A rapid evolution of work has been going on for decades. At nearly 18 million strong in the U.S., the independent workforce has become a vital source of talent for enterprise. Within the next decade, 50% of enterprise workers could be providing services as independent contract talent. This makes it even more imperative for organizations to evolve their talent management programs to leverage this extended workforce and avoid the risks of engaging contractors or 1099s.
In the past, independent contractors were a tactical resource deployed for a project. Today, independent contractors are strategically deployed to keep pace with an ever-changing landscape that requires companies to scale up or down efficiently and tap specialized skills on demand. The work landscape is being redefined and requires a collaborative and integrative approach to sourcing and managing talent.
Traditionally, talent acquisition is a subset of human resources, while procurement manages the hiring of outsourced vendors, including independent contractors. Sourcing and engaging independent contractors, however, happens largely outside of both traditional HR and procurement functions. Individual project managers often engage solo workers and then turn to purchasing or accounting to get them paid. This fragmented approach to independent contractor engagement fails to consider both the opportunities of this talent segment as well as the potential compliance risks.
A collaborative approach to independent contractor engagement ensures that this talent source is not only compliantly engaged, but optimized. The combined functions of HR and Procurement enable organizations to create a robust independent contractor program with uniform policies that mitigate risks (such as 1099 misclassification) while also extending best-in-class practices to include an extended workforce.
Procurement functions best when they focus on their strength: enabling their business customer to obtain services safely at a competitive rate. HR on the other hand, is focused on optimizing the talent an organization has access to and assuring they are engaged and productive. In the case of IC programs, procurement can find and install the solution, while HR owns the program and oversees operation. Together, the organization can be assured this new talent pool is integrated into the overall talent management strategy.
A transparent program that integrates the vital functions of HR and procurement allows companies to maintain control of the category spend should also have checks and balances built into a systematic engagement program. In this way, companies not only achieve uniformity, but achieve opportunities afforded by the contract workforce. Companies can extend their talent bench by identifying the best independent contractors and providing a steady pipeline of work and visibility for future assignments.
Independent contractors can also be a source of knowledge into organizational best practices - as well as gaps. Unlike employees, independent contractors may interact across departments and have insight into how processes can be streamlined or improved. HR has the knowledge and technology to uniformly assess independent contractor performance as well as gather feedback.
The future of work will see a continued shift in the paradigm of work. More workers will move between traditional and independent work and companies will continue to use independent workers in project-based and knowledge work positions. It will be essential to have talent strategies that include engaging and managing independent contractors. Maximizing this opportunity will require systematic coordination and collaboration between HR and Procurement.
Need to know information for any individuals or companies hoping to engage independent professionals in the 21st Century.
MBO Partners developed a calculator that quantifies what we can: the IRS component of the risk. Our legal team scoured the IRS code and assembled the possible penalties into a single easy-to-use calculator.