July 23, 2020
It seems counterintuitive that payments to temporary agencies are not allowed since the underlying client is the one who is making the true decision and expense with regards to employment. Can you clarify the guidance on this?
Posted by Armanino Financial Advisory Team
Staff provided by temporary employment agencies receive a W-2 from the agency, not from the underlying client. Therefore, they are not employees of the client, do not participate in the client’s benefits programs and do not list the client as the responsible employer if they apply for unemployment benefits. Temp staff provided by an agency are no different than staff working on a client IT project that are provided by a consulting firm. The temp agency is a vendor, like many others contracted by the client. In this regard, temporary agency staff are comparable to 1099 contractors, who are very clearly prohibited from being included in payroll costs per Treasury guidance.