How to Stay Compliant When Hiring Temporary Staff

The average annual financial penalties and fines resulting from compliance errors amount to $14.82 million. The situation becomes more severe when temporary workers are introduced.

Why? Because temp staff create a unique compliance challenge. You need to handle workers who do not report directly to you. But you still have legal obligations to meet.

Your budget and reputation will suffer from audits, lawsuits, and penalties when you make any mistake regarding worker classification, wage laws, or safety requirements.

The good news? Staying compliant doesn’t have to be complicated. You just need to know what to watch for.

Worker Classification Matters More Than You Think

Organizations make their most expensive error when they cannot properly identify their temporary workforce.

The IRS, in conjunction with the Department of Labor, has established official definitions for these terms. An employee works under your control and direction. An independent contractor operates independently by choosing their own methods and selecting their own tools.

Incorrect classification of workers can result in back taxes and penalties, as well as potential legal issues when staff members file requests for employee benefits.

Here’s what to check:

Do you control when and how the work gets done?
Does the worker use your equipment and workspace?
Is this an ongoing relationship or a one-time project?
Do they work exclusively for you?

If you answered yes to most of these, they’re likely an employee. Not a contractor.

And if you’re hiring through a staffing agency, the agency typically employs the worker. That shifts some compliance burden to them. But not all of it.

Wage and Hour Laws Apply to Everyone

The law provides permanent staff members with the same wage protection benefits, which also apply to temporary workers. Employers must comply with the law by paying employees at least the minimum wage, providing overtime pay, and allowing them to take their scheduled rest breaks and meal times.

The Fair Labor Standards Act (FLSA) governs most of these rules at the federal level. State laws often implement additional rules that go beyond the requirements of federal regulations.

The state of California has established a rule that requires employees to receive their meal breaks after working for five hours. The state of New York requires specific overtime rules for particular industrial sectors. States have established laws that require employers to provide paid sick leave benefits to their temporary staff members.

Don’t assume your temp workers are exempt from overtime just because they’re short-term. If they work over 40 hours a week, they’re likely entitled to time and a half.

Track their hours carefully. Use a reliable timekeeping system. Managers need to understand the rules before starting shift scheduling operations.

Background Checks and I-9 Compliance Can’t Be Skipped

Every worker needs an I-9 form. Every single one.

The length of their time at the company does not matter. The I-9 document confirms that the employee has authorization to work in the United States.

You have three business days from their start date to complete it. The failure to meet your deadline will trigger penalty fines, which start at $252 for each required form. Repeat violations can result in penalties of $2,507 or more per form.

Background checks add another layer. If you run them, you need to follow the Fair Credit Reporting Act (FCRA). That means:

Getting written consent before running the check
Providing a copy of the report if you take adverse action
Giving the candidate time to dispute inaccurate information

Some states and cities have implemented “ban the box” policies, which prevent employers from asking about criminal history during the first stage of job applications. Screening applicants requires knowledge of local regulations, which must be understood before starting the process.

Workers’ Compensation Isn’t Optional

If someone gets hurt on the job, workers’ comp covers medical bills and lost wages. And yes, that includes temporary employees.

Most states require coverage as soon as you hire your first worker. A few have different thresholds. But assuming you’re exempt is a gamble you don’t want to take.

States enforce penalties against businesses that fail to obtain workers’ compensation coverage through monetary penalties, court proceedings, and possible criminal charges. One workplace injury without coverage can bankrupt a small business.

Staffing agencies must prove they have workers’ compensation insurance coverage for all their staff members. Get a certificate of insurance. Don’t just take their word for it.

Your policy should include direct temporary worker employees when you choose to hire them directly. Insurance companies require you to request coverage for temporary or seasonal workers because they do not automatically include them in their policies.

Safety Training Protects You and Your Workers

OSHA requires employers to provide a safe workplace. That obligation doesn’t disappear just because someone’s temporary.

Temporary workers face increased dangers of workplace accidents. The team lacks understanding of your operational methods, your equipment systems, and established safety procedures. The students might avoid asking questions because they wish to avoid appearing challenging.

The OSHA guidelines require staffing agencies and their host employers to share responsibility for providing safety protection to their temporary workers.

Your role includes:

Providing site-specific safety training
Ensuring they have proper protective equipment
Supervising them the same way you would permanent staff
Reporting injuries and maintaining safety records

Don’t rush through training just to get them on the floor faster. The initial time investment of a few minutes helps stop dangerous accidents and stops non-compliance issues from developing into major problems.

Anti-Discrimination Laws Cover Temporary Workers Too

Title VII, the ADA, the ADEA—all the major anti-discrimination laws apply to temp workers.

Employers must accept all candidates for employment, regardless of their race, gender, age, disability status, religious beliefs, or national origin. Staff members need protection from all forms of harassment, which should prevent them from experiencing hostile work environments. You can’t retaliate against them for reporting discrimination.

This applies during hiring, on the job, and even when deciding whether to extend or end their assignment.

Train your managers. The team needs to grasp that a temporary status does not provide any reduced level of protection. Document performance issues clearly so you can defend decisions if challenged.

Record Keeping Requirements Don’t Take Breaks

The FLSA requires you to keep payroll records for at least three years. The system requires documentation of employee work hours, wage rates, time cards, and hours worked, and all applicable deductions.

Some records must be retained for extended periods. The OSHA injury logs must be kept for a minimum of five years. Employers must retain I-9 form records for three years, beginning on the first day of employment or until one year after employment ends, whichever period is longer.

State laws establish rules that extend beyond the requirements set by federal authorities. Your business will face difficulties during an audit if you lack complete documentation, even if you have followed all applicable rules.

Set up a system now. Digital is usually easier and more secure than paper. You should create backups to safeguard your files while implementing security measures to block unauthorized access to important data.

Tax Obligations Change Depending on Who Employs Them

The employer must withhold income taxes and Social Security and Medicare contributions when employing temporary staff directly. You also pay unemployment taxes and possibly other state-specific taxes.

If you hire through a staffing agency, they handle most of that. All payments require proper documentation for reporting purposes, and organizations must maintain ready access to supporting documentation when the IRS requests it.

The IRS requires payment of penalties to anyone who receives contractor status instead of their actual employee classification. The IRS views this situation with great seriousness. Neither do state tax agencies.

You should consult a tax professional or employment law attorney whenever you need help with any situation. The process costs less than what it would take to correct errors that occur later.

Partner With a Staffing Agency That Knows Compliance

A staffing agency with a good reputation makes it easier to handle compliance requirements. The company provides services for payroll management and tax compliance, benefits administration, workers’ compensation insurance, and background screening. They stay updated on changing regulations so you don’t have to.

But not all agencies are created equal.

Ask about their compliance practices. Request proof of insurance. Discover how they categorize workers and administer wage and hour laws. A good agency will gladly answer these questions.

Hunter Recruiting has maintained a 100% audit score for nearly 20 years. That’s not luck. The organization needs to establish effective systems and properly train its staff while making compliance its top organizational priority.

The entire organization benefits from compliance integration during the initial stage of process development. You avoid fines. Workers are protected. And your business keeps running smoothly.

What Happens When You Get It Right

The primary objective of compliance extends beyond preventing financial penalties. The organization aims to create an environment that enables staff members to work with absolute confidence.

Temporary workers achieve superior performance results through proper recognition of their rights. The rules become more effective when managers understand them because they will make better choices. System organization enables audits to proceed as standard procedures, rather than creating fear for organizations.

You sleep better. Your legal team sleeps better. And your temporary workers get the protections they deserve.

It’s not flashy. But it works.

Ready to Hire Compliantly?

The process of hiring temporary staff does not need to become a complicated legal process.

Hunter Recruiting handles all compliance work, allowing you to focus on business expansion. Our system includes compliance throughout all stages of operations, starting with background checks and extending to payroll management and workers’ compensation coverage.

Need temporary staff who are vetted, insured, and ready to work? Contact Hunter Recruiting today to learn about our support solutions, which help your team stay compliant without major difficulties.