Games - Permatemp

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Permatemp is a portmanteau of the words permanent and temporary. It is a modern employment situation in which an employee does long-term, onsite work for a company but receives all pay and benefits from a third-party staffing firm.

Definition

The normal practice of temporary employment is one in which the employee has 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 care) to their long-term employees.

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, and contributions to a retirement plan. Regular employees are often eligible to switch jobs 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.

The classic permatemp situation results when a worker classified as "temporary" works alongside regular employees doing similar work for a long period. By claiming that the employee is only temporary, the worksite company avoids paying for benefits and employer taxes. It also tangentially benefits because it has no responsibility to the employee--permatemp employees can be fired or laid off at any time, as they have no career service protection or seniority. Temporary employees are often ineligible to apply for jobs open to regular employees.

A permatemp often has little relationship with the staffing firm they technically work for. 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, they can find job candidates to fill a position through Internet job sites, 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 receives money from 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

Permatemping came into vogue simultaneously with the economic bubble of the 1990s. 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 $100 million.

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.

Changes

As a result of the legal and tax rulings the human resources organizations at most companies changed their policies towards temporary employees. Microsoft, for example, decreed that an individual could not be a temp for more than 365 days, and that individuals must be away from Microsoft for more than 100 days between temporary assignments. Other companies have created policies stating that temporaries can only be assigned to specific projects that last just a few months. Individuals are often prohibited from taking back-to-back assignments within a 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 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.

[ Visit the complete Wikipedia entry for Permatemp ]

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