Does Your Company Use or Supply Contingent Workers? If So, Here Are Some Considerations.

Utilizing contingent workers can seem easy and seamless for your organization. Contingent workers provide some flexibility that a direct hire workforce does not. Steps to successfully utilizing a contingent worker include locating a worker, negotiating their rate, engaging them for a pre-determined length of time, and then terminating the worker's assignment when appropriate. As simple as it seems, there are many considerations when engaging or supplying contingent workers. To minimize the risk surrounding contingent workers your company may consider the following:

• If engaging the worker as a 1099 independent contractor, does the assignment meet the IRS test for Independent Contractors? See the IRS Worker Status Determination form here and a detailed IRS training manual on the subject can be found here. 
• Whether a worker is engaged on W-2 or 1099, does your company know the standards of relevant Federal and State agencies beyond the IRS? For example, see EEOC contingent worker guidelines here. Other considerations include ERISA and HIPPA. 
• Are contingent workers mentioned in your Employee Handbook? Handbooks may include language excluding contingent workers from standard benefits reserved for direct hire employees.
• Are your managers aware that contingent workers are covered under most of the same laws that apply to employees (including harassment, discrimination, and wage and hour laws)? For example, the State of Virginia provides many of it's managers with a guide to contingent workforce risk and can be viewed here.
• If your company uses contingent labor are those workers covered under your general liability insurance policy? Don’t take it for granted that they are… Additionally, ensuring that the staffing suppliers you work with carry the proper workers' compensation, general liability, and employment practices insurance can help to limit the risk of utilizing contingent workers. 

Emergent employs contingent workers you recruit, enabling your business to focus on it's core competencies. Emergent handles all employer responsibilities employment including legal, payroll, invoicing, insurance, tax, HR and workers’ comp administration for the duration of the worker's assignment. 

Misclassification vs. “Payroll Fraud”

As Federal and State agencies seek to narrow the tax gap, a new bill was recently introduced that puts independent contractor misclassification back in the forefront of the national labor and tax agenda.

Undeterred that two misclassification bills introduced in 2010 never made it out of Committee, the sponsors of the new bill are trying to drum up support  by characterizing misclassification as a form of  “payroll fraud.” – a term that invokes white collar criminality rather than an innocent oversight that is denoted by the word “misclassification”. It would appear that ignorance is no longer a defense in the eyes of the law…. 


A press release for the bill can be found here. The press release states "according to a study released in February 2009 by the Ohio Attorney General’s office, Ohio loses at least $160 million a year to each year from worker misclassification."

Should the bill pass here is what it would mean for businesses...

• Penalties for misclassification, up to $5,000 per employee, which could be staggering for the companies that are knowingly or unknowingly 'misclassifying' a significant amount of workers as 1099.
• It would be the one of the first federal laws where businesses must give newly hired workers a federally prescribed notice.
• The law would cover independent contractors who provide services through a corporation or an LLC and not just on an individual basis. 
• The bill would still allow companies to continue to pay workers on a 1099 basis – provided it is an appropriate relationship. 

-         Explaining the purposes of the new bill one of the sponsors states that the bill would “relieve the burden on American taxpayers who foot the bill when businesses” mis-classify workers. 

Read our post on 1099 misclassification for more information.

Social Networking Becoming More Important in Recruiting Workers

Social media sites like LinkedIn and Facebook are increasingly being used by staffing professionals to recruit and hiring potential candidates.

According to a recent SHRM survey, 56% of respondents said that they currently use social networking websites to recruit workers – up from 34% in 2008.

Recruitment professionals have certainly begun to realize the importance of social media sites as a key part of their strategy. In 2008, 45% of HR professionals said they had no plans on utilizing the social media as a method of recruitment, but now, this number has fallen to 21%.

67% of respondents stated their top reason for utilizing social networking tools is due to the fact it is less expensive than other methods of recruiting job candidates, and, as research shows, the recession has only helped drive up HR costs at most companies by over 11% from 2008 to 2010.

However, while most organizations have confronted rising HR costs since 2008, world-class HR organizations have managed to reduce their costs by more than 13%. These companies now spend nearly 30% less per employee, and operate with more than 25% fewer employees than they did in 2008.

It’s no coincidence that over the same period, the contingent workforce has also shown rapid growth. Last year alone, 26% of all jobs added by the private sector were temporary positions.

Using contingent labor saves money, according to 92 percent of recently surveyed companies that use temporary workers. They attributed savings of 9 percent toward using contingent labor.  

Research by the Human Capital Group indicates that one third of the U.S workforce is now comprised of contingent workers. This trend is unsurprising as Contingent Workers provide convenient, flexible, specialized skills that best fit the changing needs of the modern workplace.

Like the use of social media by recruitment professionals, the use of contingent workers looks set to go from strength to strength as companies increasingly value speed, cost savings and the flexibility that both contingent workers and social media tools provide.

AOL Being Challenged on Independent Contractor Misclassification and WARN act Violation

AOL terminated it's relationship with
thousands of freelancers recently.
However, some are claiming they should
have been employees. 

Last week, AOL terminated its relationship with thousands of freelance writers they had classed as independent contractors - a move that followed shortly after their merger with the Huffington Post a few weeks ago.

Some of the writers are now claiming that they should have been treated as full-time, internal employees - which would have enabled them to have been covered by the WARN act. However, AOL claims that the WARN Act - where a company must provide 90 days notice before a mass layoff - doesn't apply to contract workers. 

Even so, there are concerns that many of the freelancers AOL utilized could potentially be construed as full-time employees under the act, due to the nature of the responsibilities and full-time hours some of the freelancers worked at the company. 

AOL insiders claim that AOL held a series of calls with freelancers to address their questions. Several things came up - one freelancer noted that they worked full-time hours, while another pointed out that her duties were identical to those of an AOL News staffer who was recently laid off. This is the kind of thing that could raise legal doubts about AOL’s claim that the WARN Act doesn’t apply to contract workers.


The WARN Act requires employers to provide 90 days of notice before a mass layoff, defined as a reduction in workforce by 250 jobs (or 33 percent of the total) at one site. If it’s found that some of AOL’s freelancers worked full time and/or held similar jobs/duties to full time staffers, AOL could find themselves in a challenging situation classifying the workers as freelance or contingent. 

Source: Forbes.com

Latest Figures from Bureau of Labor: Temp jobs up by 28,800 in March

The latest figures from the Bureau of Labor Statistics show the U.S. added some 216,000 new jobs in March signaling further recovery for the American economy. Overall, the U.S has seen around 1.3 million jobs added this year and the nation’s unemployment rate fell to 8.8% last month.

Here’s where hiring happened during March:

Healthcare, Leisure & Hospitality and Temporary Labor were the three industries where hiring increased significantly last month. 

Government, Construction and transportation sectors remained more or less unchanged.

•  Manufacturers (+17K) were hiring again in March – possibly due to events in Japan

•  Temp positions (+28.8K) continued to add workers in March

•  Leisure & Hospitality (+37K) was booming as consumers took the family out to eat – a first step into the spend as consumer confidence starts to eke out of its recession lows. Restaurants and bars added workers (+26.5K) like crazy last month

•  Retail (+17.7K) employment was up during March.

 •  Financial firms (+6K) saw a slight bump in March. There was an uptick in hiring in the Real Estate (+9.5K) subsector as the volume of renting/leasing has increased.

•  Health care (+36.6K) continued to add workers, significantly better than the average month (+24K) from the past year.

 •  Tax season has been busier than usual this year with Accounting/Bookkeeping services (+20.2K) adding workers in March

Two in Five Firms Use More Independent Contractors

A recent survey* of HR execs found that 41% have used the services of independent contractors over the past two years. This shows that companies are starting to re-think  the tactics they employ to align their workforce with their business objectives – and that they are also starting to enjoy the flexibility that hiring independent contractors provides. Contingent workers make it easy for companies to scale their workforce up or down to meet seasonal or project based demand.

However, it’s not just businesses that are initiating the change. It’s the American workforce itself. The two biggest groups of people in the U.S workforce today – the baby boomers and Generation Y – are they key drivers of the growth of the contingent workforce. Research found that 80%* of baby boomers said they planned to work as contractors past retirement. The same research also suggested  that Gen Y employees are likely to change careers approximately 10 times before the age of 40 – making contract work a very attractive option for trying out new career opportunities.

All in all, it looks like the contingent workforce is set to continue to grow - and be beneficial - to companies and workers for a long while to come.

* 1.) Right Management survey
* 2.)  Nielsen survey