Staffing Regulation: 3 Issues to Watch

While the Affordable Care Act is at the forefront of the minds of many of those in the staffing industry, there are other regulations that also warrant attention. While not all may apply to your firm, they are hot-button issues that may crop up in the staffing industry in the future.

Wage theft prevention/right to know

Among the new labor laws in 2013 that were attempted, Connecticut, Nevada and Oregon tried to enact versions of New York City’s wage Theft Prevention Act but met with negative response. Acts such as these would require staffing firms to notify temporary employees of wage rates, dates of assignments, workers’ compensation carrier information and safety protocols. Look for these regulations to pop up again in these and potentially other states.

Paid sick leave

Portland, Ore., and New York City both adopted laws regarding paid sick leave in 2013. In Portland, the law requires employers with six employees or more to provide paid leave for personal or family illness and safety concerns. In New York City, the law says that employers with 20 or more employees must provide paid sick leave of up to five days by April 2014, while those with 15 to 19 employees must do so by October 2015. All others businesses must offer up to five unpaid days for sick leave per year. These provisions may apply to staffing firms, as well; check with your legal team and human resources at your staffing agency to see if your staffing firm is required to provide paid sick leave.

Credit history use

Another agency workers regulation is in place in California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Vermont, Oregon and Washington. This regulation restricts an employer’s ability to use credit history for determination of employment. In October, Nevada joined these states, making it illegal for an employer to request or use credit reports or other financial information to determine employment or discriminate against an employee. Some exceptions apply, including whether the information is reasonably related to the position. This is an ongoing topic of consideration, and more states may introduce similar laws in the future.

Managing risk in a staffing agency

Staffing, as with every industry, has its own unique risks that owners and managers must manage. These range from customer credit to contracts and agreements, which must be controlled to avoid potential penalties.


With recourse factoring, the type of factoring most payroll factors — including TemPay — provide, the staffing firm assumes the risk and losses for unpaid invoices. Staffing firms must ensure that their customers are creditworthy and able to pay their invoices in a timely fashion.

Improper credit management can result in penalties, affecting a staffing firm’s cash flow and damaging customer rapport.

To prevent credit problems, a staffing firm’s factor should provide Dun & Bradstreet credit reports and 24/7 credit monitoring to ensure it is doing business with creditworthy customers.

Cash flow

Cash flow is a major issue for staffing firms, which must pay temporary employees and vendors weekly while waiting 30, 45, 60 or even 90 days for client payment.

It is especially important to mitigate this risk at a staffing agency when starting a business or preparing for a period of growth, as firms can easily find themselves in a situation in which they need money they don’t have.

To solve this problem, many staffing firms choose payroll factoring, in which they sell accounts receivable invoices to the factor for a fee and receive cash up front to pay employees, vendors and other obligations. In addition, staffing firms should establish clear payment terms with their clients, be proactive about payment and create a cash flow plan that outlines weekly and monthly cash flow, which determines the firm’s cash flow trends and allows it to plan accordingly.

Workers’ comp

One of the largest staffing firm expenses is workers’ compensation, which protects the firm in the event of an employee injury by providing wages and medical benefits in exchange for the right to sue for negligence.

In most states, temporary employees are employees of the staffing firm, not of the client, so the staffing firm is responsible for injuries and disability costs, which vary depending on the industry and its specific risks. Most staffing firms receive workers’ comp insurance through an insurance company; however, some states, such as Ohio, handle it at the state level. To determine state rules and regulations, visit

Staffing firms that are unable to receive workers’ comp directly can go through a professional employer of record, a third party that manages human resources aspects such as workers’ comp and payroll for employers.

Without workers’ comp coverage, staffing firms are at risk in the event of an employee injury and could face penalties from their state for failure to maintain coverage. To reduce work-related injuries and minimize premiums, staffing firms should screen employees through drug testing, background checks and prior injury history and should ensure that employees are properly trained and provided with the necessary safety equipment.

Contracts and agreements

Documentation is key, and contracts and agreements are a legal requirement for business that should protect both the firm and its employees.

In client contracts, staffing firms should include payment details and due dates, as well as a confidentiality clause in which the firm agrees not to disclose trade practices that temporary employees may learn on the job. The contract should also include a reciprocating confidentiality clause in which the client agrees not to disclose the firm’s trade practices.

A contingency clause is also necessary, as it ensures that the client won’t hire the firm’s temporary employees within a certain time period unless the client pays an additional fee.

For in-house employees, noncompete agreements prevent employees from both starting a competing business and from working for a competitor within a certain time and/or geographic area. These agreements can be complicated, as enforcement depends on specific court interpretation, so they should be as narrow as possible. Before implementing such agreements, firms should consult legal counsel to ensure the agreement will hold up in court.

3 ways the ACA impacts staffing agencies

With the enactment of the Affordable Care Act, employers have been confused about its impact on staffing firms. Now that the final rules have been released, there is a clearer picture of how this act affects staffing firms and their employees.


  •  In most cases, the burden of adhering to the ACA falls on the staffing firm, not on the client. Staffing firms typically qualify as a common-law employer because they handle functions such as recruiting and hiring employees, paying wages, benefits and taxes, and terminating or reassigning employment. In rare cases, the client may be the common-law employer. If this is the case, the staffing firm can offer coverage on behalf of the client and maintain that plan.


  • Temporary employees may work 30 hours per week on an assignment but then have a period in which they are not employed. In this case, the firm may be able to treat the employee as a variable-hour employee, allowing it to evaluate the employee’s hours during a look-back period of the initial 12 months of employment before offering health care coverage if the employee averages at least 30 hours per week. In addition, the final ACA rules allow employees with a break in service of as little as 13 weeks to be treated as a new employee, with a new look-back period.


  • The final rules state that the look-back period, including the use of the initial measurement period for a newly hired employee, can be applied to seasonal employees the same as it is to variable-hour employees. Seasonal employees are those in positions for which the customary annual employment time is six months or less during approximately the same time of year, such as summer or winter. However, employees can still be considered seasonal even if their employment is extended longer than its typical duration. For example, a lifeguard might work for six months during the warm months but be asked to work longer during an unseasonably warm summer.

For more information the impact of the Affordable Care Act for employers, visit



Payroll outsourcing: your invisible partner

shutterstock_handshakeStaffing firms are busy doing what they do best — interviewing candidates, selling staffing services to potential clients and marketing their firm to those potential clients — all while keeping one step ahead of the competition. Full-service payroll funding for staffing companies serves the role of an administrative branch of the staffing firm.


Virtually all employee and client communication is done in the name of the staffing agency, including issuing payroll checks, invoicing clients and making collection calls. The payroll funding company also:


  • Pays and reports all quarterly payroll taxes to the Internal Revenue Service on behalf of the staffing firm


  • Generates all W-2s in its name. This allows the staffing firm to maintain control over the process, while the payroll funding firm operates as an invisible partner.


Full-service funding is an immense benefit for staffing firms that don’t want the headaches of processing payroll or the hassles of filing timely quarterly payroll tax reports to the IRS. In addition, payroll funding companies provide weekly client credit reports.


While your payroll funding company acts as an invisible partner, it is in your best interest to share the partnership with your customers. They are most likely curious about how you get funding for your business, and this both assures them of your financial strength and ensures customers send payments to the correct address, maintaining a consistent cash flow.


You should inform customers through both a UCC notification letter, which the payroll factor mails to each customer to disclose the relationship, and a personal call, so they are not caught off guard by the letter.


If your client requests a letter of financial strength, your payroll factor should be able to both create and send the letter to assure the customer you have access to funding.


In addition, although your payroll funding partner helps get funding for a business and handles administrative functions, you still have a role in the process.


Once you sign an agreement, you will need to provide names, Social Security numbers and other employee information, as well as a list of your accounts receivable invoices and copies of the invoices and time sheets As new employees are hired, current ones leave the company or pay grades change, you’ll need to update the payroll funding company. You also need to send accounts receivable invoices as you generate them and provide the company with tax documents.

5 hidden benefits of outsourcing payroll

shutterstock_5While the main benefit of payroll outsourcing services — continuous cash flow to help you pay your employees and other related parties – is obvious, there are many hidden benefits you may not realize. Full-service payroll funding companies:


  • Fund and process all of your payroll. This is one of the main advantages of outsourcing payroll. Payroll funding is often a worry for staffing firms, as your employees are paid weekly but your customers often don’t pay for 30, 45, 60 or even 90 days, depending on your agreements. Outsourced payroll funding alleviates the worry of whether you’ll make payroll, while also taking away the time-consuming administrative burden of payroll processing. Many payroll funding services provide several payment options for employees, including live check, pay card or direct deposit.


  • Invoice your customer directly. Your clients see your name on the invoice but send their payments to the payroll funding company.


  • Make collection calls and notify you of delinquent accounts. This is done professionally by the payroll funding company’s employees on behalf of your staffing firm, eliminating your need to direct workforce toward this task and freeing them for more important duties, such as servicing clients. Keep in mind, though, that most payroll funding companies engage in recourse funding, which means you bear the risk and must pay up if your clients fail to pay.


  • Pay all applicable payroll taxes and files quarterly 941 payroll taxes with the Internal Revenue Service. This saves you from accruing penalties and/or interest due to late and/or forgotten payroll tax payment.


  • Generate W-2s for each temporary employee. Outsourcing payroll services eliminates this time-consuming administrative task, providing one less task to worry about.

The value of outsourcing payroll services

Pay ToA TemPay client in Indiana was doing approximately $10,000 per week in sales prior to using the payroll funding company’s services. It had self funded the firm by maxing out credit cards to continue to maintain a limited client base. The client found itself unable to grow due to a lack of capital, as it was unable to gain traditional funding through a bank.


Why outsource payroll? When the client researched that question, it discovered that payroll funding companies provide full-service factoring that would fund 100 percent of its payroll and also pay all applicable payroll taxes. Outsourcing payroll not only eliminated potential credit card debt but also freed the owner from tedious administrative duties such as processing payroll and taxes with the filings required by local, state and federal levels of taxes. Now that the owner has time to focus on selling his company’s services, the business is doing approximately $250,000 per week in sales.


Most payroll funding companies offer two types of funding — money-only and full service. Money-only funding provides basic payroll funding without any added administrative services. Full-service funding, the type selected by the Indiana staffing firm, provides payroll funding plus services such as paying employees, filing and paying payroll taxes, invoicing customers and collecting from delinquent accounts.


The reason why full-service factoring is valuable for staffing firms of all sizes is because it allows staffing agency owners to focus on growing their business without the worry of doing mundane, time-consuming administrative tasks. This type of funding is especially beneficial for small firms and startups because these owners often wear many hats, and the time freed from administrative burdens allows them to focus more on building their talent base and selling their services — critical functions for any staffing firm’s success.

Why is payroll factoring better than a small business credit card?

creditcardWhen your staffing firm has a cash flow issue, it may seem like an easy fix to reach for the plastic.


However, there are downsides to using small business credit cards.


  • Credit cards require a great deal of personal management to stay abreast of changing terms, interest rates and even perks.


  • Your business credit card can affect your personal credit score.


  • Credit cards often have high annual fees.


  • Some cards require you to pay your full balance each month to receive rewards.


  • If you go over your limit or have a missed or late payment, you face high fees.


Payroll factoring, on the other hand, is a more flexible option. It does not require lengthy credit or financial reviews, and the application process is quick and easy.


With payroll factoring, you sell your accounts receivable invoices to the factor in exchange for immediate cash. Your clients then pay the factor directly.


Payroll factors are likely to overadvance because they understand the staffing industry, while with a business credit card, if you go over your limit, you’ll be penalized with high fees.


In addition, payroll factoring includes one low rate, expressed in your contract, that doesn’t change without your agreement.


For more information on payroll factoring and how it can benefit your staffing firm, visit

5 free online tools for staffing firms

shutterstock_5There are many free resources available that can benefit your staffing firm, if you know where to look.


Here are five online tools for managing everything from your social media accounts to job postings.


1. HootSuite – Managing multiple social media accounts can be difficult. HootSuite is an easy-to-use interface that allows you to view all of your social media accounts at once and publish content to one or more sites. You can also schedule posts in advance and view analytics.


2. Skype – This video conferencing tools allows you to communicate with employees and clients and is a great way to conduct online interviews, especially if you engage in virtual staffing. It also features instant messaging and file-sharing capabilities for easy intra-office communication.


3. WordPress – WordPress started as a blogging portal but can also be used to create websites. The simple platform allows you to upload media, manage comments, schedule publication and even enter search engine-optimized keywords.


4. Google AdWords – With this site, you can type a keyword or URL and receive related keywords and performance data. You can then download keyword ideas to an Excel file for easy reference when creating blogs, website content and social media.


5. ZipRecruiter – ZipRecruiter allows you to post job openings to more than 40 job boards at once. You can also search about 3 million resumes and ask fill-in, multiple choice or yes/no questions to identify qualified candidates.

Succession planning for your staffing firm

shutterstock_businessstrategySuccession is one of the most important decisions you will make for your staffing business. There is no better time to start planning than the present – the sooner you have a strategy in place, the smoother the transition will be.


Unsure where to start? Follow our tips to ensure succession success.


1. Have a business plan and update it regularly. This document provides an outlook three to five years ahead and a framework for your company goals. It is not just for new businesses or those seeking funding; a business plan shows buyers you are organized and dedicated and keeps stakeholders up to date on your plans. Visit for help creating a business plan.


2. Decide on your role. How long would you like to remain involved in the company? Will you stay on for a time in an advisory capacity or be available for advice? Determining retirement plans such as recreation, travel or other work opportunities first can help you determine how involved you would like to be in the company.


3. Seek advice. You don’t have to go it alone. Consult with stakeholders and key management members, or hire an outside consultant to help guide you through the process. In addition, talk to your peers in the staffing industry to see how they’ve handled succession.


4. Determine the nature of your transition. If you’re considering family succession, ensure that your successor has both knowledge of the staffing industry and a desire to take over. You could also sell to your management team, create an employee stock ownership program or seek an external buyer.


5. Identify key positions and start grooming people for these roles as early as possible. Selecting these employees early and providing the appropriate training ensures an effortless transition. And you don’t need to look only internally; conducting an external search is also an excellent way to choose a successor.


6. Conduct an audit. This can begin internally but should include an external look, as well. Address concerns such as systems updates or redundant processes prior to putting your business up for sale to attract the most serious buyers and best price – and ensure your firm’s continued success.

The 4 biggest marketing mistakes — and how to fix them

shutterstock_fourToo many people overthink marketing. The most effective strategies are not necessarily those that are flashy but those that provide the most value.


Beware of these top marketing mistakes staffing firms make – and simple ways to fix them.


1. Failing to invest time in social media. Having a social media presence is more than creating a Facebook account or posting a tweet every now and then. Customers expect you to interact with them, so designate someone to manage your accounts and respond to customer comments and feedback in a timely manner. Encourage interaction by asking engaging questions and monitoring responses. Social media sites are some of the first links that potential clients will browse when searching a business, and they are more likely to choose a company they view as friendly and responsive on social media over one with no updates or interaction.


2. Failing to utilize your current clients. Your clients are your best resources for new business. Offering incentives such as discounts or bonuses for referrals can be a great way to gain new business, while having the clients do the legwork. Existing clients also present an excellent opportunity to upsell or cross-sell; they already utilize your talent, so you don’t need to sell them on its merit. As they grow and expand, they’ll need more employees. Keep tabs on their business to anticipate and meet these needs.


3. Failing to think about your mobile clients. More and more people are using smartphones and tablets to access the Internet – 50 percent of mobile phone users use mobile as their primary Internet source, according to Super Monitoring, which provides online monitoring services. If your website isn’t mobile friendly, you’re alienating a large portion of your current and potential customers. Keep your mobile design simple and easy to use so users can access the most important information quickly.


4. Creating “salesy” communications. Current and potential clients don’t want to hear you talk about how great your staffing firm is – in a world where people are constantly inundated with messages, they look for the most valuable content, which includes real-world tips and advice they can utilize. Providing valuable information that subtly links back to your site will garner more readers and funnel more potential customers to your site than a sales pitch.