How the employment picture is shaping up in this uncertain economy Featured

10:55am EDT October 1, 2012
How the employment picture is shaping up in this uncertain economy

The U.S. economy has been volatile to say the least in the past few years, and tumult in markets across the globe is chipping away at companies’ already shaky confidence, which has stalled hiring.

However, some industries are seeing orders or requests for service start to increase, which requires companies in these fields to try to keep up with demand using a pared-down work force. That’s where staffing agencies have been able to lend a hand.

However, the impending implementation of the Patient Protection and Affordable Care Act is likely to have an impact on workers’ compensation benefits, a program for which many staffing and professional employment organizations take responsibility. While the consequences are uncertain, employers and staffing agencies are taking measures to provide safer workplaces to reduce claims but are otherwise bracing for its potential impact.

Smart Business spoke with Hayden Smith, account executive and consultant with Solid Agency, LLC, about how staffing firms have been faring in this choppy economy.

How has employment been impacted by economic uncertainty?

There have been some positive trends in the staffing industry. Temporary and contract employment has grown 24.8 percent since the beginning of 2012, according to the American Staffing Association. There are certainly many rosy predictions and forecasts for the temporary industry, with the consensus saying good times are ahead for well-operated firms.

Since September 2008, 88 percent of employers have either maintained or increased the size of their nonemployee work force and ASA reports that temporary and contract staffing employment jumped 24 percent in May.

Further, reports indicate more college-educated professionals and managers have been hired than blue-collar workers in the past years, signaling that contract workers have become the go-to solution for companies across industries.

This comes at a time when only 23 percent of U.S. companies say they plan to add staff in the next six months. That figure is down from the 39 percent of companies that planned on hiring when they were surveyed in April. Clearly, companies are exhibiting caution when it comes to adding costs, such as those incurred when hiring full-time, permanent workers, while the global and U.S. economies stand on shaky ground.

Workers’ compensation is a significant cost often covered by staffing agencies. How are recent events impacting this program?

Workers’ compensation coverage is the second-largest expense behind payroll for temporary agencies.

When employers use temporary workers, they can avoid the possibility of having workers’ compensation claims made against them as contract workers are covered through the agency’s program. However, the Supreme Court ruling upholding the constitutionality of the Affordable Care Act could impact the current workers’ compensation program. For instance, there is some speculation that frivolous claims made by workers could drop as more are provided health care coverage with which to get treatment, instead of filing a fraudulent workers’ compensation claim. A study that examined the impact of health care reform on workers’ compensation medical care in Massachusetts found that health care reform could reduce workers’ compensation billing volume and costs. However, it’s unclear how the findings will apply across states mandated to abide by the Affordable Care Act.

Additionally, alternative markets available for the temporary industry to secure valid coverage have continued to grow and can offer cost-effective, tailored methods other than traditional methods of workers’ compensation.

The temporary agency that does not manage its workers’ compensation very carefully will eventually find out how important this expense is to its bottom line.

How can the number of workers’ compensation claims be reduced for a temporary staffing agency?

While accidents cannot be completely eliminated, several processes and procedures can be used to help reduce the number of accidents and injuries, and possibly stop fraudulent claims.

Implementing a proven best-hiring practices program is first on the list. In depth prehire and post-offer questionnaires will help in deciding the type of work of which a temporary employee is capable. A drug-free workplace is another key component but only if the program is well managed by the employer. Also, most states offer premium discounts for drug-free workplace programs.

Another risk-reducing element that every business needs is a formal written safety program. However, this can be difficult for a multi-industry temp agency to provide. A thorough job description from the client employer will aid in the task of understanding risks and managing safety. Additionally, use these job descriptions with the aforementioned post-offer questionnaire, so client employers receiving qualified labor will be more confident using the services of a diligent temp agency.

A managed care organization is another helpful tool of a well-managed workers’ compensation program. When put in place and enforced, these can help reduce the total number of compensable workers’ compensation injuries. However, if a temporary employee is never informed and updated about the procedures of his or her workers’ compensation program, all will be for naught.

Ultimately, providing a safe workplace for employees is the responsibility of the employer. If employees are hurt, regardless of whether they are temporary or permanent, your bottom line could potentially suffer in several ways, including higher workers’ compensation premiums, loss of production and a negative impact on overall employee morale.

Proper planning, efficient management and complete implementation of components available to the staffing industry can help you avoid ‘the ugly’ in the future.

Hayden Smith is an account executive and consultant for Solid Agency, LLC. Reach him at (678) 460-2965 or hsmith@solidagencyins.com.

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