What is a Staffing Agency Agreement?
A staffing agency contract is a written agreement between a staffing agency and a business that allows the staffing agency to refer workers to the business on a temporary basis to provide services. The staffing agency continues to be the legal employer of all personnel provided to the business and is responsible for employees’ compensation, taxes, and compliance with statutory and regulatory requirements. The staffing agency provides a service to employers who do not want the burden of hiring a full-time worker and to quickly fill employment gaps that may be for a fixed period of time (e.g. covering vacation time leaves of absence, seasonal hiring) or on a temporary basis while deciding whether to offer a full-time position.
A staffing agency contract generally includes an agreed-upon pay rate for each worker placed with the hiring business. The staffing business then pays each worker a slightly higher rate of pay than agreed with the hiring business , with the difference in rates covering the staffing agency’s payroll taxes, employee benefit costs, and profit margin. In many cases, the staffing agency hires the workers on a part-time or even full-time basis and continues to employ them after the temporary assignment for other businesses or assignments in similar fields of work.
These staffing agency contracts are important to any business that utilizes temporary staff, such as for a busy holiday retail season, or in professional fields, such as in health care or information technology, where the demand for workers can occasionally exceed the available supply. Businesses also use staffing agencies when they do not have a human resource department that is experienced in hiring workers, or when they need a worker quickly, but anticipate the need to fill the position as soon as possible.
Key Elements in a Staffing Agency Agreement
A staffing agency contract should include the essentials of what you expect from your supplier. These include the scope of work and/or services provided, timelines for performance, and the duration of the contract. There should also be payment terms, confidentiality provisions, non-compete and non-solicitation clauses, performance measures or standards, and a termination provisions.
Scope of Work: This part of the agreement defines what work the staffing agency will provide. It may also detail what services the temporary staff will perform, and even identify the type of staff you would like (i.e., general maintenance, nurse aide caregivers, etc.). The person responsible for hiring should include a detailed outline of their expectations of the agency so that the agency can be held accountable for its actions under the contract.
Duration: It is important to include how long the employment contract should last, as well as any conditions for renewal. It is also advisable to include a process for terminating the agency contract before any expiration exists, as stated in the agreement. This could be, for example, a breaching party giving a notice of intent to cure the breach.
Payment Terms: A payment terms provision details the payment terms the staffing agency will receive for their efforts. It may be an hourly wage, or a salary on a per diem basis, based on what the caregiver provides. Payment can be made on a weekly, monthly, or quarterly basis, depending on what the staffing agency will accept.
Confidentiality: A confidentiality clause with respect to the information exchanged between your business and the agency should be included. In the event the agency breaches this confidentiality, your private information can become common knowledge, and this exposes your agency to various threats.
Termination: A termination provision can help you in the event the staffing agency does not comply with the agreement. You should also include a process for when certain events occur within your organization due to employee turnover, or employee failures to fulfill their duties.
Considerations and Opinions on Staffing Agency Agreements
A properly managed staffing agency should be well aware of applicable federal and state labor laws, of which a large portion will likely need to flow through to its employees in some manner. For instance, if the state in which the agency is providing services has a minimum wage that is greater than federal minimum wage, the contract should not only specify that wages must be paid at the higher rate, but should also set forth an understanding that the contractor will be responsible for any additional wages and penalties assessed—so that the staffing agency is able to impose such responsibilities on the contractor in the event that a raise would boost their liability.
Likewise, the Equal Employment Opportunity Commission ("EEOC") has stated its position that employers are covered by anti-discrimination laws with respect to employees assigned to their business, even if technically those employees are employed by a staffing agency. In 2014, the EEOC issued formal Association Guidance specifically addressing the shared liability of an employer and a staffing agency arising from the hiring of an individual (see here). The contract should expressly state the responsibility of the staffing agency for the actions of its employees with respect to discrimination and harassment, and should indicate that the agency will be responsible for any potential damages therefrom. Moreover, while the staffing agency is recommended to be principally responsible for the payment of overtime and other wages, the client is better positioned to be the party liable for the payment of worker’s compensation benefits, and thus these obligations should be expressly allocated in order to avoid costly litigation down the road.
How to Negotiate a Staffing Agency Agreement
Whether you are a contract worker or a hiring business, there are areas of the Staffing Agency Contract that could stand a little more negotiation. Mindful of the sensitive nature of negotiations, be respectful of the other party during the discussions. Both parties should go into negotiations with a full understanding of what the contract is for and why. For contract workers, this means knowing the basics of the services to be provided and the costs associated with those services. Hiring businesses should be clear on the scope of their requirements and what they are willing to pay to have those needs filled. Cost is a primary element of negotiation. For both parties, be certain to consider all relevant costs. For contract workers, consider absolutely everything that will come out of your pocket. For example, you and your family need health insurance—will you be paying for coverage or will the staffing agency provide your benefits? What geographical limitations or scope of work restrictions will apply? Will you be required to pay your own business expenses? If you drive for work, will you be compensated for mileage? What about travel costs related to temp assignments? When you meet with the staffing agency to discuss compensation, drill down on what your compensation actually is and establish an accurate bottom line before you sign. In most cases, however, you will not have much room for negotiation as a contract worker. Hiring businesses are in an even more precarious position when it comes to negotiating a Staffing Agency Contract. Your business depends on meeting customer requirements, but one of the primary reasons for working with a staffing agency is to fulfill those needs without the extensive financial obligations of hiring employees. This puts hiring businesses in a difficult spot—how do you fulfill customer requirements and manage the costs? It may help to sit down with the staffing agency and evaluate your requirements so that you can determine what you need from them. Do you need people to work a preferred shift or are you willing to build a flexible schedule with whichever person is best suited for the job? Can you offer to provide a vehicle or car service? What about meals and lodging if your contract workers are assigned to a temporary gig away from home? Discussing the options early on will allow you to have a complete picture of where you can negotiate with the Staffing Agency before you begin talks.
Common Pitfalls to Avoid
One of the biggest pitfalls for companies regarding a staffing agency contract is forgetting that they are entering into a two-way agreement. A staffing agency employee is technically an employee of the staffing agency up until the point where the appropriate contracts are executed. This means that the staffing agency is not the only one with liability in this arrangement. For instance, if a temp worker were to hurt him or herself while working for the company, the burden of liability may fall on both parties — the staffing agency and the company. If your company has not taken steps to properly vet the staffing agency you are asking to provide employees , you could be opening yourself up to liability in such a situation. Another mistake that many companies make is neglecting to consider all the factors that could affect the number of employees to be provided for a specific time frame and at what expense. If a company is undertaking a special project for six months and estimates that it will need 15 employees at the start, they may simply put that figure in a contract without considering that they may not need all those employees at once or that demand may quickly rise or drop. Plus, if you need more workers in less time, that isn’t typically a problem for a good staffing agency — they may simple be able to provide workers with shorter notice. But if you’re not considering issues like this, you may end up signing a blanket contract that doesn’t meet your changing needs.
Advantages of a Good Staffing Agency Agreement
A well-written staffing agency contract brings numerous advantages to the relationship between the business and the agency. These benefits can be significant in preventing disputes and enhancing the efficiency of operations. Firstly, clear terms and conditions set forth in the contract help to establish a common understanding between the staffing agency and business which can be helpful for ensuring that operations run smoothly and mitigate the risk of disputes arising. Following the terms and conditions established in the clear, written contract in the implementation and operation of the contract allows all parties to the contract to work with certainty as to how the contract operates and what is expected of the parties to the contract. For example, clear terms and conditions regarding timeframes for the provision of staff, invoicing and payment terms can help to avoid confusion and potentially disputes between the parties, which can lose both parties time and money that could be more profitably spent elsewhere. Also, having a well-written staffing agency contract helps to ensure that there are minimal gaps in the contract and therefore avoids situations where ambiguity can arise. For example, a business may make a claim against an agency for a breach of the contract for failure to meet a term or condition in the contract, when this term or condition is not actually included in the contract itself, either because it is assumed to be implied as an essential term or condition of the contract or because it is overlooked in the haste to settle a contract to commence operations. Having a well-written contract can help ensure that all parties to the contract are clear on the terms and conditions governing the performance of the contract and avoid any potential ambiguity in determining the obligations of the parties to the contract and any claims for breach of contract. Additionally, a well-written staffing agency contract can help to enhance the efficiency of the client’s business and its operations. For example, a contract that clearly sets out the responsibilities of the parties for the management of staff payments and wages of the staff supplied by the agency may assist to shareholder and director level to allocate responsibility for the tax consequences of wages and other remuneration payments made to employees or casual staff. Using the staffing agency contract to allocate responsibility can help ensure that there are no duplication or overlaps in costs incurred by the parties to the contract and this can assist to ensure that the client’s business can operate efficiently and profitably.
What’s the Future for Staffing Agency Agreements
Emerging trends in staffing agency contracts include the growing use of technology, demand for gig workers and stricter labor laws. How these developments shape future contracts will depend on how each trend evolves. Staffing agencies and employers that use their services continuously adapt to the increasing role technology plays in staffing. Compared to ten years ago, most staffing agencies are much more reliant on technology to improve their efficiency through scheduling, invoicing and payroll efficiency. Many staffing agencies have software to track the speed of employee check-in and check-out. Others use apps and other tools for fast and easy communication with employees. Many employers expect staffing agencies to provide information on how often employees miss shifts and other pertinent data. Technology will continue to have a growing presence in future contracts as it becomes a common and necessary tool for all staffing relationships.
The increase in the use of technology has made the growth of gig workers and independent contractors easier. Staff hire workers directly through app-based market places and these workers have less of a need for staffing agencies. However, as on-demand flexibility needs have increased (due to generational, economic and demographic shifts), staffing agencies have proven themselves as capable players in this space . The quality of service offered by staffing agencies in fields such as logistics, healthcare and construction is an advantage they still retain. While gig economy work has less reliance on staffing agencies, staffing agencies will continue to be an important player in the workforce. Future contracts will likely need to specify if the contract covers all your potential workers. If it does not, employers are unlikely to even consider staffing agencies if their traditional staffing needs are fulfilled by gig workers that they employ directly.
One of the key drivers of the gig economy is the nature of the work available. As the demand for "flexible" work increases, the market naturally adapts. As a result, the gig economy has increased the demand for temporary workers through staffing agencies. Federal and state governments view the growing gig economy as a problem to be solved. Governments see staffing agencies as a hybrid that can supplement current labor laws while protecting employees who work flexible hours. Future contracts should consider relevant labor law developments in your area. If your employees are vulnerable to employment claims, you should consider how to mitigate the risk through your contracts.