IL and NJ recently passed laws that are intended to raise pay for lower skilled contract workers. MA, MN and now OR passed laws designed to reduce costs by capping how much a staffing firm can charge. These laws may have good intentions but may have adverse effects on staffing companies, clients served, and the contract employees. These laws can ultimately make “hard to find” talent even harder to find.
IL just passed a law that requires contract employees (clerical positions are exempt) to be paid the equivalent compensation as comparable employees at the company. Much like the one passed in NJ, its stated goal is to raise compensation for the contract workers. These laws may cause employers to automate more and reduce hiring.
Oregon is poised to pass a law that caps what a medical staffing agency can charge. Its stated goal is to help reduce medical costs but will most likely reduce pay for the contract employees. Keep in mind these employees are in high demand and hard to find. For example: many long-term care facilities rely on staffing agencies to help maintain minimum staffing requirements because they are unsuccessful at finding the talent on their own.
The links below explain the laws in more detail. But what none of them mention are the risks staffing agencies take such as:
· Indirect costs – Recruiting, job boards, background screening, drug test are borne by the staffing agency that the candidate may not pass.
· Injury Claims – Multiple claims at one job site increase workers comp costs for ALL staffing agency employees.
· SUTA – Multiple layoffs at one job site will raise SUTA rates for ALL staffing agency employees.
· Credit risk – Staffing companies extend unsecured credit. Some industries (like long-term care facilities) pay their invoices very slow and are a higher risk of bankruptcy.
A staffing agency must factor these risks into the overall bill rate – like every other business. Otherwise, it doesn’t make sense to make the placements – hurting the staffing agency, contract worker, employer and ultimately the consumer of product or service.