Ensure your contingent workers are in the right place.

Contractor Payroll refers to the tasks a company must execute to ensure temporary W2 Workers and 1099 Independent Contractors (ICs) are paid correctly and on time in accordance with their contract or Statement of Work (SOW).  Contractor payroll is a complex business responsibility that can often appear confusing to employers unfamiliar with the different set of obligations that must be met when paying contractors vs. traditional employees.

Before your organization decides on a payroll model that’s the best option for bringing qualified talent quickly and cost effectively into your contingent workforce, below is a list of critical considerations that will help you on your journey to making an insightful decision:

When onboarding an independent contractor, organizations must classify aspects of the contingent worker relationship to ensure compliance with the correct tax and employment laws. Misclassification of workers happens when tax authorities and/or regulatory bodies deem one or more of an organization’s contract workers as actual employees. 

Managing a blended or contingent workforce is a logistical challenge in the ever-growing gig economy, and contractor classification is one of the biggest risks facing organizations that operate one.  

Between 10–20 per cent of employers misclassify at least one worker, and the Internal Revenue Service (IRS) estimates organizations have misclassified millions of workers in the U.S. alone.  

When onboarding contingent workers, these insights will help you understand contingent workforce language and how to categorize and classify your worker relationships, so you can focus on moving your business forward.

They go by many different titles: contingent workers, gig employees, freelancers, contractors, but regardless of naming, they all serve the same purpose: providing organizations with flexible, skilled staffing solutions to help them quickly respond to market changes and demands.

In the past it was very common for organizations to source their contingent labor through a staffing or recruiting company. For a flat fee or a percentage of each workers’ pay, the recruiter would vet resumes, qualify workers, negotiate pay rates, and manage all payroll and compliance for that worker. In return, the client received timely access to skilled consultants and workers and was glad to outsource the process to their trusted suppliers.

In an effort to save money, better manage talent, and regain control over their recruits, companies have become increasingly more comfortable taking on some or all of the contingent worker engagement process for simple or frequent openings within their organizations. The practice of engaging contingent workers directly is known as direct sourcing and while it is true that direct sourcing can save companies money, the opposite can also be true if the company doesn’t have the proper resources in place or a formal program to manage the process. This post will address some of the challenges with direct sourcing, as well as five key decisions companies need to make when establishing their own direct sourcing program.

It’s important to note, direct sourcing programs don’t have to be an all-or-nothing approach. In fact, many companies use direct sourcing for routine or frequently engaged contingent worker requirements and still use an outside staffing agency to manage complex roles, executive positions and other senior company positions.

Whichever route you choose, below are some considerations to help enhance your program: