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Permatemp
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A permatemp is an employee whose status is somewhere between a temporary employee and a permanent employee. The word is a portmanteau of the words permanent and temporary. It is sort of a tongue-in-cheek textual contrivance poking fun at the dynamics of the New Economy with its characteristic job insecurity and lack of benefits for a considerable portion of the workforce.
There are two types of permatemp employment relationships.
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A permatemp is an employee whose status is somewhere between a temporary employee and a permanent employee. The word is a portmanteau of the words permanent and temporary. It is sort of a tongue-in-cheek textual contrivance poking fun at the dynamics of the New Economy with its characteristic job insecurity and lack of benefits for a considerable portion of the workforce.
There are two types of permatemp employment relationships. In the first form, a public or private employer hires employees as "temporary" or "seasonal" employees, but retains them, often full-time for year after year, at low wages and without any benefits. These employees often do the same work as permanent employees, but without the same benefits. The second kind of permatemp is an employee of a third-party payroll agency or other employer, who sends workers to work in a long-term, on-site position for a private company or public employer. The employee is paid by the agency rather than by the primary employer, and sometimes receives benefits. These employees are also referred to as contractors.
Definition
Traditionally, a temporary employee is hired to substitute for an employee who is on leave or vacation or to staff a project for which there are insufficient permanent employees to carry out the task. A seasonal employee is hired for the limited time because the work is only necessary for a certain season. The normal practice of temporary employment for an agency is one in which the employees have a close relationship with the agency from which they receive their pay. Their work may range from day labor to high-priced consulting. The employee may work for one or several companies, and the working periods may be for days or months at a time, but the working periods come about irregularly. Temporary agencies may or may not provide benefits, such as subsidized health insurance, to their employees. However, it is relatively common for such workers to draw higher pay in exchange for not receiving the benefits afforded to the regulars.
Regular, permanent employees work for a single employer, and are paid directly by that employer. In addition to their wages, they often receive benefits like subsidized health care, paid vacations, holidays, sick time, or contributions to a retirement plan. Regular employees are often eligible to switch job positions within their companies. Even when employment is "at will," regular employees of large outfits are generally protected from abrupt job termination by severance policies, like advance notice in case of layoffs, or formal discipline procedures. They may be eligible to join a union, and may enjoy both social and financial benefits of their employment.
The most abusive permatemp employment situation results when a worker classified as temporary works alongside regular employees doing similar work for a long period, usually without comparable benefits, thereby exploiting loopholes in business law. By claiming the employee as temporary, the employer avoids paying for benefits and possibly pays a lower hourly wage. The employer also tangentially benefits because it has no direct responsibility to the employee. Permatemp employees can be fired or laid off at any time, as they have no career service protection or seniority. In addition, all costs, including the markup from the temp agency, are deductible as Schedule A (Form 1040) purchase of subcontractor services to the client employer.
Policies regarding temp workers tend to differ between companies, and range from being regarded as abusive to little different from policies applied to the regular employees. At some companies, temporary employees are ineligible to apply for jobs open to regular employees. On the other hand, other companies use temporary staffing arrangements to "test drive" prospective employees. At the end of the agency company employees, and underperformers can be let go with minimal proceedings.
When a staffing agency is involved, the permatemp may have little relationship with the agency that employs him. The staffing firm may have a national contract with the worksite company. Although the staffing company may be thousands of miles from the job location, it can find job candidates to fill positions through Internet job websites, with interviews occurring over the phone and paperwork filed via fax machine or e-mail. It is not uncommon for a permatemp to never actually meet anyone at the staffing company.
The staffing firm provides a wage to the employee, but may or may not provide any benefits. Often, if benefits are offered, they come at a direct decrease in the pay rate. In order to pay the employee, the staffing firm is paid by the worksite company at an agreed upon bill rate, which can be 50 to 100 percent higher than the pay rate. Bill rates are rarely disclosed to the employee, and the staffing firm may, in fact, be contractually prohibited from disclosing it.
Legal issues
Arguments have been made that when a worker is actually employed full-time, year round, but called a temporary or seasonal employee, the employee is being exploited by being denied the wages, benefits, and employment rights enjoyed by other employees. While it is unknown how common this kind of situation is, class action lawsuits have been decided against Seattle, Washington and King County, Washington. These public sector cases generally involve violation of ordinances or rules limiting the length of service of such workers.
Two California cases address the issues of public employees who were improperly considered "temporary" when they were actually employed as regular, permanent employees. The first case involves the Los Angeles County Fire Department; the second such case concerns the employment practices of the Metropolitan Water District. These cases are both class action lawsuits that have been litigated over a number of years. Both cases are near, or in the process of, being settled.
In an Albuquerque, New Mexico, case a federal district judge ruled that an employee who worked full time for the City of Albuquerque for more than ten years as a "seasonal" supervisor and recreation leader (never earning more than $7.00 per hour and with no benefits) had a "property interest" in his employment such that he could not be terminated without a hearing. The judge also certified a conditional class of "similarly situated" city employees employed as temporary or seasonal employees in violation of City ordinances, which limited temporary employees to two years and limited seasonal employees to nine months or less each year.
Staffing through temporary agencies became common in the Silicon Valley technology companies. Permatemping came into vogue simultaneously with the economic bubble of the 1990s. Most recently, General Motors and its subsidiary, Delphi, announced plans to rely on temporary employees. Whether these will be long-term temps, or permatemps, remains to be seen.
General Motors has used "permatemps' for a long time in its lowest management level, Level 6 Supervisor, under a national contract with Kelly Services.
One legal issue and one tax issue, both having to do with permatemps at Microsoft, defined permatemping and also changed it.
Vizcaino v. Microsoft
In 1996 a class action lawsuit was brought against Microsoft representing thousands of current and former employees that had been classified as temporary and freelance. The monetary value of the suit was determined by how much the misclassified employees could have made if they had been correctly classified and been able to participate in Microsoft's Employee Stock Purchase Plan. The case was decided on the basis that the temporary employees had had their jobs defined by Microsoft, worked alongside regular employees doing the same work, and worked for long terms (years, in many cases).
The case and subsequent appeals were heard in the United States Court of Appeals for the Ninth Circuit. Before a final ruling could be issued, Microsoft settled the case for US$100 million. The Microsoft permatemps collected their money almost 10 years later.
IRS tax rulings
Simultaneous with Vizcaino, the United States Internal Revenue Service issued a ruling that Microsoft owed millions of dollars in payroll taxes. The IRS determined that permatemp employees were common law employees of Microsoft and the staffing firm's role was simply that of payroll processor.
Legal changes
As a result of the legal and tax rulings, human resources organizations at many companies changed their policies towards temporary employees. Microsoft, for example, decreed that an individual could not be a temp for more than 364 days, and that individuals must be separated from Microsoft for more than 100 days between temporary assignments with the company. Other companies have created policies stating that temporary workers can be assigned to only specific projects that last just a few months. Individuals are often prohibited from taking back-to-back assignments within an agency client company.
When a company requires a break in service of its permatemps, the result is often that those employees regularly cycle between two companies instead of having back-to-back assignments. Other permatemps plan for personal breaks and simply use the time as vacation. In most cases, they are eligible for unemployment insurance as long as they nominally look for work. This form of permatemping may be attractive to those not wanting a steady, full-time, or year-round position, or not wanting to be committed to one position or one employer.
Another arrangement to avoid long-term serial temporary assignments is to "in-source" the work to be done, and not the position that does the work. In this arrangement, a company does not hire a staffing firm to fill a position, but rather hires it to do the work. The staffing firm still must hire the permatemp to do the work, still on-site at the corporation.
Some of these alternative arrangements barely differ from the pre-Vizcaino format for permatemping. Laws and legal rulings continue to define the permatemp-employee relationship. The IRS continues to warn many companies they may owe employment taxes for their temporary workers and employee lawsuits over temping repeat the same arguments.
Due to the 365 day rule, high value contractors (typically in IT) who choose to accept the risk of not receiving benefits and of contract termination in exchange for higher hourly rates are forced out of standard business relationships. This causes problems for both the contractor, who must continually move to new companies, and for the company, which must retrain and familiarize a new contractor with business rules and infrastructure. This lose-lose situation forces contractors out of the contracting business and encourages employers to move jobs overseas via out-sourcing and in-sourcing relationships. These well-paid contractors, who have no reason to sue and see themselves as running a small, independent business, are hurt by these legal rulings that are meant to protect low-wage permatemps.
Permatemp job stability
In many surveys, those in permatemp situations readily state that they would prefer to be regular employees of the companies they work for. Not all permatemps agree with this, however. Many enjoy the high hourly rates associated with such jobs as well as the on-again/off-again lifestyle and do not need the guarantee of a stable income.
Some permatemps also disagree on the effectiveness of lawsuits and new laws to regulate hiring. Even those who would prefer to be regular employees recognize that the policies instituted after lawsuits make their employment less, not more, stable. Before Vizcaino, many Microsoft permatemps could be certain they would find a new assignment at the end of a project, but mandatory breaks put arbitrary deadlines on how long they can work a new assignment.
Other critics note that the constant job turnover mandated by human resources department policies has the effect of increasing the unemployment rate, which has led to wage deflation in fields with large numbers of permatemps.
In the wake of employee lawsuits, most companies have not increased hiring of staff in positions typically held by permatemps. In fact, rather than risk lawsuits, many firms have decided not to hire within their own country at all, instead turning work formerly done by their pools of permatemps over to outsourcing firms in other countries.
Permatemp culture
In corporate culture, the presence of permatemps creates a caste-like system. That permatemps had socially integrated into the corporate culture and that the company had included permatemps in morale events and gift giving was evidence both in Vizcaino and to the IRS or a communal corporate culture. Policy enforcement that now restricts permatemps from participating in morale events, employee social clubs and the like creates a second class division between regular employees and permatemps.
Many corporations do not hire regular employees to do work they deem low-skilled or unimportant. Permatemps hired to do that work may not get the resources that a regular employee would. Permatemps might be forced to share office space, cubicles or phones when regular employees have their own. Employee badges for permatemps might be a different color, and permatemps may be recognized in the corporate e-mail system by dashes or other identifiers appended to their login ID. By declaring positions filled by permatemps to be low-skilled and making it easier for regular employees to identify their co-workers who are permatemps, companies create a sense of elitism in their regular employees. Permatemps, as a group, might be known by epithets such as "dash trash" (referring to an identifier and a dash prepended to an email user account).
Frequently permatemps are highly skilled, excellent workers, particularly in the IT field, but are still not allowed to participate in company events or receive bonuses for work well done. If they earn over the United States Department of Labor minimum for overtime exemption, they may be asked to put in similar overtime hours to benefitted, salaried employees without overtime compensation. Depending on the staffing firm and corporation policies, permatemps may discover themselves in one of several positions, all of which require the same level of work from them as from their coworkers:
- Working for an inclusive corporation that allows permatemps limited rewards for good work, with a staffing firm that provides some benefits. If a staffing firm offers benefits they are occasionally immediate, but more typically the employee must wait several months to a year before becoming eligible. Some staffing firms have their own rewards programs for things like good contractor evaluations and length of employment.
- Working for an inclusive company through a staffing firm that offers no benefits. For example, a corporation might make up for a lack of holiday pay by paying for the day despite the employee's not working. This would eliminate common situations where permatemps received reduced pay due to forced time-off (such as company-wide closings on New Year's Day or Christmas holidays).
- Working for a non-inclusive company that offers no benefits at all to permatemps, with a benefit-offering staffing firm.
- Working for a non-inclusive company with a staffing firm with no benefits. Staffing firms are competitive, and long-term contracts vary between companies. While some do offer tangible benefits such as partial coverage of insurance premiums and personal time, others only offer pseudo-benefits. For example, a contracting company might advertise insurance as a benefit for its contractors, when all they offer is the opportunity for the permatemp to pay full price for insurance through them. Many corporations have contracts with staffing firms that don't allow them to switch a permatemp from one firm to another, so once a permatemp is brought in through a staffing firm, they must stay with that firm for the duration of the job, short of the corporation hiring them permanently. Unfortunately, a permatemp may discover themselves accepting a job that has no benefits out of economic necessity, or because their field has limited-to-no permanent openings in their location.
See also
External links
- of employer relationships, including common law employees.
- Microsoft "permatemps" win
- , a message board for current, past, and future contractors at Microsoft.
- , a permatemp rights organization.
- , a research and policy organization on permatemps, nonstandard employment, and health insurance.
- Microsoft permatemp checks finally arrive.
- , by Tech Law Journal.
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