Independent Contractor – Friend or Foe?
Ever since 1994, when Microsoft was the subject of a Class Action lawsuit (and subsequent IRS action) for incorrectly classifying thousands of independent contractors, there has been a stigma around the use of this valuable resource, which can in fact be a very effective strategy for companies. This issue has been brought into focus again recently when on April 22, 2010, a long-awaited bill addressing the issue of misclassification of employees as independent contractors was introduced in Congress by the House (Rep. Lynn Woolsey, D-CA) and Senate (Sen. Sherrod Brown, D-OH). The bills, H.R. 5107 and S. 3254, are called the Employee Misclassification Prevention Act (EMPA). With all of the potential challenges and risk surrounding this population, many companies have established policy to eliminate or severely reduce the use of independent contractors.
The issue is not with the use of independent contractors, but rather with the misclassification of them. Companies can avoid the risk associated with “permatemps” by ensuring that they leverage subject matter experts that can help them to properly screen and classify their non-regular workers. This simple step can ensure that they avoid potential costly risks while still taking advantage of this extremely cost effective and valuable approach to out-sourced labor.
Brian- you are spot on! A good way to manage the independent contractor population is through a VMS tool like IQN but always make sure that they are properly vetted by applying both State and Federal IC compliance tests before you engage them as ICs.
Karen, thanks for your comments. I absolutely agree that if firms follow closely both the IRS formal questionnaire and also best in class behavioral evaluations, these cost effective resources can be used with little if any risk. I would also add that it is a good idea to have a subject matter expert engaged who can work with your internal staff to insure that they are utilizing the resource properly, insuring that risk isn’t incurred after the on-boarding process.
Well said; independent contractors are a highly valuable and rapidly growing segment of the workforce, and organizations of every size will need to “make friends” with ICs and retool their business processes to effectively engage with them.
Designing a consultant-friendly compliance and engagement program that meets the special needs of high end ICs and micro-businesses (like statement of work consultants) is one key to driving more value, increasing program adoption and making risk mitigation efforts more effective.
Well said; independent contractors are a highly valuable and rapidly growing segment of the workforce, and organizations of every size will need to “make friends” with ICs and retool their business processes to effectively engage with them.
Designing a consultant-friendly compliance and engagement program that meets the special needs of high end ICs and micro-businesses (like statement of work consultants) is one key to driving more value, increasing program adoption and making risk mitigation efforts more effective.