workers who are supervised by the company’s own supervisors as well as contract workers supervised by its contract staffing agencies. Recently, the company has become concerned that its managers’ increasing reliance on contract workers to reduce FTE headcount may be masking the deeper causes of out-of-control costs. This has created insecurity in the permanent workforce and possibly caused quality issues attributable to the use of contract workers in roles for which they may not be fully qualified.

Contract Worker Guidelines Example

The contingent worker guidelines will apply to all ABC Company facilities and operations using contract workers. For purposes of these guidelines, contract workers are individuals not on ABC’s payrolls who provide services to the company under one of the following categories:

•  ABC-supervised contract workers

•  staffing agency–supervised contract workers.

In those facilities or departments where ABC maintains day-to-day direction and control over its contract workers, ABC assumes certain responsibilities concerning the contingent workers, as outlined in appendix A.

In circumstances where the staffing agency supervises contingent workers, the staffing agency assumes sole operational responsibility for providing contracted services, along with supervision, direction, and control of its employees in accordance with requirements and parameters set out in the agreement between ABC and the agency.

The following criteria are mandatory in staffing agency–supervised contract worker arrangements:

•  The staffing agency must provide the direct on-site supervision of contract workers assigned to an ABC facility at all times.

•  The staffing agency assumes all responsibility for the supervision, direction, work, administration, and personnel matters of its workers.

•  Whenever possible, the work that contract workers perform should be separate and distinct from that performed by ABC employees. Ideally, this work should focus on noncore jobs requiring less formal training or on-the-job experience to perform to standard. Exceptions must be approved by ABC leadership in consultation with the director of operations.

•  The staffing agency is required to provide policies and procedures for its employees assigned to an ABC facility, including job assignments, promotions, pay increases, bonuses, terminations, and layoffs.

•  In the event of an anticipated increase or decrease in workforce needs affecting contingent employees, ABC will advise the staffing agency of these changes. It will be at the sole discretion of the staffing agency to administer these changes. ABC will not provide direction or input into decisions of which contract workers are assigned to ABC’s facility, but will provide the staffing agency information about the facility’s workforce needs. The staffing agency will ensure that there are sufficient qualified workers to meet the workforce requirements at the facility in the event of a reduction or increase in contract staffing.

•  Whenever possible, contingent workers should be provided separate locker and break rooms.

•  Contingent workers must use the staffing agency’s timekeeping systems for tracking the number of hours worked for pay purposes.

In addition, ABC has established the following restrictions concerning the use of contract workers, which are applicable to both ABC-supervised and staffing agency–supervised workplaces:

•  Contingent workers should not comprise more than 40 percent of the total employee population at any single facility under any circumstance.

•  When it is anticipated or becomes evident that ABC-supervised contingent workers will remain assigned to an ABC facility for a period of more than 24 months, additions to the permanent workforce should be considered.

•  Staffing agency–supervised workers may remain assigned for longer than 24 months provided they are managed in accordance with the provisions of these guidelines.

Table 3-1 shows the specific lower-level jobs that contingent workers will be permitted to perform (Jobs A, B, C, and D) and those higher-level jobs (E and above) that will remain exclusively the responsibility of the company’s permanent employees.

Responsibilities in Managing Contingent Workers

Continuing with the ABC Company example, appendix A addresses how responsibilities for the management of agency-supplied contingent workers might be allocated, depending on which party supervises them. Note that each employer retains full responsibility for its own permanent employees.

You will notice that independent contractors are not included on the chart. This situation is different from when you may be working with or hiring independent contractors. In that case, the company’s relationship with independent contractors will be set forth in a contract that describes the scope of the work and the results to be achieved. Whether the contractor is an individual or another organization, the contractor will maintain sole responsibility for themselves and any of their employees with regard to all aspects of the work, including pay rates, benefits, the control and direction of the work and workers, payment of payroll taxes, providing required insurance, and so on. The contract may set forth certain minimum requirements for contractor employees working at the company’s premises, such as safety training, harassment policies, criminal background checks, or drug testing requirements, but the contractor is to retain sole responsibility for carrying out such mandates.

Responsibilities of Staffing Agencies

All contingent workers should meet ABC’s pre-employment standards concerning background checks and drug testing as well as all federal or state employment onboarding requirements. It is the responsibility of the staffing agency providing these workers to ensure that all the requirements in appendix A are met. ABC will provide contact information to staffing agencies on approved vendors if requested. Staffing agencies are also required to implement and administer a random and for-cause drug testing program for all contingent workers assigned to ABC facilities in accordance with ABC drug testing standards and provide proof of this testing annually to ABC’s corporate purchasing department.

Staffing agencies providing contingent employees (who are not independent contractors) should deliver at a minimum the following benefits to their employees assigned to ABC facilities in accordance with their own policies and practices:

•  annual performance evaluations

•  vacations

•  paid holidays

•  annual raises

•  a health insurance plan meeting minimum requirements of applicable law.

These requirements should be included in all contracts with staffing agencies under the direction of ABC corporate purchasing and should be part of the negotiated markup costs charged to ABC.

Benefits of Creating Contingent Worker Guidelines

The organization in this example, ABC Company, intended to address a few different objectives. For instance, the company was concerned about their managers’ seeming overreliance on the use of contingent workers in their facilities. Durational limits force managers to periodically analyze the true benefit of using contingent workers versus permanent workers. Durational limits also help to avoid creation of a joint employment in situations where that is not desired.

Senior management was also concerned about product quality problems suspected to be caused at least in part by contingent workers performing higher-level jobs without adequate training, especially when the contingent workers are not under the direct supervision of ABC. As shown in this example, there are designated jobs to which agency-supervised employees are limited.

A phenomenon we have witnessed connected to the use of contingent workers is the negative reaction of permanent workers when contingent workers whom they consider to be less skilled are brought in to perform the same work they have been performing. Your long-term employees, who may have been conditioned to believe that their experience and skills add value to the company, may have a negative reaction when they perceive that their employer thinks that their job can be performed by contract workers with relatively less skill and experience being paid a significantly lower wage.

Rightly or wrongly, your permanent employees may regard contingent workers as not only a threat to their own security but also a less-qualified brand of worker. This can lead not just to morale issues and on-the-job friction, but also to the loss of good workers or even thoughts of unionization. When introducing contingent workers, you should be aware of and take steps to alleviate this potential reaction. If this is a problem you find possible, you may wish to preserve the higher-level jobs for your permanent workers by limiting contingent workers to lower-level jobs through your guidelines.

Many other benefits exist for creating such guidelines for your organization. As you can see from the example, ABC wanted to also make sure that everyone working in its organization met the same pre-employment screening regardless of their employment status. This can help ensure that the employment standards of the organization are maintained even with contingent workers. These guidelines also clearly establish who is responsible for these contingent workers concerning these pre-employment functions.

You will also see that these guidelines address certain benefits the staffing agency is to provide contract workers. You may wonder why a company would concern itself with such things as annual performance evaluations, paid vacations, paid holidays, and annual raises for employees not on its payroll, especially because it will ultimately be responsible for these costs. However, think about what problems may exist in the absence of such benefits. Cost savings do not come free of charge. What kind of morale or work attitude might any employee have without these programs in place? How could this affect the quality of work that these workers perform or the service that they provide to your customers? If contract or contingent employees are dissatisfied with their employer’s treatment, this can have a detrimental influence on the quality of their work or service to your customers. Understanding and influencing these types of factors can have a positive impact on the success of your contract worker initiatives longer term. This will be reviewed in greater detail in chapter 7.

These guidelines were designed to meet this organization’s employment goals as established in its contingent worker strategy both immediately and in the future. It is important that these guidelines be communicated with everyone on all levels of the organization, especially to those who have direct responsibility for its implementation.

It is also important to ensure that staffing agencies understand what is required of them as detailed in these guidelines and to establish metrics and regular reporting accountabilities for these agencies for meeting these requirements on a regular basis. Proactively addressing any problems concerning these guidelines can prevent them from becoming bigger issues in the future and help make your contingent worker initiatives meet your goals and objectives.

Practical Applications

•  Establish and review your contingent worker guidelines with the managers and supervisors in your organization so they can have a better understanding of the rules and procedures that they must follow in this process.

•  Use those guidelines as an educational tool to help managers and supervisors with direct responsibilities for contingent workers understand what is and is not permitted concerning these workers. This document provides a clear road map for them to follow.

•  Share those guidelines with all staffing agencies providing contingent workers to your organization. This document should be regularly reviewed with them to ensure that they remain in compliance.

•  Leverage those guidelines to help your organization select future staffing agencies as part of your request for proposals process. By reviewing this document, the prospective agencies will have a clear understanding of what your organization expects concerning their services.

•  Update your guidelines regularly to address changes in circumstances.

Questions to Consider

•  Who should be responsible for creating contingent worker guidelines?

•  How can you get the buy-in of both senior management and line managers for these guidelines?

•  How can you avoid these guidelines from becoming solely the responsibility of your human resources function, and what would be the benefit of achieving this objective?

•  Who will be responsible for ensuring these guidelines will be followed?

•  How can you partner with staffing agencies in the development and application of these guidelines?