“Congratulations, you’ve just hired a hygienist!”
A client called with a situation. She thought she had engaged a “temp hygienist” through a well-known dental “temp” agency and was questioning why the hygienist was wanting to be paid directly as an employee instead of through the company. I asked her to send me the contract with the company.
It took me about three seconds of scanning the first page of the agreement to realize that this was not a temp agency. It was a staffing agency – sometimes referred to as a “referral agency” or “placement agency.”
Instead of getting a “temp,” my client had just hired herself a part-time hygienist.
What is a Temp Agency?
When you think about hiring a “temp,” you assume you’re getting a worker who can come in for a day or two to cover the shift of an employee who is out sick. Perhaps you’ve hired a “temp” to cover the work for an employee who is taking an extended medical leave. These individuals are sent to you by a company you pay to provide quality workers with the skills needed to jump right in and get the work done – a “temp” agency. Easy enough, right?
Maybe. But in dentistry, your “temp” agency isn’t always what you think it will be.
Let’s look at the different between temp agencies and staffing agencies, the latter sometimes described as a referral agency. A temp agency provides you a temporary worker whom they employee. You pay the agency directly for the use of this worker for a short- to long-term assignment. You pay a much higher fee per hour than you would for an employee to do the same job, but the fee can be worth it because you can typically schedule the worker on short notice and skip the recruiting legwork. This format takes the headache out of the employment process because you are not the worker’s employer and are not responsible for their paperwork, payroll, etc.
Staffing & Referral Agencies
A staffing agency is similar in many ways. Staffing and referral agencies connect you to workers who they’ve vetted via background checks, resumes, references, and interviews. Quality staffing agencies will have a roster of local candidates who they can pair with a dentist needing a short- or long-term skilled position filled for a small fee.
Here’s the difference – a temp agency employs their workers. Staffing agencies do not.
When you work with a staffing agency, you are the employer. Regardless of the number of hours or days the temporary worker performs productive work for your practice, you are responsible for paying them correctly. This means you should have the worker fill out the appropriate documentation – an I-9 and W-4 for employees, W-9s for contractors. Which begs the question…
Are Temp Workers Employees or Contractors – and Does it Matter?
Here’s the thing… the rules of worker classification are complicated. One of the biggest misconceptions practice owners have is thinking that the length of time a worker performs services for a practice determines their worker classification. You can have an individual work for your practice for one day and still be considered an employee. It really depends on the type of work they’re performing, who controls the behavior, who provides the supplies, how payments are made, etc.
The IRS has a multi-point worker classification test that can answer whether a position is a contractor or employee position. However, you can generally assume that workers who do “the business of the business” are employees. Front desk, dental assistants, and hygienists are all very likely to be considered employees if the working relationship is scrutinized. A good rule of thumb to follow is this – you’ll never get in trouble for classifying a worker as a employee when they could be a contractor; you will get in trouble if you classify a worker as a contractor when they should be an employee.
What Happens When You Pay Temps as Contractors When They Should Be Employees?
“Oh, she was just a temp.” – Famous Last Words Before TWC Awards Unemployment Benefits to a Claimant You Thought Was a Contractor
Imagine you’ve hired a temp, they worked for the couple of days you needed them to, you cut them a check for their day rate, and they leave. The next week, you receive a notice from the Texas Workforce Commission. The “temp” you hired has applied for unemployment benefits.
You wouldn’t be the first dentists who has had to respond to an unemployment benefits claim for someone who only worked for you for a few days. How can they do that? Only employees qualify for benefits, right?
Well, not exactly. Unemployment benefits can be difficult to understand, and there is a lot of myths and misinformation surrounding who is eligible to receive them, how to fight a claim, and more. It would take another full article to explain the ins and outs of the system, but let’s narrow down the basics for this circumstance.
Unemployment Claims in Texas
Despite you hiring a worker as a contractor, they can absolutely apply for benefits. Note – “apply for” does not mean they’ll be eligible for benefits, but they can try. The problem is that the worker may have been misclassified as a contractor when they should have been classified as an employee. If TWC determines an employer-employee relationship existed – regardless of the amount of time they spent working for you – the individual is likely to be eligible for benefits. Of course, you may end up with other issues on your hands if that’s the case.
Depending on when they file for benefits and whether they’ve done enough work in the four calendar quarters of the period (called the “base period”) used to determine benefits qualifications, you may not be the employer who has to pay out the benefits… yet. If your “temp” has a habit of working a few days and filing a claim for unemployment benefits (it happens), they are likely to do this again in the future with another employer. If they do, and you’re deemed to be an employer in their base period, you may be on the hook for a percentage of the benefits that are paid out for the claim.
Regardless of whether you think this person should receive benefits or not, make sure you handle these claims as if they could. How you handle claims when you’re not a base period employer can affect the outcome of claims that occur when you’re a base period employer in the future.
Should I Still Use Staffing Agencies?
There’s absolutely nothing wrong with using a staffing agency to hire a temporary employee. It’s a valuable service that takes some of the guesswork out of filling short-term – or even permanent – positions and short-circuits the hiring process. But practice owners need to be aware of what they’re getting into when they work with these agencies and understand the rules of paying people. They need to know what defines an employee versus a contractor and realize that a “temporary employee” is still an employee.