The careers our grandparents described to us seem like the stuff of antiquated TV shows now – the wistful nostalgia of bygone times, fairy tales from the fifties. Credit technology. Credit the economy. Credit a modern workforce seeking liberation. No matter the culprit, agility and freedom are the themes underscoring this century’s notion of work. Even in our industry, we’re watching the rise of clients who want to take back control of their staffing by directly sourcing independent contractors and freelancers. And a lot of people see the benefits of these arrangements. The government? Yeah, not so much. As the independent contracting movement gains steam, regulators aren’t far behind, nipping at its heels with the battle cry, “Misclassification!” Compliance is a critical issue, and clients who want to go it on their own may not be prepared. Fortunately, there are solutions.
Declarations of Independence
Today, very few people plan to work for the same company their entire career. In an interview with NPR, Arun Sundararajan, author of The Sharing Economy, said, ”Twenty years from now, I don’t think a typical college graduate is going to expect that full-time employment is their path to building a career.”
Yet the once novel notion of side-hustles has surpassed the realm of transience or desperation; people aren’t supplementing their incomes with project-based work because of economic distress, instability, or a bump from one-time gigs. They’re choosing autonomy and, essentially, creating their own roles in what could be accidental entrepreneurship or a calculated means for steering the courses of their own destinies. Regardless, more professionals, even those with vaunted credentials, want to investigate the possibilities of independent contracting.
In June 2018, the U.S. Bureau of Labor Statistics (BLS) released its long-awaited reading of how many Americans rely on freelancing, independent contracting, and other non-traditional work arrangements. Better late than never. By the best estimates, there are nearly 10.6 million independent contractors in the United States, with another 56 million Americans choosing to freelance. The problem? Employment misclassification cases have matched the momentum, increasing by more than 30%.
To innovate, contain overhead, and operate nimbly, businesses have expressed a high demand for freelancers and independents. But because of the unfamiliarity of these arrangements or the fear of reprisals, they hesitate to move forward. And many staffing industry firms have precluded independent contractor programs from their offerings, also to avoid the associated risks.
Direct Sourcing: Clients Are Also Crying “Freedom!”
With technology becoming “smarter,” businesses are looking to elevate their contingent workforce solutions by leaning on internal expertise and leveraging outside consultants who can deliver advanced levels of support — without the perceived limitations of specific partnerships, alliances, or staffing divisions.
Beeline is helping companies achieve these lofty goals, emerging as a premier network for direct sourcing. Naturally, there’s a lot of excitement. Beeline’s Self-Sourcing platform, as the company describes, empowers clients to find and engage “talent for contract positions, not through traditional staffing suppliers, but through direct access from your Vendor Management System (VMS) to internal and external talent pools.”
However, as SIA’s Kate Goss cautioned, clients may be too eager to dive into uncharted waters: “As with any new solution, unanticipated consequences and difficulty of execution may result in the solution falling short of its initial rosy promise.”
Even companies pioneering solutions for direct sourcing will need suppliers on the backend who can ensure accurate employment classifications and compliance. The good news is that the structure of these offerings accommodates the inclusion of agencies of record (AOR) with the legal and HR resources to qualify independent contractors, administer their invoicing and billing, or move disqualified candidates onto their payrolls as W2 workers through employer of record (EOR) services.
Staffing leaders that have concentrated on combined AOR and EOR solutions allow companies to bridge a crucial gap: they can substantially mitigate the risks of independent contractor engagements while supporting a robust payrolling solution for W2s. Not only are these firms imperative to the new dynamics of non-traditional employment, they’re emblematic of where the industry and the economy are heading.
The Only Constant is Change
Labor regulators and legislators recognize that the laws of employment classification have failed to keep pace with economic shifts. Sen. Mark Warren (D-Va.) famously lobbied Congress to reconsider its stance on independents, citing the dependent contractor status that countries like Canada and Sweden have established. In 2015, a Hamilton Project policy proposal outlined a similar solution: the independent worker.
In the plan, the Brookings Institute explained, “Harris and Krueger propose that independent workers have the right to collectively bargain as well as protection from various forms of employment discrimination. However, independent workers would not qualify for hours-based benefits like overtime or the minimum wage. Harris and Krueger argue this new classification would benefit both workers and businesses, reducing expensive litigation by clarifying the rights and obligations of each party.”
Until these academic theories and regulatory updates take shape, we’re left with the issue of properly classifying candidates as valid independent contractors or W2 talent in need of employers of record. And that’s where the power of AOR and EOR providers shines brightest.