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This article by Bart Jackson was prepared for the March 20, 2002

edition of

U.S. 1 Newspaper. All rights reserved.

When to Use Contingent Workers

Two reporters write for the same newspaper. Madly

typing,

they compose markedly similar stories; filling their 40-hour weeks

with markedly similar work. One man, however, is labeled a "core

staffer" — reimbursed with a set salary and full benefits.

The other is a "stringer" — paid either by the article

or the printed word. Long a newspaper tradition, this blending of

core and outsourced talent has been aggressively adopted by all fields

of business for the past decade. Question is: Just how well does this

trend work?

Those seeking the optimum method of bringing aboard temporary,

part-time

and contractual employees will want to attend the Employers

Association

of New Jersey’s panel discussion "Strategic Use of Contingent

Workers," which is one of many panels taking place at EANJ’s

conference

on Tuesday, March 26th, at 10 a.m. at Seton Hall. Cost: $165. Call

973-313-6103.

Barrie Peterson, co-director of Seton Hall’s Institute on Work

moderates. Panelists include Francine Moccio of Cornell

University;

Don Watson, production manager of Stepan Company; Cathy

Brown

of AT&T; and Hylton Senior, director of patient services for

Memorial Sloan Kettering. A series of new survey studies and practical

panel experience will shed light on the actual cost saving benefits,

morale difficulties, and even the legal aspects of taking on

contingent

workers.

It seemed a marvelous plan to pull American business out of its tight

money problems. After the recession of 1992, every company of every

size sought desperately to cut costs. Massive layoffs provided

short-term

solutions, but alas someone had to be retained in the shop to do the

work. Analysts quickly brought compensation under the financial

microscope

and discovered the astounding differential between actual salary and

cost-to-company of putting that person on the job.

The solution, already growing since the early 1980s, became obvious:

bring on the temps, part timers, and independent contractors. Call

them consultants and let them take care of their own benefits and

bookkeeping, and pay their own Social Security taxes. From 1990 to

2000 the temp market tripled to 3 million active temporary workers.

Independent consulting firms in the U.S. jumped 15 percent, from

barely

65,000 in 1992 to well over 75,000 in 1997. Then the law jammed a

stick in the spokes.

Microsoft, ever the trend setter, carried this outsourcing to an

extreme.

Keeping a minuscule salaried core staff, it hired vast numbers of

independent contractors, paying them a flat fee, and providing them

with a 1099 tax form instead of the W-2 salaried workers receive.

This arrangement attracted the attention of the IRS.

The same unimpeachable agency that had so deftly gobbled up Al Capone

squared off against Bill Gates — with the same results. The IRS

indicted Microsoft for misclassifying its workers and in December,

2000, the Supreme Court demanded that the computer giant pay $97

million

in back benefits to its not-so-independent contractors. In addition,

Microsoft faced the mammoth underlying expense of re-classifying,

refiguring, and re-accounting its entire salary and wage system. This

precedent set employers, human resource workers, and attorneys

nationwide

to trembling.

But, Microsoft’s troubles aside, Peterson insists that "the mixing

of part-time and outsourced staff with a salaried core has a host

of benefits for both workers and employers alike." Peterson, a

native of Teaneck and a graduate of Princeton Theological Seminary,

has spent the past decade at the Institute for Work helping employers

make exactly such staffing decisions.

He lists several excellent reasons for expanding with part time,

temporary

and contingent workers, but warns each comes with a caveat, demanding

a special strategy.

Schedule flexibility. Mom can work only when the kids

are away at school. The local hospital or library, open seven days

a week, has all sorts of odd hours that need filling. Frequently it’s

a great match with both employer and worker accommodating to the

other’s

needs. However, costs lurk hidden here. Usually some highly-paid

salaried

staff member must now devote a hefty portion of her time to working

out a schedule for these part-timers. Secondly, temporary and

part-time

help typically may demand more money per hour than core staffers

receive.

Temp to hire. Hiring a worker temporarily or on some

contingent

basis offers both employer and employee a chance to test the fit.

If things do not work out, both can part, without harm, foul, or

costly

unemployment insurance.

Here again, however, Peterson adds a warning: Be totally honest. A

very justifiable misrepresentation lawsuit awaits the company that

lures a worker in part time with the promise of a permanent staff

position, only to renege on the deal later. A recent American

Management

Association survey reveals that the vast majority of temporary workers

are not temporary by choice. They see their time with you as a much

coveted foot in the door. Unfortunately, only 13 percent will receive

permanent positions from any of their temporary employers. Another

47 percent will find permanent jobs, but elsewhere in the labor force.

Outsourcing bookkeeping for contingents. The inordinate

amount of time spent on salary and wage bookkeeping is invariably

an expensive headache that any employer would gladly leave to a

supplier

of contingent labor. However, human resource executives would be well

warned to examine into whose hands these contingent workers’ payroll

accounting processes fall. If a temporary agency or hiring hall comes

under indictment for illegal practices, your firm can be named in

the suit.

Seasonal workers. For the seasonal or tenuously expanding

firm, contingent workers provide an adaptive labor force that can

be more easily let go if the economy or your plans begin to falter.

Of course, setting up workers as canaries in your firm’s economic

coal mine may not prove the best way to inspire loyalty. Establishing

a potential upward pathway for workers and concentrating on how much

corporate success depends on them may be a counterbalance to the

fatalistic

grumble of "last hired — first fired."

Savings on benefits. This is the spark that launches most

bottom-line-driven firms to cut core staff and swell the ranks with

outsourced folks who can jolly well look out for their own health

care, retirement, and everything else. Undeniably, in an age when

a firm must shell out $200,000 a year to woo and keep a $60,000

salaried

assistant manager, the $75,000 outsourced consultant can look pretty

good. "The problem with staffing by math," points out

Peterson,

"is that you tend to get what you pay for."

All those costly benefits the guys in accounting are now moaning about

serve to keep morale up, loyalty and productivity high, and to hold

the intellectual capital of your business inside. The contract or

contingent worker owes you nothing but his work in trade for your

cash. He stands on the outer ring, looking in. A definite separateness

and even antagonism can evolve within work teams.

Many managers and department heads have in the past years tried to

overcome this problem by equalizing all of their team. While the

financial

reimbursement may differ, all members are invited to Christmas

parties,

given similar work spaces, praise, and other perks. "Ah, but now

here comes Scrooge," laughs Peterson. "The legal departments

in many firms, fearing the IRS’ ruling against Microsoft, are

thundering

in with a segregation maxim. They are demanding contingent employees

be treated distinctly from core staffers." This, of course,

shatters

all the morale-building efforts the managers have labored so hard

to create.

"There is an enormous amount to be gained by flexing our

traditional work schedules and remuneration into ways more adaptive

to both the employer and the employee," says Peterson. "But

this part of business growth, like any other, must be carefully

planned

from every aspect."

— Bart Jackson

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Corporate Angels

The Girls Scouts of Delaware-Raritan recognized eight New Jersey women

who exemplify dedication, leadership, and commitment in their

communities

and in their fields of expertise. The awards were made on Thursday,

March 7, at the Girl Scouts’ 11th annual Women of Distinction dinner.

Recipients of the awards include Andrea Alstrup, corporate vice

president, advertising, Johnson & Johnson; Deborah Ford,

soprano,

Trinity Episcopal Cathedral; Barbara Gitenstein, president,

the College of New Jersey; Katherine Kish, president, Market

Entry; Dr. Elaine Leventhal, professor of medicine, UMDNJ-RWJ

Medical School; and Melanie Willoughby, president, New Jersey

Retail Merchants Association.

Fleet is sponsoring Liberty Science Center’s traveling

exhibit, A Question of Truth. The exhibit examines how the search

for truth in scientific inquiry has been influenced by bias and

prejudice

throughout history. Fleet contributed $100,000 to the exhibit. At

the presentation ceremony, Jack Collins, president of Fleet New

Jersey,

said: "Especially now, while we are reaching out to our neighbors

in the aftermath of September 11, it is important for all of us to

continue to support the great cultural, educational, and arts

organizations

that enhance our communities. Through this exhibition, Liberty Science

Center is advancing efforts to bridge our understanding of different

cultures and beliefs."

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Donate Please

The American Red Cross of Central New Jersey is hosting a blood

drive at its Princeton office at 707 Alexander Road on Saturday, March

23, from 8 a.m. to 1:15 p.m. The organization reminds potential donors

that the blood supply must be replenished almost daily because red

blood cells last 42 days, unfrozen, and blood platelets, which are

so important for cancer patients, last only five days, and cannot

be frozen.

The Trenton Area Soup Kitchen (T.A.S.K.) has launched

a building expansion project in order to increase services to the

community. The project, which will take one year to complete, will

add approximately 3,000 square feet to the soup kitchen’s existing

6,500 square feet of space. It will include a kitchen expansion,

additional

storage space, offices, and a community meeting room.

Over the past few years, the number of patrons coming to T.A.S.K.

has steadily increased, and the soup kitchen is now serving over 2,500

meals a week. In describing the soup kitchen’s need for additional

space, Peter Wise, its director, said "poverty is clearly on the

rise. The lines at the soup kitchen are getting longer. The level

of need is greater than ever. The gap between the `have’s’ and the

`have not’s’ is continually growing. If we are to provide T.A.S.K.

patrons with meals and other much-needed services, we must have more

space."

In addition to meal services, T.A.S.K. provides adult education

programs,

including one-on-one tutoring in literacy, basic math, GED

preparation,

and computer skills. The organization’s fundraising goal is $300,000.

An anonymous area businessman has agreed to provide one dollar for

every two dollars T.A.S.K. raises before August 1.


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