In 2014, nearly 35% of the average company’s workforce was contingent or contract-based and this percentage will grow to 45% by 2017, according to the 2015-2016 State of Contingent Workforce Management report by Ardent Partners.
Without doubt, more people are taking up work on a project or contract basis than ever before, as traditional full-time work is no longer seen as the only option anymore. The number of contingent workers, whether independent contractors, statement-of-work-based labor, or freelancers who provide services to corporations, is growing exponentially even as the world is debating the merits and demerits of some of these classifications. Some of these independent contractors bring in niche skills which ensure that they enjoy multiple engagements and earn much more than they would have earned in a regular employment relationship, with the bonus of being able to enjoy greater work-life balance.
These contractors also have the flexibility to choose or reject a given assignment. This indirectly puts pressure on the companies to put processes in place to easily engage and retain these independent contractors as their availability is finite, while their skills are highly valued. The Harvard Business Review says that the number of contingent workers providing professional services to corporations has been growing at nearly three times the rate of overall employment over the past five years.
Even as businesses are looking to increase the agility and flexibility in staffing their teams and managing their businesses, these independent contractors are stepping in to offer much-needed skills, for the time required, at rates which far surpass those of any full-time workers. Businesses are willing to accept such pay rates as they see the engagement as temporary and the skills offered as essential to their business growth and success in an uncertain business environment. Accessing the needed skills without investing in training and development is also an additional irresistible advantage offered by skilled independent workers.
Hiring Independent Contractors:
As the demand for these professionals goes up, their ability to pick and choose engagements will also increase. This would require a business to invest some thought into staying attractive to these workers.
There are ways and means by which this objective may be achieved by businesses that wish to retain the same independent contractor’s services, again at some time in the future. Payment forms only a part of this consideration, as the independent contractors value intangible things like the treatment given to them at the workplace, the recognition and respect they get for their contributions, their ability to control the pace of their work and the sense of autonomy afforded to them at the workplace. They would expect to be treated with courtesy at the workplace and have a smooth experience with support services. Savvy businesses offer other valuable benefits like enrolling them to an alumni network which serves to keep them in the loop on new opportunities.
The task of companies does not end with attracting independent workers. They will also need to ensure that their classification of the workers as independent contractors does not attract penalties for non-compliance with the regulatory requirements in independent contractor classification à la Uber and Fedex who are fighting these regulations and Homejoy, which closed down its operations citing legal liabilities over misclassification.
Independent Contractor Classification:
An employee-employer relationship is governed by many regulatory bodies at the federal, state and often local levels, with the employer being held responsible in myriad ways for the workers. With independent contractors, this control passes to the workers, who are expected to pay their own taxes and levies like workers’ compensation insurance. In any case, independent contractor classification cannot be taken lightly or determined easily, without an eye to the regulatory requirements.
The 1099 classification methods of companies like Uber do not need to frighten away the users of 1099 independent contractors, who bring immense value in the form of hard-to-find skills. A business needs to make sure that its independent contractor is truly independent, and in business for oneself and working on multiple projects for multiple employers; none of whom employ them. If the criteria for independent contractor classification fail, a business need not lose the worker and can always engage the person through an intermediary, one whose payroll the person is shown.
Remember that the stringent regulatory requirements are put in place to ensure that it is not being used as a way to exploit the workers or evade taxes and workers’ compensation insurance and other benefits payable.
Do you look at the engagement of independent contractors as an avoidable risk? Please comment and let us know what you think of this category of workers. If you need expert advice in this regard or wish for a technology which can walk you through the classification process, please contact us to speak with our subject matter experts.
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