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Navigating Compliance and Legal Considerations in Staff Augmentation: A Guide for Employers 

September 6, 2023

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Navigating Compliance and Legal Considerations in Staff Augmentation: A Guide for Employers 

With the constant changes in the world of work, companies often find themselves faced with staffing challenges that hinder the efficiency of their processes. As a result, organizational leaders have begun looking into the concept of staffing services such as staff augmentation to remedy these needs. 

Although it’s a popular solution, some fail to consider the most important aspect when choosing their staffing partner: the firm’s ability to comply with laws and regulations. 

So how exactly can you ensure that the company you’ll choose can, in fact, follow compliance and legal considerations in staff augmentation? You first need to also be aware of the basic laws to follow. 

A Recap on Staff Augmentation 

Staff augmentation is a strategy where businesses hire professionals from an external source and have them work temporarily alongside existing staff members. This is usually done for projects or events that require specific staffing needs like an additional workforce or experts with specific skill sets. 

Find Out More: Raso360’s Staff Augmentation 

Availing staff augmentation services have been gaining popularity due to the benefits it can offer. The following are some of these advantages you can get though the service: 

  • You would have access to a wide network of professionals and a talent pool which means you’re certain to find someone who would fit your company’s needs. You could also choose the best person that will fit in the environment and culture you foster in your workplace. 
  • You would have the flexibility of upscaling and downscaling your workforce. This is specifically advantageous to companies who have seasonal demands due to the nature of their business. 
  • You can reduce company costs since the hiring process, benefits, and other long-term employment commitments would be taken care of by your chosen staffing partner. 

Read More: Agile Workforce Solutions – Leveraging On-Demand Staffing with ServiceNow 

Obligations and Compliance for Staff Augmentation Services 

Hiring a staff augmentation team would definitely help your organization meet its varying staff needs. But to choose the best staffing company, you need to be aware of their obligations to the law so you can ensure the partner you choose complies with the law. 

Labor Law 

Labor laws are legislations that specify the rights of employees as well as the responsibilities of employers to their people. This ensures employees’ wellbeing. A good staffing company needs to be aware of all the labor law in the state you’re operating in. 

Proper Classification of Workers 

A law-abiding staffing firm properly classifies its workers based on their roles and duties to the company. 

Since both employees and independent contractors receive different compensations and benefits, firms sometimes misclassify employees for their own financial gain. There are other times where they simply fail to classify them correctly due to their lack of knowledge of the criteria of classifications. 

This act of misclassification in any form of staffing service can have legal consequences and liabilities regardless of if it was intentional or not. 

Read More: Compliance and Legal Considerations in Staff Leasing 

Compliance Regarding Compensation 

According to the Wages and Fair Labor Standard Act, an employee is entitled to a federal minimum wage of 7.25 dollars per hour.¹ Aside from this, there are also many states all over the U.S. that have their own detailed minimum wage laws. 

If an individual is subjected to both the federal and state minimum wage law, they should be given the higher wage of the two. This shows how important it is for a staffing company to be knowledgeable and updated regarding the laws of all the states they practice in. 

Protection against Discrimination 

Similar to other companies, a firm that offers the service of staff augmentation needs to uphold the laws against discrimination. 

As stated in title seven of the Civil Rights Act, potential and current employees are protected by the government from any forms of discrimination. Whether the unfairness is rooted in race, religion, sex, color, or national origin, individuals cannot be discriminated upon in any steps of the hiring and employment process.²

Failure to comply with this labor law may result in fines for compensatory damages due to intentional employment discrimination. 

Tax Obligations 

A staffing company can only comply with labor law if it has fulfilled all tax obligations that come with their offered services. This involves all monetary payment and compensation to employees and to the state. 

Tax Involving Worker Classification 

In connection to the previously mentioned labor law, each classification of workers has different rules to follow with regard to tax. 

For example, contractual employees are responsible for paying their own taxes while employers are the ones who take care of the withholding income taxes of full-time employees.³

Since contractual workers are generally taxed less, some employers misclassify employees with the hopes of reducing labor costs and benefits. When choosing a staffing firm, make sure to choose a company that isn’t just fully aware of the classification criteria, but also takes care to follow them. 

Payroll Tax Regulations 

Companies who offer staff augmentation services must also comply with the regulations regarding employee payroll. This means they need to properly calculate the withholding taxes of each individual and deduct the exact amount from their compensation. 

Aside from this, the staff augmentation company you choose will also be responsible for proper reporting and remittance of taxes. So, to ensure obligations are met, you need to choose a company that’s organized and equipped with a systematic approach to tax regulations. 

Insurance Requirements 

When choosing a staff augmentation provider, it’s important to consider their compliance with insurance requirements. You don’t want a company who only ensures the protection of its own name and people. Instead, aim for a provider that also cares for your business and reputation. 

Read More: Maximize Your Business with Staff Leasing 

Compliance with Insurance Laws 

Insurance laws and regulations can vary depending on the jurisdiction, but its main purpose is always to protect all related parties in the process of staff augmentation. This includes the service provider, the experts, and the company client. 

Some general aspects your staff augmentation provider should consider are: 

  • Health Insurance: This coverage focuses on the employees placed by the staff augmentation provider. It ensures that employers are responsible for any medical expenses needed by their people regardless of if it’s for a check-up, hospital stay, tests, preventive care, or required medication. 
  • General Liability Insurance: This specific type of insurance provides you – the client company, protection against employee claims related to property damage or bodily injury. It states that if any of the previously mentioned situations arise, your insurance will cover any legal fees, costs and settlements. 

Remember, a staffing company that cares for both its client and its people is important since you can see their commitment to following laws and regulations while helping you reach your company’s milestones. 

RASO360 IS HERE TO PROVIDE EXTRAORDINARY SERVICE FOR YOUR STAFFING NEEDS 

With a mission to accelerate business through building the right culture and connections, Raso360 can properly deliver the services you need. Whether you require contract staffing or direct hiring, we have the solutions for you.  

With focus on the industries of accounting & finance, call center, digital marketing, and technology, our talent acquisition model can provide you with extraordinary talent that can help your business succeed. Ready to start growing your company? Contact us today! 

References 

1 “Wages and the Fair Labor Standards Act.” U.S. Department of Labor, Jul. 2023, www.dol.gov/agencies/whd/flsa

2 “Protections Against Discrimination and Other Prohibited Practices.” Federal Trade Commision, Jul. 2023, www.ftc.gov/policy-notices/no-fear-act/protections-against-discrimination

3 “Employment Taxes and Classifying Workers.” Internal Revenue Service, 27 Dec. 2007, www.irs.gov/pub/irs-news/fs-07-27.pdf

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