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Posted by American Worker on April 24, 2001 at 20:52:45:

Payrolling and Other Schemes

It used to be that employers provided the same benefits to all of their employees regardless of position. As employers have rushed to satisfy profit goals, they have cut costs in employee pay and benefits. The staffing industry, led by such giants as Kelly Services, responded by helping employers divide the workforce into two tiers, one well-paid with good benefits, and a lower tier with less pay and fewer benefits.

At major companies like ARCO and Microsoft, this is accomplished by a scheme called "payrolling" - placing the employees on a staffing agency or contract company payroll to pretend that the employees work for the staffing agency or contractor instead of the real employer.

Permatemping can take many forms: Temporaries who aren't temporary. "Independent contractors" who aren't independent or contractors. Leased or contract workers who are permanent.

Where did payrolling come from and how does it work?

In the 1970s and 80s, employers labeled workers as "independent contractors" to save money and avoid legal responsibility. After the IRS cracked down on the use of independent contractors, many employers moved to such practices as "payrolling," "employee leasing," "1099 conversions," and similar schemes.

This practice was noted by Washington State Superior Court Judge J. Kathleen Learned in a May 1999 decision on a King County case. Judge Learned said:

"The County paid employees through outside agencies, such as temporary employment agencies, in a practice sometimes known as payrolling, for the purpose of making the workers appear to not be County employees even though they were actually County employees."

Payrolling is huge business. A recent Internet search found more than 1,500 commercial websites offering payrolling services to employers. Payrolling is not to be confused with legitimate payroll services like ADP, which do the computer processing of employees' paychecks for their employers. Misclassified workers are in clerical, administrative, production, technical and professional jobs, and work in industry, health care, construction, business services, high-tech, telecommunications, pharmaceutical, financial services and government. Employers also resort to permatemping to avoid responsibility as employers under work safety, discrimination and wage and hour laws.

For example, Kelly Services offers a solution to the problem of what to do with "a group of your current or former employees that you choose not to have on your payroll. The solution? Put them on our payroll."

And COMFORCE, a fast-growing staffing firm, reports that "a significant part of their revenues is payrolling individuals who do not qualify as ‘independent contractors’ in the original business."

Available information, though incomplete, document that at least several million American employees are permatemps and that their numbers are increasing.

Permatemping helps explain the fact that, while the number of employed Americans has grown in recent years, the percentage of employees offered health insurance by their employers has been dropping. In 1987, 69% of the non-elderly population had employment-based coverage. By 1997, that percentage had declined to 64%.

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