4

Strategic Recruitment

As Marcus Buckingham and Curt Coffman wrote in First, Break All the Rules, “Selecting for talent is the manager’s first and most important responsibility. If he fails to find people with the talent he needs, then everything else he does to help them grow will be washed as sunshine on barren ground.”¹ Approaching the staffing of your organization from a strategic perspective will enhance your opportunities to achieve your goals and objectives.

Now that your workforce planning process has ended, and you know the number of new hires you need and what skills your organization requires to move ahead, you need to determine the best sources for the new hires.

It once was simple: If you needed a new employee, you hired one. Now, many people don’t want to actually work for you all the time; they want to be more in control of their own time and energy. Contingent workers can be consultants, independent/temporary contractors, seasonal workers, freelancers, temporary employees provided by an agency, on-call workers, or part-timers. Because of how quickly economic and competitive situations change today, you will most likely want to have a mix of all types of employees to have maximum flexibility and to get the best available talent.

Contingent workers come from many places, including from your current workforce. One source of part-time workers may be your employees who are reaching retirement age, but still have needed skills (and, most importantly, institutional knowledge) and would like to work fewer hours. Temporary workers can be hired to work in virtually every level of the organization, including at the executive level.

You may decide that you want to hire a consultant with a particular skill set to do a project or a series of projects for your organization. There is probably a consultant for any specific task you need. Your decision should be based on whether you have the talent in-house and/or the bandwidth to accomplish what you need or whether you need to retain an outside consultant.

HR plays a vital role in managing the flexible staffing process. First of all, HR must be involved in making the decision as to whether to bring on a full-time or part-time employee, or to use a temp or a contractor. If you decide to go outside your own organization, the next step is to find the appropriate firm to supply you with the quality of talent you require or to locate independent contractors for specific projects. The best way to find either a vendor or an independent contractor is by asking your personal network whom they recommend or by using a trusted resource that has provided your organization with high-quality talent in the past.

If you’ve decided to use an agency and have met with them and are confident that they can meet your requirements and checked their references, the next step is to draft a statement of work and a working agreement. Though we know that agreements do not guarantee understanding, an agreement that clearly outlines what each party is responsible for will make your life much easier in the long run. Your legal counsel should work with you to prepare the agreement, which can then be revised for future engagements. Firms you work with may have their own agreements, and it is perfectly acceptable to have their agreement reviewed by your attorney and modified for your situation rather than drafting your own.

    Appendix: Sample Statement of Work and Consulting Agreement.

When you are working on the agreement is also the time to be negotiating rates. Whenever possible, ask for volume discounts or additional services. Be sure the agreement you negotiate protects your organization when it is time to end the relationship.

Options to Consider

Part-Time Employees

Part-time employees are employees of the organization (on the payroll) but work less than a full-time schedule. Some may work less than an eight-hour day for five days a week whereas others may work a restricted number of days. Part-time work can be effective when recruiting diverse workers, including students, parents of young children, older workers, and others who need or want to work but who do not want a full-time schedule. Part-time workers are subject to the same policies and procedures that a full-time employee must follow. Some organizations, including Starbucks, UPS, and Home Depot, provide benefits to part-time employees, and this trend has become very popular for organizations that need to compete in difficult labor markets. Some organizations also offer time off to part-timers, usually pro-rated by the hours they work.

Contract Workers and Consultants

There may be times when you need someone who has a specialized knowledge or expertise not currently found in your workforce. Independent contractors and consultants can be used to meet these special requirements. It is important to follow the Fair Labor Standards Act and the Internal Revenue Service regulations on who is and who is not a consultant. Classifying someone as an independent contractor should be made carefully, because these arrangements are closely monitored by the IRS.

Outsourcing

One way to handle new tasks or an increasing workload for some organizations is to consider outsourcing tasks or entire departments. Outsourcing became particularly popular recently in the human resources world, as well as for other functions such as IT and accounting. If your organization is considering outsourcing, it is extremely important to select the right firm and then to establish clear guidelines for the partnering relationship. The agreement between the two organizations should carefully lay out how you will communicate and what measurements will be applied to determine whether or not the outsourcing is successful. Many organizations find it highly cost-effective to outsource functions; others have found the cost savings are not worth the loss of control.

Temporary Staffers

Your organization may have a need to fill a job on a temporary basis—usually when filling in for an employee on leave or for a short-term project. Many excellent temporary agencies specialize in filling positions for short-term assignments, and they usually are able to fill them quickly. Develop relationships with a couple of agencies in your local market so that you are able to call them when you have a need. For example, if the CEO’s assistant is in a car accident and calls to say she will be out the rest of the week, you have access to people who can get a replacement to your office in a matter of hours! Many of these firms also can supply other types of employees, including professionals, to fill in when needed for an assignment. Some organizations have guidelines as to how long a person can work for them as a temp. Consider the cost impact you will incur, because not only will you be paying for the temp’s salary, you’ll also pay a fee to the agency. Most agencies will work with you to come up with a way to hire the temp, based on performance.

On-Call Workers

Some organizations that have significant swings in the number of employees they need at a particular time use call-in workers. These are employees who have been fully trained for the job but who only work when needed—for example, seasonal workers in retail stores at holiday time or farm workers at harvest time.

Legal Issues With a Contingent Workforce

It is extremely important that you not assume that, just because you call someone a consultant, they won’t be considered your employee by the IRS or the EEOC. If your organization misclassifies a worker, you can be required to pay back taxes and also to provide back benefits.

The EEOC has information on this subject that focuses on:

    What staffing companies need to know to avoid violations of all federal antidiscrimination laws.

    ADA information related to the types of questions that can be asked after an offer is made, and requirements and responsibilities for reasonable accommodation

    The allocation of responsibility between employers and staffing firms.

    For more information, go to www.eeoc.gov and review:

    EEOC Enforcement Guidance on the Application of the ADA to Contingent Workers Placed by Temporary Agencies and other Staffing Firms.

    EEOC Enforcement Guidance: Application of EEO Laws to Contingent Workers Placed by Temporary Employment Agencies and other Staffing Firms.

IRS Independent Contractor Test

The IRS formerly used what has become known as the “20 Factor” test to determine whether a worker is an employee or an independent contractor. The test was revised and the 20 factors consolidated into three main groups:

    Behavioral control.

    Financial control.

    Type of relationship of the parties.

Behavioral Control

Facts that show whether the business has the right to direct and control how the worker does the tasks for which the worker is hired include the type and degree of:

1.    Instructions the business gives the worker. An employee is generally subject to the business’s instructions about when, where, and how to work.

2.    Training the business gives the worker. An employee may be trained to perform services in a particular manner while an independent contractor ordinarily uses their own methods.

Financial Control

Facts that show whether the business has a right to control the business aspects of the worker’s job include:

1.    The extent to which the worker has unreimbursed business expenses. Independent contractors are more likely to have unreimbursed expenses than are employees. Fixed ongoing costs that are incurred regardless of whether work is currently performed are especially important. However, employees may also have unreimbursed expenses.

2.    The extent of the worker’s investment. An employee usually has no investment in the work other than his or her own time. An independent contractor often has a significant investment in the facilities used to perform services for someone else. However, a significant investment is not necessary for independent contractor status.

3.    The extent to which the worker makes services available to the public at large. An independent contractor is generally free to seek out business opportunities and often advertise, maintain a visible business location, and is available to work for others firms.

4.    How the business pays the worker. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even if the wage is supplemented by commissions. An independent contractor is usually paid a flat fee for a project, although it is common for some professions, such as law, to pay contractors hourly.

5.    The extent to which the worker can realize a profit or loss. Because an employer usually provides employees a workplace, tools, materials, equipment, and supplies needed to do the work, and generally pays the costs of doing business, employees do not have an opportunity to make a profit or suffer a loss. An independent contractor can make a profit or suffer a loss.

Type of Relationship of the Parties

Facts that show the parties’ type of relationship include:

1.    Written contracts describing the relationship the parties intend to create. This is the least critical of the criteria, because what the parties call the relationship is not as important as the nature of the underlying relationship. However, sometimes, a written contract can make a difference.

2.    Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, or paid time off. The power to grant benefits carries with it the power to take them away, which is a power generally exercised by employers over employees. A true independent contractor will finance his/her benefits.

3.    The permanency of the relationship. If the organization engages a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that the intent was to create an employer-employee relationship.

4.    The extent to which services performed by the worker are a key aspect of the regular business of the organization. If a worker provides services that are a key aspect of the organization’s regular business activity, it is more likely that the company will have the right to direct and control his/her activities.

This is a complex issue and we recommend that you consult a labor and employment attorney for advice on this topic.

    For more information, go to irs.gov and review IRS Publication 15-A, page 6.

Discussion Questions

1.    When does it make sense for an organization to bring in a contractor or consultant?

2.    What is the benefit to an organization to have some part-time workers?

3.    What is the benefit to employees to have a part-time schedule?

4.    Are part-time employees eligible for employee benefits?

5.    How do you determine if someone is an employee or contractor?