Contingent Worker Definitions – Can’t We All Just Get Along?

163741763No wonder hiring managers are so confused. They just want to get their work done, products out the door and technology developed. Today, the non-employee labor space is plagued by everything from acronym soup to lingo stemming from urban myths. Lack of standards is contributing to all of this while the growing usage of workers within the non-employee side of things is actually playing into the hands of auditors looking for misclassification. What’s a Fortune Company to do? Let’s see if we can provide some education and insight without overcomplicating matters. If you’ve ever played that infamous game, “Two truths and a lie,” you know that it can start out fun and end up painful. Let’s try it now:

  1. There are only two “types” of workers today
  2. All payrolled workers are found by hiring managers and submitted internally for W-2 Payroll or outsourced to a third party where arm’s-length administration and benefits are a driver
  3. Staffing Suppliers typically shy away from submitting independent contractors to clients as part of their supply chain and recruitment strategy.

Which is the lie? No. 2. But even the truthshere are not cut-and-dry. Let’s look closer at each. 1. “There are only two ‘types’ of workers today” — Truth. There are either employees or non-employees. This is a bit tricky, though, because there are at least nine ways in which workers can come into employment within a corporation that I can think of, such as intern, temp, SOW, independent contractor, and so on. Underneath the two umbrellas you can further define these ways in order to ensure that you are compliant. Regardless, these types will fall under one of these two types.

2. “All payrolled workers are found by hiring managers …” Lie. — Many times payrolled workers are found by looking at talent pools within an organization from the past, i.e., returning retirees (be careful of this, there are many rules governing how long retirees should be away before they can return, and effects on pensions, eligibility for benefits etc. etc.); or past recruits who weren’t hired, but are a good fit for contracting, third-party databanking of resources on your behalf (so-called “silver medalists”). At ICon, we call this Talent Locator™, which is a very cost-effective and qualified approach to engaging the talent companies need as part of the supply chain strategy early in the process or as a back-up plan when traditional supply chain fails.

Often a corporate brand and direct employee referrals are the best line of defense when recruiting. This is true for non-employees too, not just FTEs or a recruitment process outsourcing scenario. The lines are getting blurry, so it’s important to leave no talent stone unturned. Great people are everywhere, you just need to adopt better strategies to find and retain them. Another term used here is “self-sourced.” 3. “Staffing Suppliers typically shy away from submitting independent contractors to clients … ” Truth. — While true, it’s a mistake for them to do so. We’ve seen some staffing firms that will do so when allowed because it brings more margin due to the lower administrative costs.

PREMIUM CONTENT: Payrolling and IC Evaluation/Compliance Landscape Report

There are actually four ways to engage these worker types:

  • Directly as an employee
  • Directly as an Independent Contractor (IC)
  • Indirectly through an Employer of Record staffing company
  • Indirectly through an Agent of Record staffing company for qualified IC (and this is changing rapidly in our business model, wherein the staffing company submits an IC for vetting and validation by our company first, before determining which EOR or AOR provider works best)

Why are things heating up now? Congress and states are playing more and more attention to worker classifications. While it hasn’t passed, The Payroll Fraud Prevention Act of 2013 is just one of several legislative attempts to clamp down in worker misclassification. The goal of such legislation is to:

    • Make misclassification of employees a federal labor offense.
    • Oblige every employer and enterprise to provide a classification notice. So there’s the kicker. If you haven’t “defined” which class the work benefiting your company is falling under and done everything within your power to properly reclassify things when they are clearly in the wrong bucket, you are exposing yourselves unnecessarily.

Take our advice and dust off those policies. Clearly define what goes with what in terms of your employees and non-employees. Then, make the definitions under these two types crystal clear. And last, educate, communicate and evangelize to your hiring managers. Include this in new hire training and new manager training.

MORE: Will you be prepared when 40 percent of our workforce is contingent?

Dana Look-Arimoto

Dana Look-Arimoto
Dana Look-Arimoto, founder and CEO of Phoenix5 LLC, is an executive and leadership team coach, Talent Eco advisor, speaker and author of Stop Settling, Settle Smart: Rethinking Work-life Balance, Redesign Your Busy Life. She can be reached at dana (at) phoenix5th (dot) com.

Dana Look-Arimoto

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