Independent Contractor Compliance: A Four-Step Program

Posted by Andrew Bartolini on December 12th, 2013
Stored in Articles, General, People, Process, Solution Providers, Strategy

The Ardent Partners Contingent Workforce Management Framework has three major categories: traditional temporary labor, complex contract talent, and independent contractors. Each represents a specific set of capabilities, competencies, processes, goals and performance metrics. While each category in the framework certainly arouses interest from a variety of executives (including the Chief Procurement Officer), only one of the umbrella wedges can truly result in enterprise-shattering ramifications if mismanaged: the independent contractor (IC) arena.

While the “easy” part of effective IC engagement, management and risk mitigation is maintaining a “compliant attitude” towards IC-enterprise relationships, the hard part is the actual execution of compliance-heavy processes. Thus, we’ve outlined a four-step independent contractor compliance program that can be leveraged by all organizations to understand current risks, how to address them and the best strategies for doing so.

  1. Assessments, assessments, assessments. In any situation involving a misclassification case or federal audit, the first piece of the program that has typically faltered is the lack of real-time information and data. Thus, it is imperative that organizations understand the relative importance of building deep assessments regarding IC status and regularly-update those assessments as project scopes widen or state / regularly / federal laws and guidelines change. This assessment management piece should be the top priority for any IC compliance program.
  2. Maintain a history of all communication. Much like the top bullet indicates, a trail of information is key in understanding where ICs sit across the greater organization from a compliance perspective. Any effective compliance program relies on both assessment management and a consistent method of communication between those stakeholders that rely upon ICs. Is the sourcing process consistent and include hard documentation? With little notice, can an IC’s communication with the organization be pulled for review purposes? These are significant questions to ask in developing this component of the IC compliance program.
  3. Leverage the core foundation of talent management. I’ve spoken before about the benefits of looping in HR in any “total talent management” strategy, in which both full-time equivalents (FTEs) and contract talent are managed under the same centralized program utilizing both HR and procurement-esque processes. While organizations must be careful to not include performance reviews in managing their ICs (due to the fact that those reviews are meant for FTEs only and are usually one of the first), there’s some benefit to leveraging talent management strategies. The core component of talent management is linking talent to the achievement of business goals, and applying this thinking to ICs can help improve how contractors can be both effective…and compliant. The foundation of an IC compliance management program must not only ensure that contractors are leveraged in a proper manner, but also utilized in such a way that they are achieving project-based goals, as well.
  4. Understand that it’s not always a “black-or-white” scenario, so be prepared for the unknowns. To quote Donald Rumsfeld, organizations must “know the unknowns” in regards to managing their ICs. With ICs penetrating so many business units, geographical locations and enterprise divisions, there is bound to be a lapse somewhere in the management chain. There is often a “gray area” when it comes to IC compliance, as spinning a label on an IC-business relationship isn’t an exact science and there’s often room for interpretation. With this in mind, key IC compliance program execs must develop “worst-case” plans for dealing with misclassification or federal audits and build the framework for a proper response to avoid those dire ramifications so often experienced by leveraging this freelance workers.

Of course, one means of tying these four steps together is through the advent of IC compliance-specific technology. There are multiple solution providers that offer capabilities that organizations can leverage to manage assessments, communication, legal, and classification attributes. Randstad Sourceright, a provider of staffing, MSP, payrolling and “blended workforce” technology, offers a robust platform for both independent contractor risk assessment and compliance management capabilities. Their offering automates a variety of IC management aspects, including SLA management, assessment development and tracking, and an interesting feature that allows both the IC and the enterprise to complete portions of risk assessments (which helps to bolster risk mitigation).

The Randstad Sourceright IC offering also includes a stout-yet-user-friendly reporting dashboard that can help any stakeholder or executive drill-down into a plethora of IC-specific aspects (i.e. corporation-to-corporation agreements, pre-screen information, etc.). Randstad’s IC platform also allows users to “templatize” email and other forms of communication with ICs.

Stay tuned for a follow-up article on IC compliance that will further detail the role of technology in this viable component of contingent workforce management.


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The Independent Contractor Conundrum

A Primer for Contemporary Contingent Workforce Management

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