Compliance: How to Minimize Exposure When Employing Contingent Labor


In part one of this series, we examined steps organizations can take to minimize exposure to risk in the process of hiring contingent labor. This post, part two of the series, will explore the steps an organization can take to mitigate risks inherent in employing contingent workers of all varieties for the duration of the time these resources are a part of the overall workforce. So let’s take a look at some best practices for minimizing exposure.

As opposed to the myriad legal and regulatory risks we focused on in part one – risks inherent in classification, on-boarding processes, benefits provision, tax implications, etc. – this installment will focus on some of the non-regulatory risks. It is important to remember that the purpose of leveraging multiple types of non-employee labor is to drive value for the company. Yet, some of the following risks can really sap the effectiveness of contingent workforce usage and should be known and avoided.

Productivity Risk

According to HR Hero, “some employers express concern that workers such as independent contractors and temps who aren’t dependent on any particular employer for their livelihood or motivated by normal advancement opportunities will be less loyal, less productive, and more apt to produce lower quality work than regular employees.” To combat this perception and protect productivity, it is important, whenever possible, to identify any existing pathways to full time employment, thereby providing contingent workers with some incentive to put forth their best efforts in pursuit of a better position.

Status Risk

For companies that are not offering a temp-to-hire pathway as described above, it becomes very important to ensure the contingent workforce is treated with respect and dignity.  Although classification concerns may preclude employers from including contingents in moral-boosting activities, a little bit of recognition goes a long way. Consider devising programs to focus on the achievements of contingents and their collective contributions to the organization.  A simple $10 coffee shop gift card or other token of appreciation can help avoid feelings of “second class citizenship” amongst contractors. Just make sure any such programs are well delineated from those engaged for full time workers.

Confidentiality Risk

It is very easy for non-employee workers to do a stint with one organization and then, by virtue of their particular skill set, accept a temporary role at a competing organization once their contract is up.  The only hedge against the potential for intellectual property leakage is to have a strong policy governing the assignment of contingent labor to only non-core functions. A simple core vs. non-core assessment should be performed for every role the company intends to fill with contingent labor.  

Turnover Risk

In organizations lacking strong and replicable training practices for their contingent workforce, there is almost always a higher than acceptable level of turnover. This leads to much higher costs associated with training as well as a drag on productivity as continuity suffers on projects where workers are always coming and going. Engage your contingents early and often and ensure they are clear on what their role involves and how they’ll be measured for accountability. This activity ties in well with the suggestions we provided in terms of mitigating status risks as well.

Best practices for employinh a contingent workforce includes:

  • Procuring the right workers
  • On-board, provision, and never lose sight of them
  • Train and engage to increase effectiveness
  • Communicate often
  • Compensate correctly
  • Remain compliant at all times

In short, fielding a contingent workforce is not just about convenience and cost savings for the organization. It is about filling each and every role – from the critical to the ancillary – with the best possible resource. Done properly, it makes for a dynamic and successful business.  Done poorly, it is a source of more struggle and expense than it is worth. Make sure you’re doing it right – talk to your nextSource representative for help.

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