Owners of temporary staffing agencies must address several liability exposures that are often not covered by standard insurance policies. Even though the agency’s clients supervise those employees at off-site locations, the agency retains liability for the actions of its employees. They can alleviate some concerns by partnering with PEOs (Professional Employer Organizations) that provide comprehensive human resource department outsourcing to help the company with human resources, employee benefits, payroll, and regulatory compliance.
A PEO works through a co-employment arrangement, which means the PEO contractually, shares certain employer responsibilities with the company. Having peo insurance means that the right insurance is in place to cover the cost of any damages incurred from outsourcing to a peo. The PEO will work to optimize HR practices for their client companies, and one such way is by offering employment practices liability insurance (EPLI) with coverage generally ranging from $1 to $2 million.
A PEO that provides this coverage can also include other useful services, such as access to employment law attorneys, background checks to reduce risks of future employment lawsuits, and training courses for managers and employers providing instruction on proper ways to handle employment situations (hiring, termination, supervision, management). If these services were acquired separately from EPLI, the cost could be significantly greater than the PEO service cost.
Temp staffing agencies differ from employment agencies
Temporary staffing agencies are often misclassified as employment agencies, which provide permanent employees to businesses seeking to bolster their staff. Temporary staffing agencies remain the employer of any workers they place, making them liable for the actions of those workers. An employment agency’s liability for a placement’s actions, on the other hand, ceases the moment they place an employee with a client.
While any type of company can employ the services of a peo, they are often a good fit for temp agencies because of the type of relationship they have with their staffing placements. There are a number of issues and concerns relating to providing temp staffers to different companies, often in diverse industries, so a peo can concentrate on HR and related areas, allowing the temp agency to focus on placement and delivery of staff to their clients.
While this relationship may seem a bit complicated, it has proven to be quite effective. And having an agent familiar with temp agencies, PEOs, and peo insurance, is the best person for determining what will work best for a particular set of circumstances.