1099 Risk Blog

Independent Contractor Classification Tip #8

Clamp down on “maverick” spend.  As compliance programs are only effective if they are used, executive buy-in and a strong communications program are critical. Check that contractors are not being engaged as “maverick” spend by managers unwilling to participate in the compliance program. Often, if a contractor fails compliance and resists W-2 payrolling, the hiring manager may opt to engage them as a 1099 anyway – in spite of the risk to your organization. A W-2 engagement program that is attractive and functional from the perspective of the independent contractors will also encourage high program adoption.

The latest research supports this view. According to Chris Dwyer, as seen in the research performed for the Aberdeen 2009 Contract Labor Study, enterprises using MBO Partners are able to capture 11% more contingent labor spend inside their program than organizations not using MBO. We attribute that incredible success, in part, to having an offering that is contractor-friendly. Our platform enables contractors to continue operating like de facto independents, even when they’re being payrolled as a W-2 with MBO Partners. They keep their business expenses and the right to have other clients. The program also offers rich benefits and a number of tax advantages that are attractive and lead to an incredible high adoption rate. A high program adoption rate leads to less friction and less impetus for hiring managers to go around the system.

When a program works really well and makes all the parties happy, there’s just no need to fight it. Look for an independent contractor compliance program that provides a seamless and contractor-friendly engagement channel for your contractors, whether or not they can pass compliance as legitimate independent contractors. Because at the end of the day, even with the most rigorous process in place, your contract workforce is only compliant to the degree the process is adhered to. Given all of this, it’s not surprising that even in companies with an outsourced contingent workforce management program, only 61% have confidence that their independent contractor program is compliant with the law (Aberdeen, Contract Labor Report, 2009).

Well, that concludes our series on Independent Contractor Classification Tips. You're encouraged to review the other 7 tips here on our Risk Blog, but also join us for our upcoming webinar presented by attorney Eric Rumbaugh where we'll discuss the state of compliance in today's workforce and ways you can protect yourself. You can find out more and register here.

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