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To offer business managers a contingent labor solution that retains business knowledge within the enterprise, adds flexibility with regard to headcount, reduces labor costs, and mitigates co-employment risk. Additionally, streamline vendor interaction within the architecture of a managed services solution, allowing the client company to focus on core business and strategy with little or no interruption. Streffco can convert your staff in less than one week in most cases.
Birth of Co-employment (Permatemp)
Co-employment is a legal term born as a result of contractors banding together to sue Microsoft. The lawsuit won by the contractors was brought about by Microsoft’s practice of retaining contractors on a 1099 basis for many years. These 1099 resources did not receive the same level of benefits as did their counterparts who were full-time employees (FTE’s) of Microsoft, particularly with regard to health and retirement benefits and stock options. The 1099 resources worked side-by-side with their Microsoft colleagues month after month, in some cases for multiple years. The FTE’s who received stock options and participated in reduced price stock purchase plans reaped large monetary rewards not available to those who held the status of contractor or 1099 resource. In the 1997 9th Circuit Appeals Court case Vizcaino v. Microsoft, the court held Microsoft liable for retroactive benefits to temporary employees and was ordered to pay what amounted to millions of dollars for benefits and potential stock appreciation.
Corporations need to minimize their risk
A percentage of companies have instituted Human Resource policies to minimize their co-employment risk. Most high-tech companies that heavily utilize contingent labor have policies and procedures in place governing the practice of using contingent employees. Many companies have simply mandated that a contingent worker cannot work for more than X months consecutively without rolling off contract for X number of months. We’ve also seen mandates where prior employees cannot be contracted back to the company, thus losing valuable expertise to the competition. These mandates have effectively minimized the risk from an HR/Legal point of view. In practice however, productivity suffers as a result of the turnover of the contingent workforce, and valuable business knowledge is lost when the resource(s) is forced to leave.
Streffco Consultants Solution
To minimize risk and to maintain flexibility, productivity and valuable business knowledge, Microsoft, HP, Agilent and other large employers turned to their staffing partners for solutions. The result was the concept of Managed Services.
Description of Managed Service
This service would operate the same as any other business function, but is managed by a third-party staffing provider. The service is managed on the customer site or off-site as appropriate for the business need.
Solution Architecture and Statement of Work
In order to avoid co-employment risk yet maintain the continuity of the contingent workforce, the status of the contingent worker must change from “contractor” or “temporary worker” to Full-Time Employee (FTE). In the Managed Service model, the FTE works on-site at the client company, but as an employee of the staffing company. Statements of Work (SOW) are used to clearly differentiate employees working through managed staffing programs from FTE’s of the client company.
Typical components of a SOW utilized as a Managed Service Agreement between employer and a staffing agency include the following detailed information about the service being performed:
- The service being performed has a project start date and a project end date.
- The SOW clearly defines deliverables.
- The SOW is project based and is billed as a project (as opposed to hourly).
- Typically, billing for services is done monthly or semi-monthly.
- A Purchase Order Number (PO) is applied to the SOW project.
Benefits of a Managed Service Program:
- Consistent productivity.
- Improved workforce continuity (less turnover). In some cases, resources who successfully complete a project may be “held over” for future projects in order to retain their knowledge and experience.
- Minimizes employer headcount, lowers fixed costs, moves costs from fixed to variable and therefore makes them more manageable (CFOs like this feature).
- Improved reaction time to market conditions and new projects. Managed Service programs are easier to ramp up/ramp down due to fluctuations in volume of work.
- In large programs where there is a Streffco Program Manager interfacing between client company and workforce team, business managers will have fewer hands-on managerial issues to deal with such as employee illnesses, training, paid-time-off/vacations and tracking hours, productivity. All these and other responsibilities would fall to the Streffco on-site Program Manager.
Draft versions of SOW’s can be provided that are easy to modify for specific projects.