It is estimated that by 2020 more than 40% of the U.S. workforce will be independent – i.e. they are not employees of a company, but instead they have chosen to work on a contingent basis. This growing segment of workers is referred to by many different names, including: freelancers, temps, consultants, solopreneurs, ICs, contractors, independents, or more generically, the flexible workforce.
When it comes to the flexible workforce, the business news cycle has recently been dominated by the 1099, or sharing, economy companies like Uber or Lyft that depend on large numbers of relatively low-skilled workers to deliver their services. Because of the way these companies have designed their business models, they have unfortunately attracted a lot of attention from various government agencies who care about proper worker classification, tax collection and worker protections. As a result, there are numerous pending worker misclassification lawsuits, and undoubtedly many more audits and resulting settlements which won’t be made public.
A fact that often gets lost in the sensationalist daily news cycle is that these workers only represent a relatively small component of the total supply-side of the talent equation. What gets significantly less coverage is the higher-skill (and more highly compensated) workers who choose to work as independent professionals. The fact is the higher end of the flexible workforce is growing quickly, and will continue to grow by the choice of the talent that chooses to work independently. This trend is being driven by seismic and irreversible demographic, psychographic, and firmagraphic trends toward flexibility, cost effectiveness, and access to talent on demand.
Engaging Safely with the Flexible Workforce
Many progressive organizations are beginning to directly source and engage these vital knowledge workers as a core component of their total talent management strategy. In doing so, they will face the same legal and regulatory concerns in regard to proper worker classification and co-employment risk that the on-demand companies are facing.
To do it right, these companies need to establish which workers (and the corresponding project or role) are able to qualify for independent contractor status. Those that don’t meet the requirements must either be hired as an employee, or engaged via a third-party employer of record like TalentWave.
Uber, and many other 1099 economy companies, have a fundamental problem because their business models are built on using a flexible workforce, including independent contractors, in order to be profitable. The challenge is many government agencies and regulators believe these workers should be categorized and treated as employees.
On the other hand, most enterprise companies can legitimately justify engaging some of their flexible workforce as independent contractors. Despite all the negative news and Department of Labor posturing, it is still perfectly legal to be an independent contractor, and to engage independent contractors for projects. However, to do so requires specialized employment law expertise and a comprehensive engagement solution, two things many HR or pocurement organizations simply don’t have experience in.
Fortunately, there are specialist independent contractor compliance and engagement solutions providers, like TalentWave, who specialize in helping companies to engage all of their self-sourced flexible workers. In addition to the obvious benefits of mitigating the risk of worker misclassification and co-employment, organizations who engage talent through TalentWave also benefit from lower transaction costs, better rate transparency, and faster time to productivity.