Employment Risk as a Contract Staffing Firm

Contract staffing firms that handle the recruitment of temporary workers have many responsibilities. One of the essential duties of a staffing firm is managing employment risk and the variety of legal paperwork that comes with it. These services can help alleviate a lot of time and resources that their end clients may not have. However, without human resources (HR) or legal departments, it can be challenging to navigate employment risk as a contract staffing firm.

Services of a Contract Staffing Firm

If you are a contract staffing firm your end clients are going to expect you to be able to handle the below tasks as a part of your services. If you do this yourself you will be exposed to many risks which we outline in the below article.

  • Financial: payroll, direct deposits, unemployment taxes, pay per diem, collections, etc.
  • Administrative: employee onboarding, hiring, employee benefits, unemployment claims, terminations, etc.
  • Insurance: ACA and COBRA compliance, workers’ compensation, health benefits, etc.
  • Legal: Client and employee contracts, immigration authorization, liability, etc. 

Employment Risk

All of the above services take time and resources from your contract staffing firm. As a contract staffing firm, your time is valuable. And when it comes to employment risk, those tasks may be tedious, but it’s essential to understand the law and complete those tasks correctly. Otherwise there may be hefty fines or costs to pay in the future.

Liability & Worker’s Comp

When you hire temporary workers or any staff, you have to consider the risks. Workers’ compensation, general liability insurance, and professional liability all center around injury or negligence and compensation. If someone were to be injured while on the job, they can apply for workers’ compensation to help alleviate the financial impact of medical treatment and lost wages. If one of your workers steals from an end client, you could be liable for damages if you are the employer.

If you don’t understand the law or have a background in HR, liability insurance and processes can be overwhelming. This is especially true if you work in industries that are inherently more risky than others. Industries like construction, mining, and healthcare involve a lot more risk. That risk can be very detrimental to the growth of your firm. Did you know that the average workers compensation claim is $40,000?! That’s certainly something you want to avoid.

Broken Contracts & Employment Law

Much like the endless legal lingo of liability, navigating broken contracts and employment law is also an overwhelming process. If you attempt these tasks on your own, you’ll quickly learn why many corporations have substantial legal and HR teams! 

It’s frustrating when a client doesn’t pay or contract workers don’t show up or finish a job. Both those scenarios are common in staffing unfortunately, and both will leave you with a significant loss in revenue and cash flow. When things like that happen, there are necessary legal steps to take, such as collections, litigation, and more. 

Unemployment claims

Some may be confused why Unemployment claims are a risk, but with the ever revolving door of candidates, there are many times when staffing firms will face unemployment claims and their costs. No matter how many times these things happen, the staffing firm will have to deal with the paperwork and discussions with the government and contractor. 

The time and energy it takes to fight these claims, and the money it takes to pay them if you lose, is quite costly. Thus, it’s a significant risk for staffing firms that choose to be their own Employer of Record.

How to Avoid the Risks

If you want to earn recurring revenue through contract staffing, but avoid the risks, there is a solution. Leveraging an Employer of Record like FoxHire can help alleviate the risks mentioned above and more. Additionally the services listed above also become the duty of an Employer of Record, saving your firm time and money.