Classifying the Contingent: How VMS Technology Supports Compliance & Risk Mitigation Efforts

488689611Government regulations coupled with employee protection laws affect all individuals engaged in an employer-employee relationship, regardless of classification or type. While multiple overlapping policies are cumbersome to manage, they are also very dangerous to ignore. A strong combination of legal expertise and a sound technology application can solidify the administration of your contingent workforce while mitigating the risks that come from mismanagement.

A robust vendor management system (VMS) should provide inherent functionality to ensure that contingent workers are appropriately classified. While most organizations leverage a managed services provider (MSP) to oversee and facilitate material aspects of their contingent workforce programs, it is the staffing suppliers – who provide the contingent talent – that are the actual employers of record, as they provide those contingent workers. Because the onus of responsibility lies squarely on the suppliers’ shoulders, it is imperative that they fully understand the applicable laws and classify workers appropriately. Utilizing a solution with highly configurable functionality that drives the transactions down the appropriate path will ensure that all resources are appropriately classified, regardless of their labor category.

PREMIUM CONTENT: How to match a VMS to your Contingent Workforce Program requirements

For example, consider overtime policies. Based on the state of employment, a worker might be eligible for overtime after a certain number of hours worked in a day or over the course of a week. The VMS can be configured to automatically calculate overtime pay based on the worker’s location when a timesheet is entered in the system. If the applicable legislation changes, the system can quickly and easily be reconfigured and updated.

The VMS should also help support hiring managers as they define job requirements and determine the right resources to fill a role. Many systems offer integrations with HR applications so that all of your staff-related data creates a single, unified picture. These solutions offer tools to help determine the right requisition type for a specific position, based on the structure of the work, job requirements and any other applicable criteria.

That being said, the VMS will not necessarily prevent a user from taking independent action and overriding the recommendation. It is therefore critical to conduct periodic audits of the system data and your contingent workforce program as a whole to ensure that classifications are accurate and you are in compliance. The system itself can facilitate an audit by providing a complete record of activity, including historical data, user workflows and transaction statuses. This information can also be useful in contract reviews, to determine the efficacy of resources.

While a VMS offers many benefits in the management of your contingent workforce, it is important to remember that the system is only as effective as its configuration and use. The rules that are used to govern your contingent workforce must be clearly defined and set up in the system, and your internal team must monitor the data within the system to ensure that you are in compliance with the laws and policies that apply to your business. Regardless of who – or what tools – you involve in your contingent workforce management processes, you are ultimately responsible for compliance. If your company engages a significant number of contingent workers, you need an electronic mousetrap to provide an additional layer of enforcement for your classification requirements.

MORE: Can a VMS really suport your project services spend?

Domenic Mancini

Domenic Mancini
Domenic Mancini is senior product manager for Provade, an enterprise vendor management system (VMS) provider.

Domenic Mancini

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