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The Other Side of Onboarding Compliance: Best Practices for Managing Subcontractor Hiring Practices

Thursday, September 7, 2023

One of the many benefits of using an outsourced services provider is the ability to quickly source the required staffing with the right skill sets to do the job, often at a lower cost than an in-house solution. But what happens when that provider demonstrates shoddy hiring practices?

As we explored in a previous blog post, the consequences of partnering with a vendor that doesn’t have a comprehensive onboarding compliance program in place can be significant. In one recent example, Packers Sanitation Services Inc. (PSS), a Wisconsin-based janitorial services provider was found to be illegally employing 100+ minors at 13 meat-processing plants throughout the Midwest. Federal regulators levied a $1.5 million fine against the contractor, but the biggest hit may have been to the owners of the plants. These companies saw their name repeatedly dragged through the media in relation to the investigation, damaging their brand.

But onboarding compliance is not limited to direct employees of the primary outsourced provider. In many cases, that provider relies on subcontractors to help supplement services for their clients depending on their needs. For example, these subcontractors often assist with specialized projects or are used in geographic areas where the primary vendor has limited reach.

So how can organizations be sure their outsourced partners are effectively managing their subcontractors to make sure those employees have been thoroughly vetted against age requirements, legal immigration status, criminal background checks, and more?

In the area of facility services, here are four things organizations should look for when talking with outsourced providers about their subcontractor compliance programs.

1. A Strong Contract that Includes Audit Provisions

The most important piece of the subcontractor relationship is the partnership agreement, which helps to ensure compliance and is the foundation for a productive relationship. This agreement should include provisions that protect both the provider and the client’s interests, including service expectations, compliance with applicable laws and regulations, and clear legal separation between the provider and the subcontractor.

“The primary goal in a subcontractor relationship is to protect clients from supply chain risk,” says Oscar Galvan, Director of Subcontractor Compliance at KBS. “This begins and ends with a strong contract. Since our subcontractor partners deliver essential services to KBS clients on our behalf, we require them to agree to strong contractual requirements.”

To protect from co-employment risk, the provider should not have direct access to subcontractor employee files, making trust a big component of the relationship. To ensure a subcontractor is sending legally eligible and qualified staff to a client site, the contract should include provisions for full compliance and allow for detailed audits. By requiring the subcontractor’s consent to conduct spot audits of things like payroll and wage information, OSHA/safety logs, and employee eligibility documentation, the transparency and integrity of the partnership is strengthened.

2. Insurance Coverage and Risk Management

The contract should also have language stating that a subcontractor must show proof of current liability insurance coverage, including workers’ compensation, to protect their assets, property, and employees. Failing to have comprehensive coverage exposes the main services provider, the subcontractor, and the client to potential risk.

Since most general liability policies are typically only valid for one year, it is critical to monitor these dates to avoid gaps in coverage that could create unwanted risk. KBS, for example, uses a system of automated email alerts and a dedicated compliance team to notify subcontractors of upcoming policy expirations. Another major step that an outsourced provider should take is to require subcontractors to list them and the client as ‘additional insureds’ on their general liability insurance policy. This stipulation carries significant benefit in the event of an incident at a client’s site that is caused by a subcontractor.

3. Validation of Business Credentials

Businesses like restaurants and healthcare facilities – and those who supply labor to them – must meet specific licensing requirements in order to keep their doors open. This requirement should be part of any contractual obligation in an outsourcing partnership. Depending on the client and situation, the provider should collect any pertinent licenses, permits and certifications required and issued by local, state and federal agencies as part of the subcontractor onboarding process.

The provider should also take an extra step, like KBS does, and conduct annual reviews with all subcontractors and require them to respond to a comprehensive questionnaire about their business details. This a proactive way to identify any changes that may have occurred. Modifications to things like company name or tax status require updates to the partnership contract, insurance documents, and other legally binding forms.

4. Advanced Technology

To help assess the performance of subcontractors, providers need to have made the proper investments in technology. For example, KBS uses a proprietary mobile application to help monitor subcontractor attendance at any client site nationwide. This is coupled with an additional proprietary operational software platform, called KBSForce, that field leaders use to optimize facility performance at every site nationwide. Continually monitoring subcontractor performance and compliance creates a system of accountability that enhances consistency and quality for clients, while making sure contractual agreements are fulfilled.

“It takes a team effort to ensure a fully compliant subcontractor relationship,” Galvan said. “Our subcontractor compliance processes span multiple departments at KBS, from operations to customer experience, and incorporate proprietary technology. Our clients can feel confident we have proven compliance process in place.

Partner with KBS

Subcontractor compliance is an often overlooked yet vital aspect of a successful facility services partnership. Organizations looking to outsource must thoroughly evaluate how providers manage compliance holistically, both for their own employees and for subcontractors. At KBS, compliant practices are at the core of our operations, enabling clients to better protect themselves from legal, financial or brand reputation risk. Learn more about KBS and its tailored programs by requesting a quote today.