A lot of staffing industry professionals look back on the 1990s as the advent of the VMS. However, many may not realize that online work arrangement intermediation platforms, as they’re formally known, also entered the market around that same time. And that could be because they’ve only recently gained widespread notoriety in the industry.
The model began simply enough. Software developers sought to create a basic technology vehicle that could unite freelance talent with prospective buyers or employers. As market demand grew, the platforms evolved to incorporate an expanding menu of features that now include efficient methods for crowdsourcing, aggregating, vetting, and provisioning more diverse groups of talent.
Today, with more than 145 development companies supporting these virtual talent marketplaces, they represent the next iteration of staffing technologies.
The evolution of human cloud platforms
What makes online staffing truly unique is the niche nature of these talent collectives. They target all buyers of indirect labor, blurring the distinction between small businesses and individual consumers. They also support the gamut of services needed to enable the performance of superior work. Because they capture extensive datasets about workers, projects, job performance, skills, qualifications and revenues, they create rich business intelligence systems from which big data can be culled.
In many respects, online work platforms are beginning to behave like typical staffing businesses: they have transformed into third-party intermediaries that facilitate contingent work arrangements and their payment processes.
This has caused some concern among staffing providers and developers. Many of the technology providers have expressed no desire to enter the business as staffing agencies, although that’s what they’ve unintentionally become. Staffing firms worry that online work platforms could potentially automate them into obscurity. Our contention has been that the prevalence of human cloud platforms will actually elevate the role of staffing professionals into curators. And one of the reasons comes from the biggest question most people are asking: How do these systems ensure compliance?
PREMIUM CONTENT: 2014 Online Staffing Platform Landscape
Compliance
Unlike staffing providers, online work platforms are not the employers of record for the contingent talent who are engaged through the software. A staffing provider mitigates a client’s exposure to labor-related risks and legal responsibilities. In this arrangement, a client has some assurance of compliance with mandated laws and regulations, along with some degree of indemnity. In the open labor marketplace model, however, the platform can’t assign or assume labor-related compliance responsibilities.
The principal legal arrangement then becomes a contractual agreement executed between the freelancer and the buyer. In this scenario, issues of worker classification, government income reporting, and applicable tax withholdings are essentially left for the parties involved to figure out. And that’s more risk than any staffing firm would allow or be comfortable with.
According to Staffing Industry Analysts’ research, some platforms do provide rudimentary compliance help features:
- Various suggestions or notifications generated by the software
- Issuance of forms for tax reporting
- Verification of required licenses
- Automated validation of legal work status by country
Some may offer indemnification for these compliance assistance services, yet nothing beyond them. The challenges only increase globally. In the United Kingdom, for example, platform based intermediaries, under certain conditions, can be held liable for VAT, worker misclassification, payroll tax issues, and data privacy violations of Safe Harbor laws. And other unique legal requirements could likely arise from country to country.
Staffing curators are vital to the process
With the growing reliance on freelancers and the online marketplaces they use, staffing professionals will be needed to curate the process, ensuring compliance and connecting businesses to exceptional contingent talent. Online staffing platforms do not act as employers of record, nor do they provide true compliance services.
As Staffing Industry Analysts notes, “The now numerous Crowdsourcing and a fewer number of ‘Online Service’ platform businesses tend to act like outsourcers or general contractors and effectively manage ‘their own’ workers (typically as independent contractors).”
For the vast majority of online work platform users, however, expert staffing professionals can be engaged to lend consultative guidance to issues of workforce regulations, employment classification, labor laws, tax reporting, and a variety of screening processes. Where issues are identified, staffing curators can step in to represent the talent for buyers, taking workers on as employees and ensuring a compliant placement process with limited exposure to risks.
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[…] A lot of staffing industry professionals look back on the 1990s as the advent of the VMS. However, many may not realize that online work arrangement intermediation platforms, as they’re formally known, also entered the market around that same time. […]