Independent contractors provide businesses today with needed skills, specialized expertise, and on-demand talent. Building a centralized program that is designed to manage the engagement and compliance processes for independent contractors is an important part of incorporating contingent workers.
An independent contractor engagement program helps 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 because of the perceived barriers. Below, we explore three common reasons companies avoid implementing a program and how to overcome these obstacles.
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.
Reality: Engaging independent contractors Can Lower Overall Staffing 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.
Check out: How to Determine the Cost of Hiring Independent Workers
2. Misclassification Risk
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 W-2 employees. The good news is, a centralized program is one of the best ways companies can mitigate the risk of misclassification.
Reality: You can engage independent talent compliantly
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.
Check out: Independent Contractor vs Employee: Which Should I Hire?
In order to compliantly engage independent talent across an organization, it is important for businesses to build a centralized engagement program that encompasses finding, sourcing, engaging, paying, and managing independent workers. Without a program in place, it is very difficult to achieve true risk management and attract top talent.
Reality: An end-to-end program is essential for compliance and contractor satisfaction
A centralized engagement program that can be used to manage the entire lifecycle of working with independent talent—from sourcing and onboarding to payment and future re-engagement.
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.
Check out: 3 Challenges of Creating a Successful Workforce Management Program