As for every other industry, the workers’ compensation solution is a straightforward answer to employee financial relief in the event of an injury.
However, things can seem a bit perplexing in the case of staffing agencies.
Let’s take an example – the state of Pennsylvania has witnessed drastic progress in logistics warehousing. Most of these warehouses and distribution centers hire workers from a staffing agency temporarily.
There are certainly good reasons to choose temporary services, including –
- Easy and quick staffing during peak seasons
- Opportunity to test employees for permanent hiring
- Mass job hopping within the industry which makes temporary staffing a cheaper option
Some warehousing facilities of Amazon and Procter & Gamble hire temporary workers through multiple staffing agencies. When these workers get injured while on duty, they’re often confused as to who their actual employer is.
Unless a company permanently hires the worker, the staffing agency is responsible for work-related injuries. This means it must be prepared to provide workers’ compensation solutions that cover wage replacement, medical expenses, survivor benefits, etc.
In this article, we will discuss how staffing agencies empower themselves with a solid workers’ compensation program in place.
There is No Escaping the Law
There is a legal principle borrowed from Aristotle that rings true – ignorantia juris non excusat. In simple English, this Latin expression means “ignorance of the law excuses no one.”
Staffing agencies may forego workers’ compensation insurance because they deem it unnecessary due to the contingent nature of their services. However, that does not mean they shall be held innocent in a court of law.
This is because different US states (except Texas) have varying requirements for workers’ compensation programs. It includes staffing companies because they are also official employers for temporary workers. It is the agency’s responsibility to conform with their respective state’s workers’ compensation program requirements.
Some states like Arizona and Colorado even have provisions for state-funded workers’ compensation insurance for staffing companies and others. Agencies can directly purchase their coverage from the state fund, especially if they operate in high-risk industries.
Then others like Washington and Wyoming do not allow private carriers to operate. All workers comp solutions must be purchased from monopolistic state funds.
Moreover, staffing agencies that connect employees across states must further review respective state provisions for such cases. For instance – monopolistic states may demand a separate policy if the worker belongs to another state (with coverage from a private carrier).
Here, it’s important to mention that not all private carriers cater to the temporary staffing industry. Moreover, agencies must ensure their carrier’s claims model is robust. According to Nixer Comp, this would include telemedicine, nurse triage, concierge claims adjusting, a web-based portal, and provisions for smooth return to work.
In a nutshell, there are a plethora of things to be careful about. But once the tough part is over, staffing agencies can expand their operations, confident of never having to face legal consequences.
Failing to comply with state-mandated workers’ compensation requirements can lead to hefty fines or even imprisonment. Not to mention the blow this would have on the agency’s market standing and reputation.
With custom compensation policies, staffing agencies get the freedom to operate across different states. In case they only choose states where private carriers are allowed, it’s best to opt for a carrier with a wide footprint (in as many states as possible).
The Client Pool Becomes Larger
According to IBISWorld, there are presently 12,554 staffing agencies across the US. The figures have increased by 2.3% since 2022. This means competition is tough and agencies are constantly looking for ways to stand out in the market.
Just like personalized communication can cut through the noise, so can having a proper workers’ compensation program in place. Let’s take an example to understand this better. Belgium is one country where employee trial or probationary periods are not allowed.
This means companies carry a heavy risk each time they hire an employee (think incompetence, disengagement, turnover, and more). The situation can get worse for companies operating within high-risk industries like construction and manufacturing.
To save time and costs, they often turn to temporary contracts with staffing agencies. A major aspect of cost savings is the assurance that the temporary workers are all insured by the staffing agency. This also provides the confidence of preserving the employee and managing the company’s reputation.
Staffing agencies that have taken care of location-specific workers’ compensation needs can attract clients across geographical boundaries. Additionally, it presents the agency in a good light, highlighting its careful attention to candidates.
Better Talent Pools Also Emerge amidst the Quitting Trend
McKinsey & Company states that the Great Attrition has turned into the Great Renegotiation. Employees (especially the millennials and Gen-Zers) refuse to stay stagnant. They believe in constantly switching jobs, taking sabbaticals, and starting businesses to retire early.
This translates into fierce competition for valuable talent. Companies (even those on the enterprise level) are relying on staffing agencies more than ever. A prime reason is the pre-screening process, which leaves behind the cream of the crop.
Staffing agencies are only as ready to uphold this responsibility as they’re willing to offer worker benefits (including compensation programs). It is a part of communicating to the employees that they’re valuable and financially secure.
This improves the agency’s chances of attracting top-quality talent across industry verticals. A good workers’ compensation program should accompany diligent studies on the client company.
This means staffing agencies must ensure that they connect employees with clients having proper safety training and equipment in place. By doing so, the agency further secures employee trust and increases the likelihood of cost savings.
Final Thoughts
Is purchasing a workers’ compensation program expensive? Yes, it can be since there’s always more than just monetary loss involved. Some ways in which staffing agencies can control workers’ compensation costs include thorough client background checks, medical check-ups for candidates, drug testing, and reference checks.
As per Deloitte’s The Future of Workers’ Compensation report, the workers’ compensation landscape is dramatically changing. Of the many changes, top priority is being given to return-to-work outcomes and prevention efforts through predictive analytics.
Better, value-based care models to treat wounded workers are on the horizon. Insurance carriers are actively bridging the gap between workers’ compensation and healthcare. As these carriers take innovative approaches to gain a competitive edge, staffing agencies must make hay while the sun shines.
Article and permission to publish here provided by Daniel Washington. Originally written for Supply Chain Game Changer and published on September 6, 2023.
Cover photo by Cytonn Photography on Unsplash