The Relationship Between IC Compliance and Spend Management


“Supply Chain Celebrity” Jason Busch has a great blog about all things supply chain related called, “Spend Matters”. They often have good information about strengthening indirect or services procurement. And the name of the site gets it right. Spend absolutely does matter. Spend management is the way companies control and optimize the money they spend on all procurement activities, with the goal of yielding savings to their organization while increasing quality. So why does spend management matter to the workforce management professional?

Companies have recently grown much more interested in Independent Contractor (IC) compliance to avoid facing the significant fines and penalties levied against organizations like Uber, FedEx and ViaSource Solutions for improper IC classification. Read our recent post about their travails here. Sounds like a lot of hassle that could just as easily have been avoided doesn’t it? So how can you positively impact your organization’s spend management programs to avoid meeting a similarly costly fate?

Ensuring that your workforce is properly classified is a way to control your organization’s spend is a great start. Avoid needless legal fees and penalties up front by ensuring your IC’s are classified according to IRS, US Department of Labor and related state agency standards. Review our recent post on how to leverage technologies like VMS software to properly plan for IC compliance as a starting point. Also, check out most of the posts we issued in March 2016 for a number of angles, ideas and strategies for ensuring proper management of IC spend.

Beyond control of spend, there are things you can do to optimize the spend on independent contractors within your organization. To optimize the IC spend, consider creating a talent pool of independent contractors providing similar services, and create a competitive environment for them to bid upon the work. For example, if engaging photographers, bloggers or graphic designers solicit quotes or bids from the contractors prior to engaging them to ensure the best prices for like-kind resources.

Another solid practice involves considering the total talent picture. Do you need to hire a full time employee for a 6 or 9-month project? Often, independent contractors are able to complete project-based work with a higher level of expertise in a given area. Engaging an IC in these cases allows your organization to avoid the significant costs and efforts associated with recruiting and providing benefits to a full time employee engaged to complete the task required. Plus, ICs are no longer paid once the project is complete. Whereas a full time hire might become a redundant or unneeded resource after the project is done. No need to continue to pay the salary and benefits of an extra resources.

For more information on how to better control and optimize IC spend in your organization, reach out to the experts at nextSource for a consultation.

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