Back in November 2007, I warned that temp benefits were "one of the biggest political icebergs in the staffing world's waters," and I recommended a solution that could steer the industry clear of danger. The solution I had in mind was cafeteria-style benefits. From that blog of many months ago:
Instead of paying a worker, for example, $20/hour, a staffing firm could pay $17/hour, with $3/hour of cafeteria-style benefits. The worker would then have the option of selecting benefits as desired, or adding the cash back to their check.
Now that we are in the thick of a benefits change that many staffing firms perceive with the same emotion as they would a grizzly bear in the kitchen, I thought I would make my case again, as the general mood may be more receptive.
In the new healthcare regime, effective 2014, staffing firms will need to either offer "regular" health insurance of the subsidized kind, or pay a hefty penalty (that is, for all temps working more than 30 hours per week over the course of an entire month).
Scary, yes, but anyone familiar with the economics of taxation (see "incidence of taxation" for details) will tell you that the party who initially "pays" the tax isn't necessarily who really bears the cost when all is said and done, as taxes are sometimes passed on to others. In this case, who ultimately bears the cost of the new plan will come down to a negotiation between the various parties--the worker, the staffing firm and the buyer.
If staffing firms blend pay and benefits together by adopting the cafeteria-style system, it will at least objectify the temporary worker's total compensation and so make the negotiation in that regard less one-sided. But wait, there's more.
According to our 2009 Contingent Worker Survey, 48% percent of temporary workers already have healthcare benefits from a source other than the staffing firm--from spouses, COBRA, retirement packages, etc. This means that any plan in which staffing firms will be paying for healthcare insurance for all temps will be a redundant cost half the time--nice for the insurance companies who can split the costs of any claim, but the temps would probably rather have plain cash.
If there are PEOs out there already offering cafeteria-style benefits, this is your moment! I suggest gearing up your sales people to sell temporary staffing firms with the idea of outsourcing benefits to you.
OK, this may not be my very last pitch on this subject.