Piggybacking Your Way to Trouble

At the beginning of  this year, we posted an article about what’s in a mark-up. Of course we had no way of knowing what the year’s news would bring.
All of us compete in the marketplace for business. All of us have fixed costs that determine the price our clients and customers pay for our products and services.  In the staffing business in addition to salaries and payroll taxes we must also insure our employees against the risks covered by Worker’s Compensation.
Imagine the competitive advantage we’d enjoy if we could reduce or eliminate one of these mandates. Our customers would enjoy the benefits of lower costs and we’d lop off a healthy market share.  Sounds good right?
Not so fast!
As you are well aware, the field of employment is a legal minefield. Decisions made with the best intentions can often backfire,  jeopardizing the survival of an entire company. If you engage a staffing agency, you want to be sure they are operating to the strictest standards of legal and professional conduct. It is possible that questionable practices of your agency can haunt your company as well.
Recently one of our competitors was soundly spanked for lowering their Worker’s Comp mod rate in a way a jury found out of bounds. While there is no indication that State Fund will pursue employers who used the competitor’s services, it does serve as a stark warning to everyone who is getting an exceptionally low mark-up from their agency.
If that’s you, it’s time to ask your agency how they are doing it. Are the agency’s employees actually being paid what you think? Are the agency’s employees eligible to work in the USA? Is the agency paying all the costs of employment?
If an under capitalized and flaky operation finds itself accused of failing to withhold payroll taxes properly for example, could your company be liable for those bills if the agency were to suddenly vanish?
When looking at paying real dollars, does shaving a few percentage points really look that smart? Could your agency be taking you for a piggyback ride off the cliff?

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