Companies that engage independent professionals to incorporate needed skills, specialized expertise, and on-demand talent as part of their workforce strategy stand to greatly benefit from a centralized program that is designed to manage the engagement and compliance processes needed for these types of workers. An independent contractor engagement program serves to minimize a company’s exposure to misclassification liability, and provides processes for finding, onboarding, and managing independent professionals.
However, because there are many nuances to independent contractor engagement, some companies may resist creating a centralized program due to the perceived barriers to doing so. Below, we explore four common reasons companies avoid implementing a program and how to overcome these obstacles.
1. It Costs Too Much to Engage Independent Contractors
When discussing the costs involved with creating a centralized engagement program for independent professional talent, it is first important to recognize that businesses today are actually realizing significant cost savings as well as increased output and efficiency by engaging independents on a project-basis. More than half of executives say the external workforce enables them to improve the overall financial performance of their company and is important in managing business costs.
The costs associated with using independent contractors tend to stem from engagement practices that have no centralized program oversight. Some businesses engage independent contractors even though they may meet this legal classification. This type of rogue engagement leads to high costs because there is no visibility into independent contractor spend, and it also puts the company at risk for misclassification which can be very costly in its own right.
To address this problem, other companies may engage independent workers as W-2 employees on a payroll program. Unfortunately, this approach also results in high costs due to the high markups of payroll programs. The optimal solution falls to a centralized program that lets companies provide flexible engagement options, allowing the business to avoid costly payroll markups, and avoid the fines and penalties associated with misclassification.
2. Managing Independent Contractors is Risky
It’s true—there is an inherent risk associated with engaging independent contractors. That’s because there are specific laws that differentiate independent contractors from typical employees. The good news is, a centralized program is one of the best ways companies can mitigate the risk of misclassification. Having processes in place to correctly classify and manage independent talent can help companies avoid the costly legal consequences that come with misclassification.
Due to the many nuances involved in independent contractor classification, many companies decide to work with a firm that can indemnify them from misclassification and legal risk. Companies that specialize in independent contractor engagement and compliance can provide the strategies, tools, and advice businesses need to create a successful program.
3. Company Leadership Doesn’t Understand the Need for a Program
Obtaining executive buy-in is an essential first step to creating a long-term, successful program. If company leadership doesn’t understand and champion a program, it will be much more difficult for internal staff and enterprise managers to follow along.
When designing a program, think through how to include company leaders from the beginning. Talk to them about why the program is important, how it aligns with business goals, and how it will be successful. As the program grows and evolves, continue to include leadership, asking them for feedback and keeping them involved in key decisions.
4. Independent Contractors Don’t Want to Work Through a Program
Today, independent professionals have more choice than ever before in picking the clients they work with. That choice is based off of the processes involved in working with a client. Important factors that influence client choice include a fast and efficient onboarding process, receiving upfront guidance on policies and procedures, and having automated systems in place to limit paperwork. A centralized engagement program can help meet all of these needs, making companies a much more attractive place to work.
Creating a program to manage independent talent is no small task to take on, but risk control, cost savings, and increased efficiency and visibility are all tangible benefits that can help businesses remain competitive, legally compliant, and attractive to top talent.
Looking for more strategies and tools to help increase adoption of your independent workforce program? Reach out to MBO today.