Q: Many businesses are creating "staffing agencies" to provide labor only to businesses they own - what are the advantages?
Working in workers' compensation in Colorado, we have noticed recently a large number of businesses creating "staffing agencies" where they provide labor only to their own businesses, not to other client companies (so technically not staffing for our purposes). We had never seen these before and are trying to figure out the reasons for doing so.
Business strategists and corporate attorneys sometimes recommend wholly-owned staffing subsidiaries. A parent company will own several businesses of the same kind and own a staffing company. This business structure makes sense when there are multiple locations that all operate in substantially the same way. Great examples are restaurants with the same menu and procedures, retail stores with the same product lines and POS policies, or daycares with the same branding and worker's credentials. In these businesses, there are several business locations with roughly the same business model, products, clients, and policies. A staff person from one location could easily work at another.
When several locations are owned by one owner, the owner still wants to hold these businesses in a unique business entity for each location. This isolates the potential liability or losses from lawsuits, tax problems, and other business problems. Each location is a separate business but can draw from one labor pool.
Employees can be assigned to different locations to balance the human resources needs. Vacations, no-shows, and surges in customer demand are easier to accommodate. With a labor pool model, workers are more likely to get the number of hours they desire each week (high or low) and are therefore more likely to be happy in the job. Most workers wouldn't much care if they work at varying locations in a career as long as the commute is similar and the job functions is the same. As a last hidden advantage, the management can better detect and handle problematic employees by assigning suspect employees to a new location. Either the symptoms will follow the reassignment, or not, and either way has diagnostic potential.
I'm not sure why you are seeing a "large number" of businesses doing this "recently" but this method has certainly been around a while. Ask around to local franchise owners and you will probably find a few folks doing this right in your own neighborhood.
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.