“Can I contract out co-employment risk?”
This question is often heard when companies begin working with a supplier or partner to develop their contingent workforce program.
The short answer, unfortunately, is no.
Co-employment risk is inherently part of any working relationship where a non-employee worker is engaged and performing work for a manager or organization. The need to mitigate risk is higher than ever with today’s rapidly changing workforce and unpredictable economic environment. The need to establish and enable best practices is often challenging with in-house contingent worker management solutions. Fortunately, engaging a capable and experienced partner can not only mitigate risks such as co-employment, but also provide the organizations with the best access and retention of highly skilled, top talent. Top talent being the unquestionable path to a distinct competitive advantage in any organization’s market.
Organizations need access to the right talent, at the right time and place, for a fair price. However, without a capable and experienced partner to help guide the way, an organization can come to the painful realization that what got them to the point where they are, will not necessarily propel them into a successful future. It is not uncommon to see an organization’s HR and/or Procurement team completely overwhelmed in the details and lack of processes for engaging with contingent workers. One common area of avoidance is to completely prohibit the use of independent contractors, or engaging with any subcontractor-like relationships. This policy can easily lead to the loss of retaining highly valuable talent.
Ironically, we’ve seen many examples where even with a policy in place to never utilize independent contractors, the practice runs rampant throughout an organization. Hidden risk can often be uncovered in potential misclassified workers being paid through various loopholes in an organization, such as simply paying off of an invoice or through a Statement of Work that is time and materials or staff augmentation based.
A progressive Managed Service Program (MSP) service provider, like Hays Talent Solutions, plays the vital role of ‘middleware’ between an organization and all of its non-employee workers. In addition to broad industry experience and best practices, this helps to eliminate rogue spend, provides compliance, and access to that most desired top talent at the right time, and place, regardless of worker classification. In some programs this also includes oversight of workers who are sourced from online staffing solutions, marketplaces, and direct sourcing channels.
One important component of a contingent workforce program is a Contractor Management Office (or CMO) service. This service is often part of an MSP service and includes the ability to properly classify and engage non-agency sourced workers. In the United States this often includes IC Compliance, employer-of-record (EOR) payroll, and agent-of-record (AOR) payment services for contractors. For more sophisticated clients it can also include vendor qualification and sub-vendor engagement services.
When it comes to mitigating co-employment risk in a contingent management program, one of the main factors an organization must be cognizant of when engaging with contingent staff is ensuring there is a clear separation of full-time employees of the organization and non-employee workers who are completing work for the organization. Utilizing a talent forward contingent workforce management partner will mitigate risk by ensuring policies are in place, tracked, and mandated, and that all non-employee workers are engaged compliantly, whether as qualified independent contractors, or a payrolled worker through a supplier.
Make no mistake, just because a supplier is contracted to offer payroll services does not eliminate co-employment or worker classification risk. Risk to the organization is still present for anything the supplier may be doing incorrectly, especially with independent contractor misclassification, exemption status, FLSA requirements, and any other state or federal regulation that must be followed. This is why there is such importance placed on having a capable and experienced partner to manage all suppliers and allow companies to focus on their day-to-day operations.
A Talent Forward Partner will eliminate risk and create an effective and enabling environment where supplier partners are measured and rewarded for being compliant and delivering the best talent. By creating an environment of open communication and transparent processes (essential ingredients for a successful program), supplier partners become informed, excited, engaged and committed to clients.
The success of programs that leverage a Talent Forward strategy will ultimately be judged by the satisfaction of program sponsors, client hiring managers, supplier partners, and the contractors who are engaged to do work. Organizations who embrace this unique methodology will gain a ‘client-of-choice’ reputation in the talent marketplace, enabling them to attract and retain all the talent they need. Risk mitigation, increased flexibility, cost savings, and the ability to quickly drive their business forward.
Daniel Evanoff, PHR, CCWP
As the Operations Director for Hays Talent Solutions, Dan provides innovative, strategic and professional leadership with expertise in contractor management and independent contractor compliance, as well as an exclusive understanding and perspective of how third-party vendors, VMS, and MSP providers interact with clients, partners and talent.