Governmental Requirements for Starting Your Own Staffing Agency

As businesses go, staffing companies are relatively easy to launch, requiring fewer licenses and less paperwork for business owners than businesses in other industries. So it’s no surprise that starting your own staffing agency is a popular business venture, with new staffing companies popping up left and right. However, if you’re thinking of starting your own staffing agency, as with any business, you need to make sure you’re set up to operate legally for your customers and employees.
Follow these four steps to ensure compliance with governmental regulations when you’re starting your own staffing agency.

Get licensed and registered

Step one is registering your staffing company in the state or municipality where you are planning operations. Learn local requirements for obtaining appropriate business licensing, check online or contact the office of your county clerk or secretary of state. Then register your staffing agency’s name at the designated local office, file your articles of incorporation with the secretary of state, and pay any required registration fees.

To legally place employees in specialized industries such as health care, staffing companies may also need to secure additional licensing. Before starting your own staffing agency, take time to ask your business development office about special licensing information.

Get insured

Staffing agencies need sound business insurance policies to protect them from liability and keep in compliance with the law. If you’re starting your own staffing agency, you’re required to carry commercial insurance and general liability insurance, as well as workers’ comp insurance coverage if your agency places long-term employees. Unsure how much insurance you legally need? Meet with an insurance agent to develop a policy that protects you and your employees.

Know your tax plan

For business owners, tax surprises are rarely a good thing. Before starting your own staffing company, ask a tax attorney or accountant what tax responsibility your agency will have under federal and state law. Most states consider temporary staffing agencies to be the employer of any temporary employees. As a result, in addition to business taxes, your agency could be subject to employment taxes, including temp agency payroll taxes, Social Security, Medicare, federal income tax withholding and federal unemployment taxes.

Once you register your business, you’ll get also state tax identification number. In addition, request an EIN from the IRS, a federal tax ID number you need for tax administration.

Learn EEOC requirements

If you have more than 15 employees in your staffing agency, you’ll be expected to work within the Equal Employment Opportunity Commission (EEOC) guidelines for creating fair and equal workplace. You and your employees could face legal recourse if either violates EEOC regulations, such as the Americans with Disabilities Act. Be prepared by reading this 1997 report by the EEOC, which lays out how EEO laws apply for temp staffing agencies.

 

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  • Expert guidance on key legal, marketing, service and temporary agency finance aspects of the staffing business
  • Tips and stats you should be aware of to grow your business

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Subscribe to TemPay Staffing Times

Subscribe to TemPay Staffing Times, a free monthly e-newsletter that features:

  • The latest staffing trends and how to capitalize on them, including starting a staffing agency
  • Expert guidance on key legal, marketing, service and temporary agency finance aspects of the staffing business
  • Tips and stats you should be aware of to grow your business

Click here to fill out the subscription form.

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Staffing Firms’ Lawsuit Thrown Out

A lawsuit filed by three South Dakota staffing companies concerning a $5 million state contract awarded to Manpower has been thrown out, according to an article by KELOLAND TV. The judge ruled the firms did not have enough of a case.

Careers Unlimited Staffing, Employment Edge of Sioux Falls and Reagan Enterprises of Watertown and Aberdeen objected to the multimillion dollar contract for Manpower to recruit 1,000 out-of-state workers to South Dakota, the article says. The firms also argued the governor’s office entered into a contract that gave one company an exclusive deal or monopoly in a private industry and that the state broke competitive bidding laws.

To view legal documents associated with the case, click here and scroll to the end of the article.

Subscribe to TemPay Staffing Times

Subscribe to TemPay Staffing Times, a free monthly e-newsletter that features:

  • The latest staffing trends and how to capitalize on them, including starting a staffing agency
  • Expert guidance on key legal, marketing, service and temporary agency finance aspects of the staffing business
  • Tips and stats you should be aware of to grow your business

Click here to fill out the subscription form.

Five Tips to Help You Stay in Compliance with Labor Laws

Bypassing labor laws, even to deal with a staffing crisis, is a dangerous situation.

 

A single instance of overlooking the law could be enough to get your firm in serious trouble with the federal government. Penalties for failure to comply may include the payment of back wages and can progress to steep fines, prosecution and even jail time for repeat offenders.

 

Failure to understand and follow the law is no excuse.

 

Here are some tips to ensure that your company stays in compliance with the law and out of trouble with the government:

 

Study the law

 

The U.S. Department of Labor has an extensive database of regulations covering labor laws. If you’re not sure whether you are compliant with how you should be paying temp employees or how you determine full- and part-time status, visit the website at www.dol.gov.

 

Take the time now to make sure you’re doing the right thing and check in frequently for updates. And work closely with your HR team to make sure your firm stays in compliance, especially if you’re just starting your own staffing agency.

 

Be diligent about tracking hours worked

 

The Fair Labor Standards Act requires employers to keep certain records for every nonexempt worker. You need to track when the workweek begins, how many hours are worked each day and each week, and any overtime that has been accrued, among other information.

 

Don’t put yourself in a position where you don’t know how many hours your employees are working. There are plenty of staffing software options available to help you record hours worked and keep track of valuable temp agency payroll data. Find a staffing software system that works for you and stick to it.

 

Conduct regular audits

 

If you’ve implemented what you feel is a good system for tracking hours and complying with federal labor laws, that’s a good start. But you need to remain diligent and conduct regular audits of your firm’s records to make sure they are kept accurately and appropriately.

 

If you find a situation where someone on your staffing agency team has gotten lazy, remind that person of the importance of accurate recordkeeping. It’s not about trying to punish your employees for not working hard enough. Present compliance to your employees as a way to make sure you’re properly compensating them for the work they have done.

 

Don’t allow off-the-clock work

 

One of the most common complaints in labor law violation cases is that employees worked through their lunch break, or came in early or stayed late, and didn’t get compensated for their effort. Make sure your staffing agency enforces breaks and either prohibits employees from working off the clock or be prepared to compensate for that time.

 

If this is a common problem, work with those employees to see why they are working extra hours. Keep in mind that employees must be paid for time worked, even if they were instructed not to work.

 

If you’re not sure, pay them

 

If you find yourself in a situation where you’re not sure if you’ve properly compensated employees for hours worked and you’re waiting on legal guidance, it’s always safer to pay people for the hours they say they worked.

You are never going to face legal action for paying your employees too much. But if you take a hard line and it turns out you were wrong, it could end up costing you.

Ask TemPay: Is My Information Private?

At TemPay, we respect our clients’ privacy.
Your  clients will not know you are a TemPay client or receive payroll factoring. TemPay operates as an invisible partner, and paychecks, accounts receivable invoices and tax filings all bear your company name along with our lockbox remittance address. If we call your staffing firm’s customers, we do so under your name.

All your information remains totally confidential and is shared only with the government as required. We do not discuss client information with other clients, and no company or individual can access our databases.

Ready to learn more about TemPay and what we can do for you? Apply now or contact us online or by phone at (866) 6TemPay for more information about full-service payroll factoring.