When you break it down, is contractor engagement really so complicated?
I talk to a lot of folks in companies of all sizes who have a shallow understanding of the Independent Contractor misclassification issue. Many believe that mitigating the risk is complicated, messy and involves a lot of "change management." To their credit, for some large organizations this may be true, as all broadly implemented programs in the largest organizations are frequently protracted efforts. What Enterprise-level program doesn't have at least some pain during the rollout?
However, for most companies, "messiness" isn't necessarily a given. A number of factors have improved this circumstance:
Maturity. Similar to the life cycle of similar industries, IC evaluation and engagement is becoming mature. Firms like MBO Partners now streamline processes based on the experience of numerous implementations, and have solid methodology for evaluating and engaging ICs for their clients. Compare this to mortgage applications; once complicated and messy, now automated and (frequently) speedy. For example, MBO leverages branching survey technologies that both inform ICs of the engagement process and move them through the onboarding process swiftly.
Repetition. Workers are more accustomed to the process. The first time ICs are presented with a vetting process, they may resist the process or even bail on the contract. Now that most companies have adopted some sort of governance model, independent workers are used to the process, and many now come prepared with the information they know they will need.
Regulatory Stability: Regulations in our field change slowly - if at all. While there are a few different versions of compliance tests, firms that specialize in contractor engagement are able to form a rubric that covers ever scenario for each IC. When regulations do change, updating IC tests has become quick and easy (e.g. California labor code changes in 2012).
"IC friendly": Engagement programs now exist that improve each independent contractor's experience with the process. Traditionally, corporate managers avoided IC programs for fear of losing key talent. Those managers believed that by driving independents into "payroll" programs, the IC would either be unhappy or choose a more lenient client. Thus, the managers would find an under-the-table method for paying the worker, losing both visibility and compliance. Now, ICES companies provide actual benefit to the ICs - even when those workers can't meet the rigorous qualification process to do business as a vendor.
So, it's relatively simple to start a program at your company. However, simplicity alone isn't a reason to adopt an engagement program for your contractors. So, you may ask: why should I be considering a compliance program?
Growth: More and more companies are using talent they find on their own. Our State of Independence study shows that one million individuals are becoming ICs each year. In short, if you don't use many today, you will likely need to use more to stay competitive.
Control: If you track your independent talent, you can reuse those contractors and more easily negotiate services. Essentially, you're building what MBO calls your "Managed Contractor Cloud." Mature companies have built cadres of top talent who work on a project or retainer basis and return from time to time to fill critical roles. As they learn about your organization, they become more productive, finish work faster and develop a sense of loyalty to you - their client.
Agility: Projects are easier to start when they're small. In the future, you will likely need to be more nimble and leverage outside talent quickly. If you set up a scalable process now and build in agility, your program will evolve to the point where you can meet an expert on Friday and have him/her on a plane Monday.
Simplicity: ICES providers should be capable of installing a process or even a complete program quickly without extensive change management. In some cases, a program can be set up in as little as a week. Be wary of companies that attempt to over-complicate the implementation process.
MBO Partners defines direct sourcing and related terms relating to the new world of work.
As 2016 winds to a close, we at MBO Partners like to take time to reflect on what has changed in preparation for the year ahead. As is common in any fast-growing industry, we marvel at how much has changed in the past 12 months, and how much will likely change again as we head into and through 2017.