Converting temps to regular staff? Beware legal hazards

One of the first indicators of an improving job market is a rise in temporary-help jobs. Why? Many organizations, still cautious about taking on full-time employees, test the market first by hiring temps. This allows them to adjust to changes in demand by scaling up or down with temp staff.

So-called temp-to-hire (or temp-to-permanent) arrangements take temp positions one step further. Such job offers are a hybrid between a temp position and a salaried position. Typically, it's defined as a temp job for about three to six months. If all goes well and an employer is ready to hire, the temp transitions into a regular, full-time employee.

'Try before you buy' approach grows more popular

Among the benefits to such arrangements:

• They eliminate re-advertising positions and trim recruiting costs.
• You can evaluate how the employee fits your organization before you close the deal.
• You can better respond to changes in labor demands.
• You have the chance to back out, whether it's due to business conditions or a poor fit.

Statistics show that such "try-before-you-buy" work arrangements are gaining speed. Temporary staffing companies employed 9.1 percent more people in the first quarter of 2004 than in the same period last year, according to the American Staffing Association (ASA).

Plus, the ASA estimates that 75 percent of temps found permanent jobs last year, of which 18 percent did so by converting to regular jobs at their client firms.

Typically, staffing agencies will require their temp clients to complete at least three months on the job (or about 480 hours) before converting to regular employee status. If the temp completes the three-month period, then your organization isn't charged a conversion (or "release") fee. But if you want to convert the employee sooner, you'll usually be charged a prorated fee based on the number of hours remaining in the initial commitment.

5 ways to avoid legal hassles

If you agree to a temp-to-hire tryout, make sure the arrangements are clear between you, the agency and the temp. Above all, be aware that liability switches from the temp agency to you once your temp becomes your regular employee.

To reduce the chance of any mis-understandings, review these five legal tips:

1. Post the job. Employers should still follow their internal hiring procedures. For example, if you usually post internal job opportunities, do it for temp-to-hire jobs, too. Consider your temp an external candidate.

2. Don't call them 'permanent' employees. When temps join your regular staff, don't say they become "permanent" employees. This word can imply that the employee has a job for life, which destroys their "at will" status. Instead, call them "regular" employees.

3. Consider impact of status change. Be aware that shifting temps to regular employees increases your employee head count, which could affect your organization's compliance with employment laws.

And if employees have been classified as temps for more than six months, they may try to count that time toward their benefits plan or seniority. To sidestep this issue, ask the temp to take a week off before starting as a regular employee. This counts as a break in service.

4. Follow pre-employment screening. Your temp should formally apply for the job, just as any other candidate would be required to do. Follow your hiring procedure, and run the person through the same reference and background checks. Don't be tempted to cut corners because you think you "know" everything about that person.

5. Include them in new orientation. This helps make the change official, plus it's a good chance for you to focus attention on expectations.

Avoid the ‘halo effect’ when hiring temps to regular staff