More than ever before organizations are turning to independent contractors as valuable talent to supplement their workforce and achieve business objectives. Almost 42 million Americans work independently, and this group has contributed more than $1.3 trillion annually to the economy—more than 6.7% of U.S. GDP.
However, not all independent contractor engagement practices are created equal. Often, independent contractor compliance initiatives alienate key talent and actually increase the risk of worker misclassification. In order to improve adoption, visibility, and talent retention and mitigate misclassification risk, organizations must pursue the right engagement solutions.
Whether you already have a process for engaging independent workers, or you are looking to create an entirely new program, it is first important to put steps in place to ensure all independent workers will be properly classified. Because independent contractors operate as their own business, they cannot be treated like traditional employees. Among many factors, contractors are free to determine where and when they work, are responsible for their own taxes, and can openly market their services.
If employment status is not clearly defined, your company may be vulnerable to an IRS audit. That’s why it is essential to have a clearly defined process in place for worker classification. If you already have a base of contract workers, conduct an internal audit to vet existing workers and make sure they meet classification criteria.
Worker classification is a complex and ever-changing web of federal, state, and local laws. Working with an established independent contractor engagement firm like MBO Partners can help give you peace of mind when it comes to contractor compliance tests and misclassification risk.
Independent contractors have different levels of self-employability, as well as individual needs and requirements. By providing flexible and varying engagement options, your organization will be able to attract and retain top talent while remaining compliant.
Because of the many nuances, complexities, and regulations surrounding classification, the majority of organizations will benefit from working with a third party or a vendor to manage engagement. For instance, if an independent contractor’s status is borderline, a third party can work with the contractor to help them become qualified. In many cases, it’s simply a matter of helping the contractor implement minor changes to their business. MBO, for example, provides four engagement solutions that are specifically designed to meet the different needs and requirements of independent contractors.
Last, but certainly not least, a robust onboarding program will help to build the foundation for a strong and lasting relationship between your company and your independent workforce. The onboarding process can often make or break the engagement experience for independent workers. Companies must find the right balance between creating a positive experience for new workers while also getting projects up and running quickly.
Independent contractors value freedom, control, and flexibility in their work. An onboarding process that automates tasks such as payment, engagement documentation, and background checks creates that positive experience and positions your company as a Client of Choice—independent talent’s preferred destination for work.
As competition for independent talent continues to rise, companies must structure policies, procedures, and engagement practices to prioritize the needs of these workers in order to remain compliant and competitive.
Want more tips? Check out our guide: Independent Contractor Engagement Best Practices for comprehensive advice on how to best engage independent talent.
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