The Ever-Increasing Financial Risks of Misclassifying Workers

dice money 1 web - croppedWhile worker misclassification has been an enforcement target throughout the entire Obama administration, the financial risks of misclassifying workers have increased rapidly thanks to the Department of Labor’s (DOL) “Misclassification Initiative.”

The loss of tax revenue due to the misclassification of W-2 employees as 1099 independent contractors (IC) has been a significant problem for government agencies. When a company engages a worker as an IC, they don’t pay the employer portion of taxes. This obviously takes money out of the government coffers. That is why the Obama administration has been cracking down on this practice.

Conversion Fee samplesPrior to the DOL’s  initiative, the IRS was the main enforcement arm  of this crackdown. The DOL got into the act when it launched its Misclassification Initiative in 2011. Since then the DOL has collected more than $18.2 million in back wages for more than 19,000 workers. But it’s not just the IRS and the DOL that employers need to worry about.  The key to the Misclassification Initiative is the “Memorandums of Understanding” the DOL is signing with the IRS and state agencies. Under these MOU’s, the DOL and the other agencies agree to share information about suspected misclassification. As a result, it is now more likely for employers to be penalized by a number of state agencies at once. This exposes them to a wide range of costs, including:

  • Back taxes, failure-to-pay penalties, and late filing penalties
  • Back pay, including overtime, and liquidated damages
  • Back unemployment taxes and penalties
  • Penalties for failing to pay Workers’ Compensation premiums
  • Civil penalties (for example, in California, civil penalties can reach $25,000 per violation!)
  • Penalties for missing I-9 forms (required for employees)
  • Interest on back taxes
  • Attorneys fees

Now more than ever, it does not pay to be involved in worker misclassification. If your clients have ICs, you may want to encourage them to audit their workforces. They want to make sure each and every IC truly qualifies for that classification.  The best way to do that is to ensure all ICs meet the IRS guidelines, which can be found at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee

You can also help them by offering to convert ICs to W-2 employees whose employment is outsourced to a contract staffing back-office. That way, they can still escape a number of the employment costs and administrative hassles without assuming the financial risks of misclassifying workers.

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What Contract Candidates Want

Contractor CandidatesAs the job market rebounds, we are entering a candidate-driven market. This is true in the contract staffing world and not just direct hire. Candidates are increasingly choosing contract staffing as a lifestyle, so it is more important than ever that you establish yourself as the recruiter of choice if you want to attract and retain the best contract candidates.

In order to do that, you have to understand what contract candidates want and then strive to satisfy those desires.  You will find that the things contract candidates want aren’t all that different from what ALL workers want:

  1. Fair pay.  Pay structure is one of the reasons that workers are gravitating toward contract staffing. In a direct position, they would typically be paid on a salary basis, but most contract assignments are hourly. Therefore, contractors are paid for every hour worked and even more if they work overtime.  There are a number of ways you can establish competitive contractor pay rates.  You can start with the typical salary a direct hire would make in a similar position and divide by 2080 (the typical number of hours worked in a year).  You can also conduct salary research at the Bureau of Labor Statistics  and www.salary.com websites.  We discuss other techniques for calculating contractor pay rates and the hourly bill rate charged to the client at How to Establish Contract Bill Rates
  2. Benefits. In the past, a worker may not have expected to receive benefits during a contract assignment, but that is changing. In its 2014 Temporary Worker Survey, Staffing Industry Analysts found that nearly half of professional contractors DO receive healthcare insurance. This is even more crucial now that most Americans are required to carry healthcare insurance under the Affordable Care Act (ACA or Obamacare).  And with the ever-rising costs of benefits, particularly healthcare insurance, contractors are looking at their TOTAL compensation package, not just their pay rate, when deciding on a position.  If you are unable to provide healthcare insurance to your contractors, you may want to align yourself with a contract staffing back-office service that can do so. This could make or break your ability to attract and retain star contractors.
  3. Great assignments. Contract candidates are going to go where they can find the best assignments. They want to work on meaningful projects where they can easily see the impact of their work. They want flexible scheduling options.  The quality of assignments you can offer is only as good as your client pool. Remember to tell all your direct hire clients that you can also offer contract staffing. There are also a number of ways that you can market your services through the Internet and more traditional means to get a wider range of clients and contract job orders.
  4. Communication. Communication is important in any employment arrangement, but it is often harder to maintain in a contract staffing situation because you do not see your contractor every day.  But in many cases, you are their first point of contact. The client company may not relay feedback directly to the contractor, so it is up to you to tell them how the assignment is going.  If they have a tentative end date, they may also look to you for information regarding any possibility of extension.  This communication does not have to be a huge endeavor or take a lot of time. Simply checking in with the contractor once and a while will help you maintain a strong relationship . . . and increase the chances that you will get to place them again in the future.

 

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Why Settle for Mac and Cheese When You Could Have Filet Mignon Everyday?

 	Roast pork, red wine. Dinner.Oh the feeling of closing a direct hire placement and receiving that big placement fee! Finally, physical proof that all your blood, sweat, and tears were worth it. It makes you feel like you can splurge a little and celebrate over a fillet mignon dinner.

The problem is when that big placement fee runs out and there’s not another big placement waiting in the wings. All of a sudden you find yourself cutting back and eating macaroni and cheese.

We often get asked by recruiters what are the advantages of adding contract staffing to their business models.  The number one reason is consistent cash flow. In other words, contract staffing helps you bridge the periods between direct placements so you can enjoy filet mignon everyday.

When you have contractors, you earn money for every hour they work and even more when they work overtime. This provides a steady, predictable income that can sustain you during those inevitable direct hire dry spells. With the peace of mind that you will be able to pay your bills, you can make smarter business decisions, turning down those job orders that you know in your gut are bad business. With contract staffing in your back pocket, you can be more choosy and focus your efforts on job orders that are more likely to be worth your time.

Contract staffing can even help make your firm recession-proof. Contract placements often cover overhead costs, making your direct hire placements pure profit. This can be a lifeline during an economic downturn.  While we hope we don’t experience another recession for quite some time, history tells us there will be another one eventually. With contract staffing you can not only survive but thrive in all economic conditions.

You can even increase your overall sales. Contract staffing tends to increase client loyalty because they like a recruiter who can meet ALL their staffing needs. That loyalty often leads to more placements (contract AND direct hire) from existing clients, not to mention referrals. You can also attract new clients with your contract staffing services and pick up their direct hire business in the process.

So if contracting is so great, why aren’t ALL recruiters doing it? Well, there is a common myth that contract staffing is significantly more difficult than direct hire. In reality, contracting is not all that different from direct hire  when you outsource the employment of your contractors to a contract staffing back-office service. The back-office will handle all the employment liability and tasks, including background checks and drug screenings, payroll processing and funding,  tax witholdings and filings, Workers’ Compensation, unemployment, employee paperwork, and benefits administration, including ACA (Affordable Care Act or Obamacare) compliance. When you place your contractors through a back-office service, your tasks remain largely the same as with a direct hire placement: you match the candidate to the job order and negotiate the fees.

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Is Contract Staffing MORE Secure Than Direct Hire?

Are-Contract-Jobs-More-Secure-146Recruiters often assume that candidates prefer direct hire positions because they believe them to be more secure than contract assignments. However, candidates are increasingly choosing contracting as a lifestyle because they have found that contract staffing can actually be more secure than direct hire.

How can work that is temporary by it’s very nature be more secure than a “perm” position? First, let’s make one thing clear: There is no such thing as a permanent job anymore. You will notice on this blog that we don’t refer to traditional employment as “perm” but as “direct hire” as is the practice of many recruiters in the industry. Few workers today will spend their entire careers with one company like they did in the past. As we learned during the last recession, their jobs could end with little or no notice. Shellshocked, laid off workers scramble to update their resumes and figure out where to start their job search.

Conversion Fee samplesNow let’s look at a worker who chooses the contract path.  Many people would think they are taking a huge risk by accepting positions that will most likely end.  How do they know that they will be able to find work when an assignment is over? Well, you know that saying that knowledge is power? That can be applied here.  By knowing that their assignment will end, they can be prepared for it.  They keep their resumes up-to-date. They line up future assignments ahead of time.  Rather than depending on a single employer who has no vested interest in their future, they depend on their own skills and experience to secure their ongoing livelihood.

This is even easier when they work with a recruiter such as yourself.  Usually, there is a tentative end date tied to a contract assignment. This gives you a reason to contact your client when that end date nears to check on the status of the assignment and get something else lined up for the contractor if the assignment is indeed about to end. These conversations can give you the opportunity to build a stronger relationship with your clients and see if they have other staffing needs. Sometimes, clients will reach out to you first to give you a heads up that the assignment is about to end, giving you enough advance notice to line up another “gig” for the contractor before the current assignment officially ends. The beauty of this for recruiters is that, rather than placing a candidate only once and earning one placement fee, you can earn that fee over and over by placing the same great candidate.

Adding to the security of contracting is the fact that a contracts are often extended, lasting much longer than expected. Sometimes they even turn into  a direct hire position. When that happens, you as the recruiter can earn a conversion fee over and above what you earn while the contractor is working.

Beyond the unexpected security, workers are choosing contract staffing for a variety of other reasons:

  • Flexibility – The project-based nature of contract positions allows contractors to stray from the typical 9-to-5 schedule and enhance work-life balance.
  • Earning potential – Contractors are typically paid on an hourly basis, so they are compensated for every hour worked, including overtime hours.
  • Enhance resume – Contractors pick up knowledge and skills that can help them secure more work in the future.
  • Variety – Contract staffing allows workers to try different types of work, projects, companies, and even geographic locations.

As more candidates gravitate toward contract staffing, you will want to be sure that you are accepting contract staffing job orders from clients so you have options for those candidates. Having positions that meet their needs is the best way to attract the highest quality candidates.

 

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4 Factors (Besides Skills Shortage) That Are Causing Record Hiring Decision Delays

Hiring ISngThe latest statistics on hiring are very encouraging for recruiters on both the direct hire and contract side of the business. But there is one recent statistic that is not good for anyone in the employment arena. The time-to-fill open positions has reached an average of 25.1 days, the longest period since that statistic first began being tracked in 2001, according to the Washington Post.  When the recovery first began in July 2009, that number was at 15.3 days.

This record was hit even though there are 9.5 million unemployed individuals available to fill approximately 4.6 million open jobs. Not to mention all of the currently employed people who are actively looking for new jobs, a number that is growing as the economy improves. So what is behind these hiring decision delays?

Conversion Fee samplesMany experts and recruiters point to a mismatch between the skills that available workers have and those that are needed. This is definitely true for certain positions and industries. However,  as Catherine Rampell notes in the Washington Post, if a skills mismatch were a widespread problem, we would see an overall increase in wages as companies compete for the small number of qualified individuals.  That is not happening. Additionally, when the four regional branches of the Federal Reserve and former chairman Ben Bernacke looked into the issue, they could not verify that there was a bonafide skills crisis,  stating that “current skills mismatches are limited,” Inc.com reported.

It appears that there are a number of other potential factors causing hiring decision delays:

  1. Economic uncertainty - The economy is getting better, but it’s still not out of the woods.  A number of issues, including political disputes, the expected turnover in Congress due to the November Elections, and the unknown impact of the Affordable Care Act (ACA or Obamacare) are leaving employers less than confident about hiring, especially with the recession and its massive layoffs still fresh in their minds.
  2. Increased employment regulation – In addition to the ACA, employment legislation has increased on the federal, state, and even local level.  A prime example: A number of states and localities are passing paid sick leave laws. Employers have to determine whether they must comply with these laws, how to administer and track the leave, and how to cover the costs. The regulatory burden weighs on employers’ minds every time they consider adding to their staff.
  3. Reluctance to hire long-term unemployed – The “unemployed mindset,” in which employers assume there is something wrong with a candidate who is not actively employed, is alive and well. This is especially true when it comes to the 3 million people considered to be “long-term” unemployed, meaning they have been out of work for 27 weeks or more. Citing data from an Evolv study, Bloomberg reported that callbacks for those with 8 months of unemployment is 45% lower than those out of work only a month.
  4. Search for the “perfect” candidate - When they have to hire, companies seem to be seeking the proverbial “purple squirrel.” According to Inc.com, 67% of hiring managers said they “don’t feel like they have to settle for a candidate without the perfect qualifications.”  They are disqualifying candidates for things as simple as not having the exact years of experience requested or missing certain “buzzwords” from their resume. It is not uncommon for candidates to go on several interviews and still not be hired. Recruiters have also reported that clients are continually asking for more options even after quality candidates have been presented.

This failure to act can cause more problems than it solves. As a recruiter, you know that quality candidates start to drop out of the hiring process the longer it goes.  Also, failing to hire hampers the growth of the company. Finally, the shortage of help can put undue stress on existing employees, which can impact productivity and retention.

You can help clients avoid these problems by offering candidates on a contract basis.  This can help in a number of ways.  If they are concerned about the cost and administrative burden tied to employees, they can instead utilize contractors, who are the legal employees of a third party (you as the recruiter or an outside contract staffing back-office service that you utilize). The third party then assumes the responsibility for legal compliance. If they are uncertain of the economy, they can use the person on a contract basis and convert them to a direct hire when they feel more secure.

Contract-to-direct arrangements can also help clients ensure a good fit in the absence of the purple squirrel. They can evaluate the workers’ performance and work ethic during the contract period and then decide whether or not to extend the direct hire offer.  Some recruiters we work with actually have clients who are utilizing the contract-to-direct option to evaluate most of their new hires.

Dragging out the hiring process is not good for you, your clients, or your candidates. You can help reduce the time-to-hire by offering clients another option that helps everyone – contract staffing.

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Contract Staffing Growth Continues Even As Overall Job Market Rebounds

 	green grass isolated on white backgroundIf there was any doubt that the contract staffing growth experienced in the past few years is more than a mere reaction to the recession, that doubt should be put to rest with the latest Employment Situation Summary for June.

The jobs report exceeded expectations, showing that the United States added 288,000 jobs last month and unemployment dropped to 6.1%, the lowest point since September 2008, according to ForbesThe job gains were shared by a variety of industries, giving the recovery the type of boost economists have been looking for since the recession ended.

If this was like other recessions and recoveries, we would expect that the popularity of contract staffing would now decline.  Typically, companies have used contract staffing to test the hiring waters following a recession and then return to direct hiring once the overall job market improves. That does not appear to be the case this time. In fact, “temporary help services” added 10,100 jobs in June, once again reaching an all-time high temp penetration rate. That rate, which calculates the number of contract jobs as a percentage of total employment, is now at 2.0677%. That percentage has risen for 19 of the past 20 months, according to Bloomberg.

These numbers support what we have long been saying on this blog: There has been a fundamental shift toward a new blended workforce model in which employers utilize both direct hires and contractors as part of a long-term business strategy. This blended workforce model allows companies to remain nimble as they respond to ever-changing business demands, continued economic uncertainty (healthcare reform, political unrest, etc.), and increasing employment regulations. Meanwhile, individuals are also changing the way they approach work with many adopting contract staffing as a lifestyle due to the flexibility and increased earning potential it offers. As a result, experts predict that contractors will comprise 40-50% of the entire workforce by 2020.

The June jobs report is great news for workers, employers, and our economy as a whole, but it’s even better news for recruiters. The overall growth in jobs will hopefully result in an uptick in your direct hire business, but you can also cash in on the continued popularity of contract staffing by placing contractors. This allows you to add a steady stream of recruiter income in between your direct hire placement fees.

If you have not yet added contract staffing, these statistics show that it is not going away.  Companies and candidates have embraced contracting, so if you want to remain competitive in this new environment, you will want to be sure sure you can meet their needs by offering contract staffing.

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Marketing Contract Staffing on the Internet

Marketing-Contract-Staffing-on-the-Internet-7081From websites to social media, the Internet offers a number of ways to spread your contract staffing message even further than anyone would have thought possible even 10 years ago. Here are some of the ways to get the most out of some common Internet mediums:

Your website

Does your website make it clear that you provide contract staffing services in addition to direct hires? You should at least have a paragraph on your website devoted to contract staffing. Better yet, add a page about your contract staffing services for clients and ANOTHER one for candidates. These pages should point out the advantages of contract staffing for both groups and why they should utilize YOUR services. This will help you get found by companies and candidates using Internet search engines to find recruiters who offer contract staffing, particularly if you use keywords such as contracting, contractor, etc. Bonus points for having a blog dedicated to contract staffing, which can help you share your expertise and set you apart from the competition.

LinkedIn

This is probably the most popular social media site for recruiters, but are you using it to its full advantage? Be sure to mention contract staffing on both your personal and company profiles. Remember, you have 120 characters in the headline for your title, so make sure some of those characters mention contract staffing, contractors, contracting, or something similar. Those keywords can help you get found by potential clients and candidates.  You can also join and participate in LinkedIn Groups in your niche. By participating in discussions and posting RELEVANT content in Groups, you can again differentiate yourself. It’s a good idea to start by reading others’ conversations and commenting on them before you start posting your own discussions. You can also start your own Group to further expand your name recognition. But whether you are posting in other groups or your own, you always want to provide useful information rather than being self-promotional.

Twitter

Any recruiter can simply post their job openings. If you want to stand out, retweet others’ posts, comment, and try to spur your own discussions by tweeting relevant and useful information.  And don’t forget to use hashtags by putting a # in front of phrases you think people will search on. You can find hashtags trending in certain industries by using hashtagify.me

Facebook

Marketing on Facebook has always been challenging, especially in the business-to-business arena, but since Facebook changed its algorithm, it is getting nearly impossible for businesses to get seen by simply creating good posts, according to Social Media Examiner. Businesses will most likely have to use paid advertising to get seen on Facebook. However, there is some good news. With over a billion users, Facebook has the largest database of candidates available, and with its “Open Graph” search, which is built around natural language rather than keywords, you can find contract candidates with very specific criteria.  Read more about it here: www.topecheloncontracting.com/blog/sourcing-contract-candidates-facebook/

Google+

Despite reports that this social media site is doomed since  its creator left the company, Google says its social networking site isn’t going anywhere. And according to Social-Hire.com it has more ACTIVE users than LinkedIn, and users tend to respond more quickly than they do in LinkedIn. It also has some good features. For starters, it allows you to segment connections into customizable Circles. You can tailor different posts to candidates and clients and even segment contacts into different industries if you have multiple niches. Then there are the video chats called Hangouts, which could allow you to conduct candidate interviews virtually. This is especially useful for contract placements that need to be made quickly or when the candidate is remote. Google+ also has “Communities,” much like LinkedIn’s Groups. So for the time being, you would be wise not to ignore Google+.  But remember, Google+ is very visual, so be sure to use eye-catching images on your posts.

Pinterest

This is the last social media network many would think of when it comes to recruiting. Yet some recruiters are finding success there, although more often on the candidates side than with clients. Those seeking creative contractors, like Graphic Artists and Web Designers, will likely have the best luck because those professionals often share work on Pinterest. You can find them by searching for terms such as “resume,” “cv,” and “portfolio.” Pinterest can also be a branding tool if you provide useful information to your audience. You will want to think a little “outside the box” and figure out what tools or information candidates can use to do their job better. For instance, if you recruit Web Designers, they may enjoy posts with uniquely designed pages. People in education may appreciate classroom tips. To learn about how one recruiting firm has successfully used Pinterest, check out our article about PediaStaff’s Pinterest Profile.

This is just a small sampling of the tools and sites that can help you spread your contract staffing message. If you are ready to shake up your contract staffing marketing, the Internet offers infinite marketing options that are just there waiting to be discovered.

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5 Ways to Build Stronger Recruiter-Client Relationships

5-ways-to-build-stronger-client-relationships-7073After over 20 years in the contract staffing industry, we have seen our fair share of successful recruiters.  While these recruiters are different in many ways, they all seem to have a particularly keen ability to build strong recruiter-client relationships. Here are some the common relationship-building techniques that we have noticed while working with recruiters who are successful in contract staffing AND direct hire:

  1. REALLY Getting to Know the Client. One of employers’ pet peeves is that some recruiters seem to throw as many resumes as possible their way to see what “sticks.”  Recruiters who only send a few highly targeted resumes set themselves apart.  In order to do that, you have to go beyond the surface information many “vendors” get about their clients. Conversion Fee samplesA number of successful recruiters make on-site visits a core part of their recruitment process.  In fact, one recruiting firm we work with will not take a job order from companies that will not meet with them in person. These recruiters take the opportunity to meet with as many people as they can, ask detailed questions, and tour the facility. The goal is to understand the culture of the company, their recruitment process, and what it takes for a candidate to truly succeed there.
  2. Being a One-Stop Shop. Successful recruiter make sure they don’t give their clients any reason to go to any other firm because they provide ALL of the staffing solutions a company could possibly need. These solutions include direct hire, traditional contract staffing, contract-to-direct hire, payrolling, 1099 independent contractor to W-2 employee conversions, retiree re-staffing, and internships/co-ops. Employers are busy, so allowing them to have one contact for all their staffing needs is a great way to build loyalty.
  3. Selling a SOLUTION, Not a Person. Clients don’t always know that they need one of those alternative staffing options. All they know is they a problem. If you can provide a viable solution, you become more than a vendor. You become a trusted staffing partner.  To do this, you need to ask open-ended questions to determine what their exact need is and then suggest a solution. For example, you might want to ask if they have a special project or deadline they need to address, which may indicate the need for a traditional contract staffing arrangement.  Or you might ask if they have a hiring freeze that is preventing them from getting the help they need, in which case you might suggest they hire someone on a contract-to direct basis because contractors come out of a different budget from direct hires, so they could use them on a contract basis until the hiring freeze lifts.
  4. Being An Employment Expert. Besides looking to you for solutions, companies often look to recruiters to be a resource regarding employment laws and issues. Therefore, it is important that you keep up-to-date on issues such as healthcare reform (aka Obamacare), wage and hour regulations under the Fair Labor Standards Act (FLSA), and proper worker classification (1099 independent contractor vs. W-2 employee).
  5. Following Up. Of course, you want to be sure to be in frequent contact with the client when you are working a job order. But don’t forget to keep in touch even if you don’t get a job order.  Just because a company may not have a need now doesn’t mean they won’t later.  Call them occasionally just to touch base. You want to be sure to stay at the top of their mind so that when they DO have a need, they think of you first.

In general, everything you can do for your client builds strong recruiter-client relationships. This not only helps you retain current clients but can also help you gain new ones through referrals and word of mouth. By simply putting your client first, you can build a successful firm that can thrive even in the most challenging economic conditions.

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The Impact of Rising Healthcare Costs on Recruiters, Candidates, and Companies

 	Prescription Medicine The American Flag and MoneyRegardless of how you feel about the healthcare reform law commonly known as Obamacare, there is no doubt that employer-sponsored health insurance has become more expensive and complex over the past several years. The implications of the rising healthcare costs are far-reaching, driving business decisions in a variety of ways that impact everyone in the employment arena.

It is estimated that health insurance premiums for employer-sponsored plans have gone up 80-100% in the past decade. It’s no surprise, then, that 49% of employers surveyed by Aflac for their Aflac Workforce Report listed cost containment, including healthcare insurance costs, as their top business issue.  This is an increase from 28% in 2011.

20 marketing tips 2“The research shows how the need to control costs is driving workforce decisions,” said Teresa White, executive vice president and chief operating officer for Aflac Columbus. “For four consecutive years, we have witnessed this growing trend and can foresee the possible ramifications for the U.S. workforce.”

Possible Causes for Health Insurance Premium Increases

Before we get into that, let’s explore what is feeding into these ever-increasing premiums. The first and most obvious potential cause is Obamacare, or more formally, the Affordable Care Act (ACA). Forbes lists four reasons that the ACA is driving the rising healthcare costs:

  1. Commercial underwriting restrictions – For example, insurers must now offer coverage to participants’ children up to age 26, and they can no longer apply pre-existing condition exclusions or lifetime limits on coverage.
  2. Insurers are now limited in how much they can vary premiums based on age
  3. New taxes and fees on insurance companies that are typically passed to employers
  4. The “Essential Health Benefits” that must be offered, including ambulatory patient services, emergency services, substance abuse disorder services, etc.

However, there are a number of factors outside the ACA that are also influencing premiums:

  • Aging population
  • Unhealthy lifestyles
  • Costly technological advances
  • Inaccessibility of healthcare pricing to allow consumers to make cost-effective choices

The situation is even worse for small employers, whose participant pool is not large enough to absorb high medical bills. Where one sick employee with high claims may not even cause a ripple at a large company, it can easily result in a massive premium increase at a smaller organization.

How Employers Are Containing Healthcare Costs

The money for the increased premiums has to come from somewhere, so employers are being forced to make hard decisions that impact the entire business:

  1. Cost-Shifting - The days of going to the doctor and paying nothing out of pocket are nearly gone. To minimize the premium increases, employers have been forced to choose plan designs with higher deductibles, copays, coinsurance, etc. The Kaiser Family Foundation found that the number of workers covered by high deductible plans has quadrupled since 2007. In addition, some employers are contributing a lower percentage toward employees’ benefits premiums.  All of these techniques result in shifting more of the costs to the workers.
  2. Raising the costs of products/services - As a company’s overhead costs increase, some of that cost is ultimately passed on to its customers. But how much can companies raise the costs of their products and services before they lose business?
  3. Employment decisions - You have certainly heard that some companies are avoiding hiring or reducing employee hours to part-time to avoid the upcoming employer mandate of Obamacare. Although it keeps getting delayed, the mandate will eventually require employers with 50 or more full-time employees to provide healthcare insurance to those employees. But because premium increases are impacting ALL companies, not just the so-called large employers subject to the employer mandate, organizations of all sizes are making these and other difficult employment decisions (e.g., freezing raises) to reduce the impact of healthcare costs.
  4. Dropping healthcare - For some employers, the costs and administrative headaches that come with offering benefits simply aren’t worth it, so they are dropping coverage. That means some of them who fall under the Obamacare employer mandate will eventually face fines once the mandate goes into effect, but they have determined that the fines are less costly than actually providing coverage.

Impact on Recruiters

Recruiters are being affected, too. For starters, you can expect candidates to be looking closer at their TOTAL compensation package, not just salary.  This is especially important now that the ACA is requiring most Americans to have health insurance under the individual mandate.  You may find negotiations to be tougher if quality benefits are not available.

You may also notice a decrease in direct hire job orders as employers try to contain costs. However, companies will still need help to address business demands, so they may turn to you for contractors. This is likely one of the reasons that contract staffing continues to grow. If you are not already offering contracting, you may find the need to in this complicated business environment.

Of course, if you employ in-house staff and/or contractors, these issues have a more direct impact on you. Are you required to provide insurance? If not, should you? Benefits are a great way to attract quality contractors, but recruiters must weigh the cost and administrative burden. Some opt to outsource the employment of their contractors to a contract staffing back-office that provides contractor benefits. That can be a great way to brand yourself as a recruiting firm of choice without taking on the complexities of offering healthcare insurance.

The cost of healthcare is a problem with more questions than answers and one that affects everyone in one way or another.  The important thing is to remain educated on the issue and put yourself in the best position to succeed in this increasingly challenging environment. The best way to do that is to become a sole-source provider who can solve all of your clients staffing by offering a variety of options, including contract staffing.

 

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FLSA Lawsuits Up 438% Since 2000 – Are You At Risk?

 	Historic Building Courtroom Court of Appeals Portland OregonWage and Hour lawsuits under the Fair Labor Standards Act (FLSA) have hit a record high once again, representing a 438% increase since 2000. If you run your own back-office for your contractors, you, as their employer, assume the responsibility of compliance and could be at risk for FLSA lawsuits.

FLSA cases hit an all-time high of 8,126 for the period between April 2013 and March 2014, according to the Society for Human Resource Management (SHRM), citing data from the Federal Judicial Center. This is an almost 5% increase over last year when 7,764 cases were filed, and this is the seventh straight year of increases. Even more cases were filed in state courts under state wage and hour codes.

This shows how intense the enforcement and focus on wage and hour issues has become. Some driving forces include the movement to raise the minimum wage and President Obama’s recent directive to the Department of Labor (DOL) to revise the regulations that allow certain workers to be exempt from overtime (“white collar exemptions”).  All of the publicity surrounding wage and hour regulations has also increased employee awareness of those regulations, making them more likely to file FLSA lawsuits.

Contract Training KitThis is a good time to remind you of some of the key provisions of the FLSA. Even if you do not employ any contractors or in-house staff, your clients look to recruiters as an employment resource, so it is important for you to know the basics of this law:

  1. Most employees are entitled to overtime (1.5 times the regular pay rate) when they work more than 40 hours in a work week. Keep in mind that the overtime (OT) laws may be even more generous to employees in certain states.  For example, in California, employees earn OT for any hours worked over 8 in a work day and for their seventh consecutive day of work in a workweek.
  2. Employees CANNOT work off the clock. It’s OK to request that they get preauthorization before they work OT, but if they do work enough hours to be entitled to OT, they must be paid for it.
  3. In order to be exempt from OT, employees must fall into the Executive, Administrative, Learned Professional, Computer-Related, or Outside Sales classifications. These classifications come with specific requirements, which again, are subject to change based on President Obama’s decree to the DOL to update the regulations. The CURRENT exempt requirements are provided on the DOL Web site.
  4. Those who DO qualify as exempt must be paid at least $455 a week on a salary (not hourly) basis with a couple of exceptions. Computer-Related professionals may be paid at an hourly rate of at least $27.63 per hour ($40.38 per hour in California). The salary requirements also do not apply to those under the Outside Sales exemption.
  5. DO NOT let clients misclassify W-2 employees as 1099 Independent Contractors. This may seem like a good way to get around the overtime rules since independent contractors don’t earn overtime, but increased enforcement against the misclassification of workers has made this a treacherous proposition.  IRS back taxes are no longer the only risk. The DOL is now actively seeking back wages, and a number of state agencies are tacking on their own penalties and damages.

This article is for informational purposes only and should not be construed as legal advice.

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