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Term used in North America

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Portable Employer of Record

A US term for a business that provides employer-like services to independent contractors and freelancers, in exchange for a percentage of the fees collected. See "umbrella company" in the UK and the Netherlands.

Captive Staffing

An internal group that provides staffing services and solutions within (and usually exclusively for) an organization to place talent in a temporary engagement. This internal staffing group, often operating under its own brand and structured much like a staffing company, provides a variety of traditional staffing services that range from sourcing talent that matches the organization’s temporary engagement needs; to ongoing temporary assignment management support; and the onboarding and offboarding services at the beginning and completion of a temporary engagement.

Agent of Record

A term used in the US to describe a service whereby the provider acts as a third-party intermediary between a staffing firm or client and one or more independent contractors, administering the back-office functions related to engaging independent contractors, including payroll and government reporting requirements. It is often used in conjunction with ICEC (Independent Contractor Evaluation and Compliance) services.

Statement on Standards for Attestation Engagements (SSAE) 16

A standard created by the Auditing Standards Board (ASB) that assesses a service provider’s internal controls and that has replaced the longstanding SAS 70 attestation. SSAE 16 was drafted and issued with the purpose of updating the US service organization reporting standard so that it mirrors and complies with the new international service organization reporting standard – ISAE 3402. SSAE 16 reporting can help service organizations comply with Sarbanes Oxley requirements to show effective internal controls covering financial reporting. It can also be applied to data centers, or any other service that might be used in the delivery of financial reporting such as Managed Service Provision.

Workers’ Compensation

Financial compensation to an employee for work-related injuries, in particular compensation of loss of wages, sometimes also for medical costs. Typically one of the major costs that staffing firms are responsible for, and in occupations such as industrial staffing, the cost of workers’ compensation insurance is significant in determining profitability.

Women and Minority Business Enterprise (WMBE)

Suppliers that meet government criteria to qualify them as being women- or minority-owned. (See also: Diversity Supplier.)

W-2 Employees

Workers who are paid hourly on a regular basis and work with a staffing firm that handles their payroll.

Variable Time Programs

Time/income trade-offs that enable full-time employees to reduce work hours for a specified period of time with a corresponding reduction in pay.

Staff Leasing

A term used in Italy to describe the supply of temporary labor through an agency. In the US, “leased” employees are those employees who are engaged using a Professional Employer Organization. Employment responsibilities are typically shared between the leasing company and the client company. The client company retains essential management control over the work performed by the employees.

Special Employer

A US legal term referring to the client employer’s legal relationship to the employee in a joint-employer relationship, which usually includes responsibility for day-to-day supervision at the worksite. (See also: General Employer.)

Sarbanes-Oxley (SOX/Sarbox)

The Sarbanes-Oxley Act of 2002 or the American Competitiveness and Corporate Accountability Act of 2002. Sarbanes-Oxley requires that publicly traded companies tighten financial controls and audits; CEOs and CFOs must sign off on the accuracy and truth of financial reports. In particular, SOX Section 404 deals with certifying the sufficiency of controls for detecting fraudulent, questionable, or unauthorized activity that could impact company financial statements. In many cases, Section 404 requires companies to take responsibility for the internal controls of service providers in addition to their own. An SOC 1 (SSAE 16) Type II Audit is one way to accomplish this.

Liquidated Damages

Compensation fee paid to a temporary staffing firm for the loss of an employee when the staffing firm’s customer hires the temporary employee on a direct-hire basis. This is more typically known as a Conversion fee in Europe. Some full-service firms prefer to charge a “placement fee” rather than liquidated damages when this occurs. Many firms allow the liquidated damages or placement fee to be negotiated over a period of 30 to 180 days on the temporary assignment. (See also: Conversion Fee, Temporary-to-Permanent.)

Labor Contracting (Labor Leasing)

The provision of labor to a third party, usually providing limited or no benefits to the workers and for a limited time. Most commonly used to describe agricultural and construction contract labor arrangements. Sometimes used more broadly to include employee or staff leasing, temporary help, and other business services such as cleaning and security.

IRS Three Factor Test

A simplified test of independent contractor status that replaces the previous IRS Twenty Factor test. The test considers behavior control, financial control and relationship of the parties. Behavior control requires independent contractors to be free from client control of how they complete their work. Financial control focuses on the business aspects of the relationship, such as whether the workers have a significant investment in their business, an opportunity for profit or loss and how they are paid. Relationship of the parties focuses on how the parties perceive their relationship and considers such factors as the presence or absence of a contract, access to benefits and ability to terminate the relationship. According to the IRS, the Three Factor Test is only an analytical tool. The legal test of whether an individual is an employee or an independent contractor is whether there is “a right to direct and control the means and details of the work,” which the Three Factor Test attempts to make more explicit. (See also: Independent Contractor.)

H-1B Visa

A visa classification that allows a foreign worker to enter the US temporarily for the purpose of performing services in a “specialty occupation” for a US employer. The H-1B visa classification requires that (1) a foreign national be coming to the US to work temporarily in a “specialty occupation”, (2) that the foreign national have the equivalent of at least a US bachelor’s degree in a field related to that occupation; and (3) that the sponsoring company pay the foreign national the prevailing wage, provide proper notice to its workforce, and not be involved in a strike or lockout. The Neufeld Memo of January 2011 contains a recent update from the State Department regarding H-1B visas and staffing suppliers.

General Employer

A US legal term usually referring to the staffing company employer, in a co-employer or joint employer relationship, that is maintaining the employee on a payroll. While not common, confusingly, the term may sometimes be used in a European context but could refer to other types of employment relationships. (See also: Special Employer.)

The Fair Labor Standards Act (FLSA)

In the United States, the FLSA is a federal labor law of general and nationwide application, including Overtime, Minimum Wages, Child Labor Protections, and the Equal Pay Act.

Exempt/Non-Exempt

Under the Fair Labor Standards Act (see definition), all employees are either “exempt” or “non-exempt.” Non-exempt employees are entitled to overtime pay. Exempt employees are not. Most employees covered by the FLSA are non-exempt. Some are not. Some jobs are classified as exempt by definition. For example, “outside sales” employees are exempt (“inside sales” employees are non-exempt). For most employees, however, whether they are exempt or non-exempt depends on (a) how much they are paid, (b) how they are paid, and (c) what kind of work they do. With few exceptions, to be exempt an employee must (a) be paid at least $23,600 per year ($455 per week), and (b) be paid on a salary basis, and also (c) perform exempt job duties.

Employer Paid Fee (EPF)

The hiring organization pays the fee to the employment agency for a permanent placement. The fee may be based on the salary of the position or a flat fee. (See also: Applicant Paid Fee.)

Employee Leasing/Staff Leasing

The practice of an entity, usually a staffing firm, supplying employees to work for a client temporarily, creating a triangular relationship in which the staffing firm employs the worker but the worker is controlled and supervised by the client. Often employee leasing is for work on a specific project that has a start and end date. The leasing company employs the worker on a fixed-term or permanent employment contract (sometimes this is prescribed by law) and pays the worker's wages and withholds and reports employment taxes. The employment relationship between the leasing company and its leased employees is intended to be long-term and not temporary; and the leasing company retains the right to hire, reassign and fire the leased employees.  (See also: Professional Employer Organization, Professional Employer Services, Employer of Record.)

BELO Agreement

An agreement between an employer and employee that outlines an alternative salary method of compensation. It includes both standard hours and expected overtime pay, but its use is even more restrictive than the fluctuating workweek method.

Applicant Paid Fee (APF)

The applicant pays the fee to the employment agency upon placement in a permanent job. APF business was common in the early years of permanent placement, but now accounts for a very small portion of total placement revenue.(See also: Employer Paid Fee) In most European countries, applicant paid fees are legally forbidden for the assignment of temporary workers, except in case of additional training or for CV-drafting services.

1099 worker

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