Critical Compliance: Advanced VMS Users Know this Functionality is Crucial | DCR Workforce Blog

Critical Compliance: Advanced VMS Users Know this Functionality is Crucial

Compliance is a growing concern in industries today, especially those that engage contingent workers. Your VMS can help you avoid coming under scrutiny and facing misclassification issues of W2 workers as 1099 independent contractors. Other areas of compliance such as security clearance, licensing and other credentials are also important to consider. As are a company’s internal compliance items related to background checks, drug testing, training and other mandatory pre-start or ongoing documentation.

Independent contractor…or not?

While it’s true that companies have a right to use independent contractors, it’s also true that using that designation without any forethought can lead to misclassification thereby making the government lose income tax revenue, unemployment insurance tax and workers’ compensation – which the company is then liable for. Additionally, as a contractor, the worker is also forced to deal with the administrative aspects of tracking and reporting wages and expenses as well as lose coverage under workers’ compensation and other rightful benefits that they would receive as an employee.

On the flip side, many workers will request to be classified as a contractor when they should actually be classified as an employee of the organization. This leaves the company wide open to consequences.

Here’s what our team has to say about the importance of compliance: 

Stay compliant or face the consequences

Punishment for non-compliance is a real risk. For example, 1099 misclassification is correspondingly high around the world and workers are free to question whether they’re properly classified and bring it to light in the case of employer error.

The depth and scope of non-compliance invites the risk of fines, penalties and expensive class action lawsuits. There may be back wages, tax liabilities, retroactive employee benefits and contributions to unemployment insurance. Additionally, if the worker lacks proper documentation and immigration status to work in the country, the IRS is joined by other government agencies in prosecuting offenders of a longer list of violations.

A host of other issues arise in certain industries such as aerospace, defense and energy organizations when a company does not ensure that their non-employees have the proper security clearance (or it expires while they’re working for them), especially those who work on secret and classifieds projects. This can have vast and far-reaching implications for national security.

The right VMS keeps you out of trouble

Many Vendor Management Systems today can lower the risk of non-compliance. Advanced VMS users will find that having a Vendor Management System with several features will help them avoid risk as well as other detrimental trouble. Depending on your exact requirements, you may need a 1099 validation feature, security clearance, onboarding module that tracks certain types of compliance, background check and drug test, mandatory training, licensing and/or certifications and more.

A highly sophisticated Vendor Management System such as DCR’s Smart Track can easily ensure that your organization stay compliant. For example, Smart Track VMS can capture on the requisition that the position requires a security clearance as well as the level of clearance required. Then when suppliers are submitting candidates, they can immediately mark what clearance the candidate has and its status.

With our onboarding module Smart Track VMS allows the assignment and tracking of compliance items and documents. Clients can create rules for what documents, background check, drug test or training are required and these can be set based on location, cost center/department, job title or type of service and more. The items can also be made mandatory pre-start which will prevent the worker from being confirmed unless the documents have been marked complete by the MSP or program administrator.

Types of documents that are usually tracked are things such as non-disclosure agreements, company policies/code of conduct, acknowledgments that the worker is not an employee of the client and others that may be specific to a company.

Along with these documents, the system can also track training that may be required such as safety training for light industrial companies or SOC training for workers handling sensitive personally identifiable information.

Similar to the onboarding feature, Smart Track VMS also has a credentialing module which has been used for tracking licensing such as ensuring the proper driver’s license for truck drivers and a nursing license for a registered nurse. This differs from onboarding because these items are recurring and they need to be renewed every few years, so the system tracks and notifies the program administrator and supplier when these items are going to expire to keep compliant.

Whether it’s tracking security clearance for defense contractors or certifications for medical personnel, having compliance tracking within a VMS is a known necessity, especially in highly regulated industries. And, as you can see, depending on the compliance items these may not be one-time items that need to be checked-off but can be recurring certifications or licenses that need to be tracked and updated on a regular basis.

Is your VMS able to handle all that?

When considering changing systems, critical compliance can be one area to improve on over your existing system to help you decrease the risk of non-compliance.

On top of that, the ability for a system to be easily configured is something that you should consider when comparing your options. Every company has something unique about its process for engaging non-employees, and although you may want to change your process to improve it, there will be areas where you’re looking for any potential tool to easily adapt to your company’s process.

I’m sure you’ve heard it all before, but it bears repeating: Not all VMSs offer the same features and it’s hard to beat what Smart Track VMS offers in how it helps align workers with projects, maintains full compliance, provides visibility into all aspects of non-employee workforce management and provides the depth of analytics while offering forecasting features.

For other considerations when comparing features and functionality among VMS providers, check out this whitepaper “Advanced VMS Users Have Magnified Business Needs“.

For a demo to see the compliance capabilities Smart Track offers, get in touch with us at 1-888-DCR-4VMS today.


The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Nick Myers is an implementation lead for DCR Workforce. He has implemented numerous programs globally and across multiple industries.