“If you serve too many masters, you shall soon suffer.”
This is one of the most famous lines from Homer’s The Odyssey. Don’t worry, I’m not going to bore you with a dissertation on the ponderous themes of epic Greek poetry. It’s all Greek to me anyway, right? Here’s the question, though. Why does a quote from over two millennia ago still resonate with modern writers, orators, and motivational speakers? Because it illustrates a dilemma that many people confront every day, particularly contingent workers caught in the crossfire of a workforce concept known as co-employment.
Serving Too Many Masters
Here’s a quick overview of this bit from The Odyssey. A guy called Eumaeus finds himself in a room full of nobles. They’ve gathered for an archery contest to win the hand of a woman. The master of the house tells Eumaeus to deliver a bow to some vagrant who’s wandered into the gathering and asked to participate. The other contestants dissent and attempt to dissuade Eumaeus from fulfilling the request. Unsure of the correct course of action, Eumaeus pauses. At that point, the master of the house issues the fabled reminder of whose authority must be heeded, reiterating the proper chain-of-command. And after much bloodshed and slaughter, some of them lived happily ever after; which is about as happy as ancient Greek tales get.
But the sticking point here involves the question of authority and ownership. Which group has the authority in this situation? A bunch of nobles (executive leadership, for lack of a better term) or the dude who owns the house? Put it another way. To whom does a contingent worker report: the client or the staffing agency? That is the co-employment conundrum.
What is Co-Employment?
At its core, co-employment defines the practice of sharing employer responsibilities between the client, the staffing agency, and the managed services provider (where an MSP/VMS program is in place). Simple as it sounds, it’s a risky business. Nearly every study on the value of MSP programs emphasizes risk mitigation among the top benefits, preceded only by cost containment and enterprise-wide visibility into the contingent workforce.
Where more than one company maintains control over particular aspects of an employee’s work, careful attention must be paid to legal responsibilities pertaining to the joint management of that talent. Typical examples include clients and staffing suppliers sharing the duties of supervising the day-to-day work of the employee, supplying equipment and materials, providing workspace, making disciplinary and promotional decisions, conducting performance evaluations, offering training, establishing wage rates, paying salaries, and more. Companies that frequently rely on the use of indirect labor are among the most common to be exposed to co-employment scenarios and their inherent risks.
Stephen Clancy, the senior director of Contingent Workforce Strategies for Staffing Industry Analysts (SIA), once described co-employment risk mitigation as an entrenched practice that nevertheless remains “misunderstood by many. This misunderstanding has led to unproductive, damaging talent management rules and policies that have put numerous organizations at a competitive disadvantage.”
Awareness, he affirmed, is the most important step in addressing and reducing co-employment risk: “Co-employment often is a problem only if you are unaware of it.”
How Perilous the Voyage?
While oracles may warn of dark omens that foretell co-employment threats, they seldom reveal the actual levels of risk that companies face. To seek out meaning beyond prophecies, we distributed a survey to contingent workers across several different industries, job categories, and locations. Half of those surveyed belonged to an MSP program while the other half had been placed in client sites directly by their staffing suppliers. The questionnaire was designed to protect the confidentiality and anonymity of the participants, the client companies, the staffing agencies and MSPs engaged. The categories covered:
- Inclusion in employee training
- Pay and rate negotiations by client managers
- Performance coaching or counseling by client managers
- Time off and vacation negotiations by client managers
- Inclusion in functions reserved for client employees
- Allowed use of client employee facilities
- Issuance of business cards or name plates by the client
- Handling of promotional or disciplinary actions by client managers
- Career opportunities presented by client managers
- Assignments terminated or ended by client managers directly
- Inclusion in client benefit programs or related discussions
Talent placed directly in client programs by staffing suppliers, absent an MSP, demonstrated the highest levels of risk in their responses -- 61.3%. The greatest areas of concern:
- Are you included in training that is typically for or only available to employees? 83% replied yes.
- Does any employee of the client company coach or counsel you directly on job performance? 65% replied yes.
- Does any employee of the client company negotiate your vacation or personal time off? 73% replied yes.
- Are you routinely included in employee functions (e.g., meetings, events, picnics, incentive programs, etc.)? 85% replied yes.
- Are you allowed to use facilities intended for employees? 94% replied yes.
- Do managers at the client company handle HR, promotional or disciplinary issues (attendance, performance, etc.) with you directly? 84% replied yes.
- Do client company representatives discuss job opportunities with you or your suitability for them? 71% replied yes.
- Do client company representatives directly terminate or end assignments of temps on site? 48% replied yes.
- Does any manager or employee of the client company negotiate pay issues or raises with you? 42% replied yes.
We also asked one final question, scored separately, which could be the most telling: “Whom do feel is your employer?” An overwhelming 76.7% of contingent workers responded that the client company, not the staffing supplier, was their perceived employer of record.
One of the participants (whose name, client company, and staffing provider shall remain anonymous) agreed to an interview. She reported, with reasonable supporting evidence, that she answers to a supervisor at the client organization, works a 40-hour week in a call center environment, and is treated as an employee of the company: they engage her in company functions, manage her directly in all HR issues, and have her training their internal employees (FTEs), many of whom will be placed in positions higher than her, or even in charge of her. During this training, she acts as a sort of de facto manager.
We consulted an attorney who functions as general counsel for a large MSP in North America. The attorney, who also requested to remain anonymous for this article, has no affiliation with the worker, the client, or the staffing agency. His assessment?
“It sounds like the client is doing just about everything wrong if they want to protect themselves from co-employment liability,” he replied in an email. “I suspect that this type of arrangement is more frequent than any of us would like, and the reason companies get away with this is that the agencies are generally good about paying their workers and doing the proper withholdings, and workers rarely pursue legal action to try to win any benefits of employee status with the client…. Let’s put it this way, if there are actual (option eligible) employees at her company who do the same kind of work that she does, and the company goes public with a hugely successful IPO that enriches those similarly-situated employee counterparts, she’d be a plaintiff-side employment lawyer’s dream.”
But it’s not all doom, gloom, and stormy seas on this voyage. The data returned from surveys where temporary talent functioned under the watchful eye of an MSP were substantially more positive and encouraging.
The overall tabulated risk factor was 23.2%. In fact, the only area where “yes” responses surpassed “no’s” came from the question regarding use of facilities typically reserved for client employees -- a negligible category by itself. And even then, only 48% of respondents claimed they had such access. More importantly, a solid 72.4% of these workers understood that the staffing suppliers, not the clients or MSPs, were their employers of record.
How MSPs Mitigate Co-Employment Risk
MSPs facilitate cooperation among staffing suppliers, contingent workers, and clients by ensuring that the relationship is well defined and that each party complies with its obligations as delineated in the terms of the executed agreement. They take a decidedly active stance in managing the temporary talent and staffing suppliers participating in the client program to avert any potential co-employment issues.
Through VMS tools, they segregate all temporary employee data and records from the client's systems, thereby ensuring the client is protected against co-employment claims. During training programs that occur toward the end of implementation, they also incorporate educational seminars, allowing client managers to address co-employment, sexual harassment or other legal issues related to the use of contingent labor. Here are just a few of the standard risk mitigation practices MSPs promote:
- Creating layers between contingent workers and client managers through staffing suppliers and the MSP
- Involving the contingent worker’s staffing supplier in the employee’s management
- Creating and enforcing term limits to prevent temporary talent from working beyond a fixed number of months consecutively without tenure breaks
- Ensuring that all job-related feedback, performance issues, harassment or discrimination concerns are handled by the MSP and staffing suppliers directly
- Coordinating end-of-assignment processes or extensions
- Facilitating time-off and vacation requests with staffing suppliers
This Odyssey’s Happily Ever After
When co-employment relationships are poorly orchestrated, defined, and managed, clients may find themselves faced with employment related liabilities. Employees expect to address workplace issues or complaints with their employer. The confusion occurs when temporary workers mistake the client for their employer instead of the staffing agency. By assuming too many managerial responsibilities, clients unwittingly obligate themselves to respond as the employers in charge of the relationship.
In a well-managed and carefully conceived MSP program, clients take on only specifically outlined and imperative responsibilities while avoiding those that the staffing vendor should accommodate. This maximizes the staffing supplier’s accountability for the majority of the employer duties, responsibilities, and obligations while minimizing the client’s direct involvement and subsequent exposure to risk.