Risks That Staffing Agencies Face: From Hiring To Third-Party Work Sites

The risks that staffing agencies face can sometimes become overwhelming once you realize the very real potential of certain sticky situations. Whether your agency hires on a temp basis or for permanent employment, supervisory control is a big problem because of the varied jobs your clients do.

Since you’re responsible for all liability in your employed clients, this only heightens the risk factors from various angles.

Facing the reality behind the numerous risks your staffing agency faces is better than tucking it away and becoming complacent. It’s time you addressed many of them head-on by taking precautions to avoid the worst type of disasters that can create impossible legal problems.

Without certain protections and more scrutiny on safety in the workplace, litigation could end up shutting your doors. However, it’s more than just about safety of clients and can fall into the category of your agency’s personal financial health.

Let’s take a look at some of your risks as you look ahead. Finding answers to them now can help you and your clients continue to foster good relationships.

Obtaining Workers’ Compensation Insurance

Not obtaining workers’ comp insurance for your agency is one of the biggest risks during the hiring process. Depending on which state you are based in, your agency is directly responsible for any injuries a client incurs at a work site. Even so, most states—like New Jersey—require you have workers’ comp insurance anyway, so not having it would prompt penalties as well as client legal issues.

While this risk only goes by personal negligence on your part, it’s still important to screen employees so you know they don’t have injury risk. Proper training and safety equipment are also a given, especially if you place workers in an industry that involves manual labor.

Employee Screening

Despite the above screening for injury risks in your clients, you have so much more to scope out before you can put them to work. Trying to vet employees is another risk you face that can only be amended by taking some extra time to do research.

Things like past employment verification, past injury history, and drug testing are vital to find out whether working with someone is a major liability. Thanks to online research capability, you can find information fast. Nevertheless, you can find out just as much from the direct sources the client provides you.

Dealing with Contracts for Independent Consultants

When you work with independent consultants, dealing with contract issues can become risky if you don’t have thorough agreements about working at third-party sites. You need to work out various clauses in your contracts that maintain certain procedures to avoid other legal risks.

Some contract clauses to consider include confidentiality clauses that promise your client won’t disclose any company trade secrets they’re exposed to.

Other clauses to consider include exclusivity clauses to avoid misunderstandings on hiring other consultants while your client works for the company. Even a reciprocal confidentiality clause is important where the third-party site agrees not to disclose any trade secrets of the hired consultant.

Cash Flow Risks

The financial health of your staffing agency needs complete attention since payment from the work sites you contract with may not pay right away. You need to establish clear payment terms with company clients so it’s assured you receive the payments you expect.

If you have to pay your employee clients weekly, you may not have enough cash flow if the company client doesn’t pay until the next month or later. Payroll factoring is a solution many staffing agencies turn to now where the latter sells their accounts receivable invoices for cash.

Still not sure about what types of insurance will help keep your staffing agency out of trouble and properly protected? Schedule a free assessment with one of our business insurance specialists to find out more.

Dan Levenson

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