As the number of independent contractors (ICs) in the US has increased over the past several years and more companies find themselves utilizing this valuable resource, there is a general trend that we are seeing: less structure when working with ICs.
This is a huge mistake.
Federal and state agencies are working together to ensure IC compliance is upheld by every company, regardless of size. Regulations are changing and evolving weekly, and if your company is falling behind, it’s also at risk. In the news recently is a story of IC compliance gone wrong, and the potential ramifications are huge.
2015 Independent Contractor Compliance Trends
Let’s take a look at how this story illuminates some 2015 IC compliance top trends:
1. Stricter requirements for ICs
More and more, we’re recommending that clients impose stricter requirements for working with independent contractors. Here at Synergis, we’ve held our ICs to a very high standard for quite some time in order to protect ourselves, our contractors and our clients. Specifically, we require all our subcontractors to:
– Have a formal business entity (in other words, not be operating as a sole proprietor)
– Be registered and in good standing with the state in which they do business
– Be up to date with annual filings and any other state requirements
– Agree to comply with any tax filing requirements necessary by law for their type of business entity
It’s important in these business partnerships (which is what you’re entering when working with ICs) that any risk involved is shared with the company as well as the IC. In this specific example, Google worked with an IC that did not have his own business entity. They partnered through an online recruitment tool, and due to a bevy of areas where the person claimed he was treated like an employee instead of an IC, Google is now facing a lawsuit, plus government scrutiny.
Stricter IC requirements in this case, as well as closer understanding and adherence to compliance standards, could have possibly prevented this example from occurring (although this is only one of many!).
2. Internet recruiting as a major player
One of the most interesting aspects of the Google case is that they used an internet recruiting site to bring on the independent contractor. Sites like oDesk and eLance are becoming increasingly popular as companies reach for more access to independent contractors. These sites are essentially online marketplaces, bringing companies and ICs together. Online recruiting sources came on a bit slow over the past four or five years, but they have become major players in the marketplace. I expect this trend to continue to evolve in 2015 and beyond – and we may even see some consolidation as more players enter the internet recruiting sphere. But from all accounts, internet recruiting seems to be here to stay.
What’s critical when considering these online recruiting sites; however, is the small print (the small print isalways critical!). Your company is typically still responsible for adherence to IC regulations. Here are some tips to keep in mind:
- Control the buying process – Have an internal process in place for the sourcing and oversight of ICs to ensure everyone, at every stage, is in compliance
- Be sure you understand exactly what your provider is offering – Beyond the contract, it’s important to understand what your provider is doing for your company. Read that small print, ask questions, and be sure you understand exactly what your company is getting.
- Audit periodically – Here at Synergis, we encourage our clients to audit our internal processes and work. We stand by the quality of the subcontractors we use, and it is important that our clients – and all companies – are regularly auditing their vendors to be sure they’re fulfilling their obligations and promises.
It’s an exciting time for businesses – the talent marketplace has never been more dynamic and exciting. Your company literally has the potential to reach incredible talent across the globe. As we move into 2015, keep an eye out for even more changes in the evolving IC landscape.
Image courtesy of FreeDigitalPhotos.net/Stuart Miles