Many prominent staffing agencies are undergoing investigations for possible illegal practices both domestically and abroad.
Contract employment has the potential to be a very viable way to help an expanding business as growing operations can create the need for labor at a moment's notice. For this reason, staffing agencies can provide a valuable service for companies looking to hire as they often have a ready and willing workforce to draw from. However, not all staffing agencies are the same, and for this reason, businesses must be careful in who they look to hire when seeking temporary labor.
Potentially Faulty Business Practices
Some temporary staffing agencies have been making headlines as of late, but not for their achievements in providing quality labor.
In France, three of the largest staffing agencies have come under investigation by the Government after allegedly violating French competition law. The firms include Manpower Group, Adecco and Randstad who together make up nearly 60 percent of the country's temporary staffing market, though it is important to note that other staffing agencies are also involved in the investigation. The companies are being fully complicit with the government authorities.
This is not the first time these companies have been under investigation for improper businesses practices. In 2009, the three companies were fined various amounts over $20 million for violations of similar competition laws.
A major player in the U.S. temporary staffing business market has been imprisoned for improper business practices as well.
Former Alliance Staffing Management Inc. owner Richard Whatley has been sentenced to 51 months in prison and $541,513 in restitution to the IRS, Staffing Industry Analysts reports.
Whatley was accused of failing to catalog and pay for over employment taxes when working at three different employee leasing companies between 2001 and 2006. The total tax loss that resulted from his improper business practice cost a total of $2.3 million.
An aging business model?
The demand for contract staffing is the highest it has been in decades as employment in the field has grown by 53 percent in the last four years to 2.7 million people workers. Though the demand for contingent labor has grown, some companies still feel the need to turn to illegal business practices.
The Staffing Stream, an industry blog, explains that there are two forms of business models which almost all contingent labor companies use. The first is what is called a "commodity" approach in which the company attempts to offer as much labor as they can at a price cheaper than their competitors.
This business model has the potential to run into problems as the focus is not so much on the quality of the labor supplied, but the quantity. This means that a potential employee could be under qualified for the job that they are assigned to, resulting in poorer quality work. Also, the possibly under qualified employee runs the risk of injury as they could be operating machinery on which they have not been properly trained.
The second business model that the blog identifies is known as the "value" model in which staffing agencies try to distinguish themselves from their competition by offering a more valuable contract worker. The advantage of this business model is that one does not need to be dependent so much on meeting numbers as they do on ensuring they provide a quality employee, which would translate into a larger return on investment for the hiring company.
One way that some contract staffing agencies distinguish their workforce is through performance-based flexible labor solutions. This form of employment has a number of benefits that can make it a more attractive employment option, including on the job training, which can ensure that the new employee is qualified for the job that they are tasked to do. Also, this alternative labor solution compensates employees based on performance rather than by the hour, giving the worker extra incentive to perform at a high level.