As the companies nationwide began to grapple with how to protect their workers amid Covid-19, Aquent became the first staffing company to offer its temporary workers paid sick leave with nationwide. Specializing in placing temporary employees in marketing and creative segments, Aquent has long been a forerunner in providing benefits to temps, starting with health insurance in 1993. Today, the company — with 800 internal workers and 10,000 temporary workers on W-2s — offers a slew of benefits including health insurance, a 401K, a dental plan and short- and long-term disability.
In early May, I spoke with Aquent Chairman and CEO John Chuang about his philosophy on offering quality benefits to the talent he places and why end users need to be more conscious about what they are buying when it comes to temp help. He discusses why he jumped on this bandwagon years ago and his aggravation at gig economy firms for not following US law as well as at the government for allowing uneven playing fields.
How has the Covid-19 pandemic affected Aquent?
We used to have 30% of our talent work from home even before the crisis. Now, that number is 100%; all of our talent and all of our clients have been really great in allowing our talent to work off site. And of course, the nature of the work we do — a lot of it one is able to do it from home.
But, so far, we are doing pretty well. Our company does a lot of work with ecommerce, and a lot of work with large companies and tech companies. And so far, those projects are continuing. Ecommerce is extremely important now for companies, so that’s why I think we are doing, I believe, much better than the average staffing company.
Were all of your contingent workers able to continue working?
Yes, it’s amazing. I think there were maybe two that needed to be on site. That’s the amazing part. We’re extremely lucky in that our talent is primarily digital talent to begin with so we were able to do that.
What are the advantages of providing your contingent workers with benefits? Are there economic or engagement benefits? What do you get in return?
Right now, with Covid-19, there is a big public health benefit in that you have to give your talent the ability to stay home. They have to be able to afford to stay home if they don’t feel well. And right now that is more important than ever. There should be an economic incentive to be able to stay home– and that’s what sick pay is.
Economics. But aside from the reasons from current events, there’s a really sort of big advantage to offering benefits to talent, and that is because the economics are better. Offering great benefits to talent allows you to attract and retain the very best people. Everyone always asks us, ‘Hey, don’t benefits cost you money?’ and our response is always, ‘No, it makes us money.’ And it makes us money because we are able to attract and retain the very best people. In fact, we had a study done for the digital department of a large bank, in which we found that for every 100 contractors that they have where they give benefits to, they will make around $2 million a year in return from attracting the best people and from retaining really good people.
Differentiator. And as a staffing company, as a talent agency, we are competing with everyone else in the world for the best talent. We want the very best talent and we want them to work for us. And because most staffing companies do not offer benefits, we can clearly differentiate ourselves. A lot of talent will also leave a contract situation for benefits. And obviously at Aquent that doesn’t happen, because we provide those benefits.
Filling a gap. Also, a lot of people like staffing because of the flexibility the lifestyle offers. But it’s hard to afford that flexibility, because people need benefits, and they are extremely expensive and hard to get outside the employer-employee relationship. So by offering benefits, we sort of reduce the gap between working as a full-time traditional employee and working in the staffing industry.
So, we enable people to live, actually survive, in a temporary lifestyle long-term, because we are giving them what is missing. The United States is not like Europe. We primarily give health and welfare from the employee-employer relationship, not from national government programs. And so, in the US it is very incumbent upon the staffing company to offer great benefits if we are to attract and retain the very best people.
So, the economics are superior by giving benefits. There is clearly a public health issue now. And I would say the last reason is that it’s just the right thing to do.
How do the clients benefit from the benefits your temporary workers receive?
In today’s workforce there is this invisible worker. Your typical Fortune 500 company is focused very much on their W-2 employees. Yet, at some tech companies like Google, often 50% of their workforce could actually be temps, contractors and vendors. And these ‘invisible employees,’ so to speak, are often critical in building the products of the company. In fact, the company enjoys a lot of flexibility and a lot of competitive advantage because they can bring on the right people at the right time.
But I think the United States’ modern workforce — having a lot of independent workers and contractors and temporaries — has really helped businesses be competitive. And it’s really good for the people as well, because they get the flexibility of this lifestyle.
However, there is one giant flaw in all of this. And that is, right now, this extended workforce, or this invisible workforce, doesn’t get the correct benefits. And that is the major problem that I believe companies are going to try to address and fix. So if the staffing industry is going to want to expand its market share, if the staffing industry is going to be able to be a true career path for people, and if we are going to be a true partner with our clients, we should be offering benefits.
Are there any challenges that you are seeing in providing these benefits?
When working with companies, typically when you talk about benefits, they totally want to do it. They know it’s the right thing to do. They don’t want to have a second-class citizen issue in their workplace where some people are treated very differently. I think they want a situation where sure, people are paid differently, but everyone is treated fairly. The problem is when it comes to basic health and social benefits like sick pay, people might not be treated the same for these health and wellness benefits.
Their big issue is the awareness. I guess the true challenge is that they might not even know that these contractors are not getting these benefits. However, Covid-19 has shined a big light on this, because now it’s a health issue for their employees and everyone around. Everyone needs certain base health and welfare benefits if everyone is going to come work together as a team. And I think there is a big awareness problem from companies where they are not necessarily making sure that their contractors have really good benefits.
HR & procurement. Its more endemic in that the department that runs the people assets of a company — and unfortunately thinks of it as just employees — at the moment, is HR. And HR is always thinking about investing in their employees and educating their employees and protecting their employees. They really look at their employees as an asset to be protected, invested in and nurtured. But then you look at the contractors who work for a company. They unfortunately don’t work for human resources. They are hired essentially by the procurement side of a company, and the procurement side of a company has grown up where their goal is to crank down the cost of widgets and to always get the best price. And they might not be thinking investment-first in a human asset.
Altering mindsets. Another part of the problem is that the procurement department of a company has to realize or understand that in today’s world, they are the new HR department. In today’s world, they actually are in charge of, in some tech companies, literally half of the human beings that are working on a daily basis at a company is actually through procurement and not through HR. And so, they need to step up their understanding of how a human asset might be different than a widget, because widgets are not human assets. Every human is different, and with a human asset you are trying to invest in that human asset, not necessarily crank down the cost.
I think it is a very different mindset and companies are just starting to understand that mindset. I think Covid is accelerating the learning; think about sick pay — anyone can make you sick, it doesn’t matter if they are a contractor or a CEO. Everyone is the same here and the disease knows no difference.
Given the Covid-19 crisis, are you seeing other companies step up and offer benefits? Do you see a shift there?
I see a shift in companies wanting this. They clearly want this. The response from our staffing-buyer clients has been fabulous.
I think a lot of client companies don’t really understand sometimes the difference of when they hire from a gig platform versus when they hire from a staffing firm versus when they hire from an Aquent. Those are examples of the tiers. With gig platforms, you are not paying minimum wage, there is no labor law that exists that they follow, and sometimes the median pay is $2 an hour. No one gets any protection from minimum wage laws or labor laws. There is no FICA, there is no unemployment, there is no workers’ comp, etc.
When you hire someone from a staffing firm, you are certainly getting a much better-protected person. Unemployment insurance, workers comp, great. Except the typical staffing company will not provide sick pay, other than where it is mandated, and will not have any health insurance. Whereas when you hire from an Aquent, you are getting someone who is pretty much covered fully as your regular employees and you will not have a second-class citizen in your workforce. There are definite degrees of care given to employees, depending on who you choose for your staff augmentation.
Independent contractors through online platforms became eligible for jobless benefits under federal Covid-19 relief legislation. But the platform companies themselves have not paid any unemployment taxes. Do you think this is going to impact, down the road, how those gig economy firms can operate?
I surely hope so. A couple of things. One, I think companies like your readers, Fortune 500 companies, they really need to be much better conscious consumers and understand exactly what they are buying and how that staffing firm is treating its employees. Sometimes, as a buyer, we can get a lot better, right? We don’t like animal testing for cosmetics. We don’t like buying our Nikes from sweat shops or from places that employ child labor. Yet, I don’t know why a Fortune 500 company thinks it okay to hire labor from folks that do not follow US labor laws. So, I think the Fortune 500 company needs to sort of wake up a little bit and be a much more selective consumer, rather than just going for the cheapest price.
Also, I think if you are a staffing company — and we are all staffing companies — I am incensed that the government would allow this unlevel playing field. We all follow US labor law and we pay our taxes. Why would we allow these gig economy companies to do none of that and have a clear, 15% cost advantage, or even greater? That’s 15% they’ve saved just from payroll tax; they don’t even pay minimum wage. In San Francisco, the minimum wage is $15 an hour, but you can get someone from a gig company for whatever the gig person is willing to work for. Five bucks an hour? Anything goes. And gig economy companies have become quite big and rich, and they have a lot of political power.
Look at the AB 5 law in California, that comes in to specifically stop the misclassification of gig workers. And it is literally now a law in California, and yet, every single gig economy company does not follow the law. In fact, they are now spending over $100 million to overturn the law through a referendum.
Why shouldn’t all staffing companies become gig companies and none of us have to then pay minimum wage? We would effectively gut labor laws in the United States and we would effectively have dismantled what the United States thought was the labor norm for the last 100 years. All these laws were established in the 1930s and 1920s. So essentially, the gig economy companies are the greatest threat to worker norms in the United States ever.
Do you think that the current Covid-19 situation is going to shine a light on this?
I hope so. But what is happening right now is even worse. The relief legislation contained a significant amount of unemployment insurance for extensions for people, and that makes sense because our company and every staffing company pays unemployment insurance. But it also now covers gig economy companies, and that’s outrageous to me because these gig economy companies put nothing into the state fund and yet, now the government is bailing them out and essentially covering their workers. Whereas, every single staffing company and frankly, every single employer — McDonalds, Walmart, you name it — we all contribute massive amounts of money into the fund. The government wants to extend it and that’s great; at least we contribute to it.
But for the gig economy companies, they are already getting a free ride, and now their people are being covered and they still haven’t put any money in. It’s almost outrageous — not in the fact that the people are being covered, they should be covered — it’s outrageous the fact that we are not asking the gig economy companies to contribute a dime for the coverage for their people, where everybody else is spending a lot of money.
And it affects the staffing companies greatly because these gig economy companies are essentially platforms where you can hire skills, which is exactly what we are.
What role will staffing companies have in the recovery?
I believe staffing companies have a critical role to play. One, in terms of offering great benefits. Again, there are 20 million Americans who work in gig companies and staffing companies right now. And none of them have sick pay or health insurance. And staffing companies could take a big role in terms of educating their customers and offering options for better coverage to these folks.