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Staffing agencies versus placement agencies: What’s the difference and why does it matter?

May 17, 2018
Temping in dentistry is common practice and many offices and workers turn to agencies to help fulfill their temporary staffing needs. But it's important to understand the difference between staffing agencies and placement agencies, as there are significant legal differences between each.

Your dental hygienist has called in sick for the day, but you have a full schedule of patients that must be seen. You call up your local dental employment agency and within an hour, they’ve sent you a hygienist to save the day.

Temping in dentistry is common practice and many offices and workers turn to agencies to help fulfill their temporary staffing needs. For employers, an agency can serve as a middleman and alleviate some of the human resource issues surrounding employment. For workers, these agencies can connect them with work that they may not have otherwise found on their own. However, not all agencies are the same and understanding the differences can protect you from potential legal issues.

So what’s the difference between a staffing agency and a placement agency?

Staffing agencies employ their workers. They take on the burden of recruiting, hiring, paperwork, payroll expenses, unemployment, and worker’s compensation. Workers receive paychecks at regular intervals from the staffing agency and all employment issues are negotiated through the staffing agency, which serves as a middleman between the worker and the practice. Staffing agencies alleviate the HR and onboarding risks involved with using temporary employees.

A placement agency also places workers with dental offices, however, placement agencies do not employ the worker within the agency itself. Placement agencies charge a finder’s fee to the practice, but the terms of employment must ultimately be negotiated between the worker and practice. Each individual office maintains behavioral control and financial control over the worker, the worker is providing a primary service for the business, and the office pays the worker directly. In most circumstances, according to the Department of Labor and the Internal Revenue Service, hygienists are considered an employee of the business—even if for only one day—and he or she would not meet the criteria to be paid as an independent contractor.

Why does it matter?

There’s been a lot of discussion about employee classification in social media forums for the last couple of years and there’s no shortage of opinions on the matter. Workers have become much more informed and are more likely to speak up when they feel they have been improperly classified. Just this week, I read a post from a hygienist (who gave me permission to use her story) who was working with a placement agency and was misclassified in several offices where she was placed. Since she was working with a placement agency, she was not employed by the agency and the terms of the employment were between herself and each office. These offices classified her as an independent contractor and sent her 1099s at the end of the year.

As I stated before, clinical hygienists almost never meet the criteria to be paid as an independent contractor. Because labor laws are based on the traditional employee-employer relationship, misclassification can leave the worker vulnerable should he or she experience discrimination or injury on the job. Misclassification also leads to higher tax rates for the worker, who must pay both the employee and the employer portion of the tax bill. For the employer, misclassification can be seen as an intentional avoidance of mandatory federal, Social Security, Medicare, and unemployment taxes and/or an attempt to circumvent the Equal Employment Opportunity Commission. This hygienist reached out to the IRS and filed a Form SS8 (“Determination of Worker Status”), and the IRS sided with her, advising her that she was misclassified and should have been paid as an employee. Businesses who misclassify workers are subject to fines, penalties, and can even be subject to an audit as a result of a Form SS8 filing.

Why is a hygienist not an independent contractor?

While there’s not a single criteria that determines worker classification, we can consider three primary categories: behavioral control, financial control, and relationship.

Does the business control or have the right to control what the worker does and how the worker does his or her job? Does the worker use the equipment and supplies of the business? Can the worker perform his or her job independent of the business? To what extent does the worker realize a profit or loss? Are the workers duties integrated into the overall business production?

Most states do not allow for direct access to hygiene care, which renders hygienist unable to truly work independently. Hygienists typically utilize the office’s space, chair, sterilization and radiology equipment, computers, and systems. They perform a service which is integrated into the overall production of the business and are most often considered “at-will” workers. Workers who receive predetermined earnings typically have little chance to realize significant profit or loss. It’s also important to note that just because a worker agrees to be paid as an independent contractor doesn’t mean the arrangement is legal or binding.

If you’re a business owner and you’re still unsure of how to classify your worker, you can also file a Form SS8 with the IRS. However, in the meantime, it’s best to classify your worker as an employee and withhold all appropriate taxes. Both the US Department of Labor and the IRS have a plethora of information on employee classification that is readily accessible on their respective websites.

The next time you pick up the phone to get a temp, know exactly what you’re asking for and from whom. Knowing the differences between staffing agencies and placement agencies can help both the worker and the practice avoid legal trouble. Employee classification is a big deal and failure to properly classify workers can lead to fines, penalties, and even an audit. So when in doubt, default to “employee” and don’t be afraid to ask the right questions!

Editor's note: This article first appeared in RDH eVillage. Click here to subscribe.

Amanda M. Richardson, MS, BSDH, RDH, has been a dental hygienist for 15 years and currently serves as a full-time professor and clinic coordinator. She teaches courses in orofacial anatomy, dental considerations for the medically compromised patient, and ethics/jurisprudence/practice management. Her interests include ethics, labor laws, quality management and the oral/systemic link. Amanda has an AAS in dental hygiene, a BS in Dental Hygiene, and a MS in human resource development.
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