How Staffing Agencies Need Better Regulation in the Corporate Ecosystem

What are Staffing Agencies, What Do They Do, and Why Are They So Important?

As the name implies, Staffing Agencies are those firms that help corporates in recruiting employees, both part time and full time.

They also assist corporates in hiring Flex Workers and Outsourced workers for shorter term assignments. Indeed, without Staffing Agencies, corporates would be hard pressed to meet all their hiring targets and goals.

On the other hand, Staffing Agencies depend on Corporates for their survival and hence, there is a symbiotic relationship between these two entities.

Moreover, with the ongoing Pandemic increasing the need for corporates to hire part time and Gig Workers, Staffing Agencies have become critical to the success of the corporates as sometimes, they have the part timers on their rolls and place them in the former’s offices, and at other times, they simply provide leads to the corporates as to whom to hire from the available jobseekers pool.

In our working careers, we have come across Staffing Agencies that passed on our resumes (after contacting us) to Multinational Corporations, who in turn, interviewed us to determine suitability and fit to the roles that they were hiring.

Therefore, Staffing Agencies are indeed critical and important.

Why Fly by Night Staffing Agencies Create Problems and Avoidable Mess for Jobseekers

Having said that, there are many Staffing Agencies that are Fly by Night operators and who cheat and deceive prospective jobseekers by promising them jobs in reputed corporates as well as assure them that they would place them abroad.

This is something that happens on a daily basis with many Shady and Dubious Staffing Agencies deceiving both the Corporates and the Jobseekers and more so, the latter, by collecting money and then vanishing overnight.

Indeed, this trend of such Staffing Agencies was acute during the Boom Years of the Indian Economy in the 1990s and the 2000s and though, there are lesser reported cases now, it does not mean that such questionable and illegal practices have ceased.

This is the reason why many Industry Bodies have come together to create a database of Accredited Staffing Agencies, whom they recognize officially so that member firms know who and which agencies to hire and select for their staffing needs.

Hopefully, this should help in weeding out the illegal ones and by extension. Help corporates and more importantly, Jobseekers in not being deceived by them. Indeed, the problem has become so acute that even Law Enforcers are routinely advising the stakeholders to beware.

How Some Unscrupulous Corporates and Staffing Agencies Collude to Cheat Jobseekers

On the other hand, there are many Tier 2 and Tier 3 firms or Corporates who are in Cahoots with Staffing Agencies to avoid paying their Employees fair wages or to save money on Provident Fund and other Social Security Benefits.

The Modus Operandi or how they operate is that they ask the Staffing Agencies to recruit employees and then have them on their rolls and place them in their premises.

Once this is done, the firms often pay the Staffing Agencies and in turn, the latter are expected to pay the workers.

However, this practice often ends up in the workers not getting Full Pay or Social Security as was the case during the recent Worker Unrest in the Wistron Plant that manufactures iPhones in Karnataka.

In this incident, the workers were short changed by both the firms and the staffing agencies leading to widespread resentment that led to the violence in the plant.

Therefore, it is not always the case that corporates are at the receiving end and in many such cases, it is the collusion between the agencies and the firms that is to blame for the sorry plight of the workers who lose out as always.

Why Technology Led Better Regulation is the Need of the Hour for the Staffing Industry

What is clear from the preceding discussion is that there must be better regulation of the entire Staffing Agencies and their role in the Business Ecosystem.

While we have discussed how workers and corporates are short changed, there are instances of the agencies themselves falling prey.

This happens when jobseekers disappear after placement leaving the corporates fuming and the agencies wondering where the former are.

In our working experience, we have come across instances of even professionals who disappear midway through the project leaving everyone high and dry.

In these cases, the agencies have to take a hit as they have to compensate the corporates for the actions of their placed workers.

So, it cuts all ways and hence, a case can be made out for an Industry Wide and All Stakeholder cooperation and coordination to ensure that nobody loses out in the process.

In the United States and other Western countries, there is smart use of technology to ensure that corporates, agencies, and jobseekers are all tracked and registered with each other and with the liaising regulator so that there is adequate information on each of them. In addition, the laws are very strict on defaulters and errant actors as well.

Time for Government to Regulate

Last, it goes without saying that in any industry, there are a few Bad Apples and one cannot tarnish the entire sector.

However, in recent years, there have been more and more such cases and hence, it is high time for the governments worldwide to step in and coordinate with each stakeholder and pass laws that regulate the industry in a professional manner.

After all, growing economies need workers and in turn, unemployed youth need jobs, and hence, it is a win-win situation for everyone if there is better regulation. To conclude, Staffing Agencies are here to stay for good.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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