Should Staffing Companies Hire More Independent Contractors?

Man Is Signing Independent Contractor Agreement By Pen.

This question is not rhetorical for me, I do not have an answer but thought I would do some research on the legal issue, think about it and write something for consideration. The three most important issues that stand out for me seem to be the following: (brief discussion follows each issue)

1.) A Temp worker, especially in a competitive area of work, might well qualify to meet the IRS requirements for independent contractor status, and especially with the cooperation of the staffing company and the client.

2.) That status would have benefits like the ability to work remotely or have a hybrid work situation, significant tax benefits, salespeople (Staffing Company) selling their talents, as well as being independent with flexibility in working hours. All of these are real monetary and personal benefits.

3.) With the current tight labor market, offering a contract worker that independent status with its real advantages might give an agency a competitive advantage in recruitment, retention, and new selling opportunities.

#1 Regarding Meeting the IRS Requirements:

“The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done” (See IRS “Independent Contractor Defined”) (my emphasis)

This might be enhanced by the contractor initially describing to the client their usual work routine,like working remotely one or two days a week, being willing to meet with the client at agreed upon times to ask and/or answer questions on the original assignment, i.e., “the result”, progress reporting, etc.,but not to have the client direct any of the details.

There is a specific IRS document for persons “who hire or contract with individuals to provide services to their business”. (See IRS document is titles “Independent Contractor (Self Employed) or Employee?) All of these rules “center around the degree of control and independence must be considered.” (My emphasis)

In any case, and especially for a staffing company, I would think the “independent contractor” status could be used more frequently and be mutually beneficial and profitable.

#2 Significant Benefits to the Contractor

In survey after survey what workers wanted, often more than increased pay, was greater flexibility in hours of work, the ability to work remotely, so the independent contractor status would have those benefits, as well as more vacation time which is often high on the list.

The tax advantages of the independent contractor status are also significant with the ability to write off a computer, printer, software, office supplies, vehicle expenses, home office, percentage of utilities, travel for training, etc.

It is also a significant benefit to be an independent contractor with a home base of a “real, concrete”, staffing company office that regularly promotes their work rather than “some huge website platform somewhere in the cloud”. How often can you stop in at Fiverr or Upwork to have a cup of coffee? We are not virtual people!

#3 A Competitive Advantage for the Staffing Company

Finally, I think there would be a real competitive advantage in recruitment and retention for the staffing company and therefore in their ability to offer top quality talent to their clients.

The Gig Platforms are an option for some top technical talent but, on top of their percentage these platforms also add fees. Also, American workers are competing with workers in India, Pakistan, Bangladesh, Philippines, etc., and everyone is encouraged by the platforms to offer the lowest price to get the job “to show people what they can do”, so it’s kind of a “race to the bottom”. Every competitor, in every country, is right there in front of every buyer. It’s also very hard for a buyer to determine quality.

Americans and others in higher cost-of-living countries are at a distinct disadvantage. So, I think there is a real opportunity with the right recruitment approach that would bring new and profitable selling opportunities.

As always, stay safe and pray for Ukraine!