Compliance in the Gig Economy

Rear view of young woman using a telephone

OCEG has a new illustration on Balancing Your Compliance Program that shows the value of having automated workforce compliance management. It’s a great resource showing how to get better results with your employees. But who besides full-time employees are part of the workforce in the current economy?

Today, companies of all types and sizes are using contingent workers at a greater scale than ever before. Beyond the traditional “outside contractor” who might perform a discrete time-boxed task, the contingent workforce, as often as not, now operate within an organization just as if it is part of the employee base. Professional services might be supplied under a statement-or-work agreement, a freelancer with unique skills might be retained through an online labor marketplace, or traditional temporary workers might be hired through a staffing agency. Entire departments or projects might be run by contingent workers.

References to the “gig economy” abound, with articles about how this task-based approach to work enables greater flexibility for both the workers and the company engaging them. On demand digital platforms now support the search for workers and for work. Economists note the globalization of the contingent workforce and predict an even more rapid pace of growth in this sector.

  • In 2015, the U.S. Department of Labor found that 65 percent of employers anticipate an increase in the use of flexible staffing arrangements to meet their future talent needs.
  • In Deloitte Consulting’s Global Human Capital Trends 2015 whitepaper, more than half of respondents said their need for contingent workers will keep growing over the next three to five years.
  • A recent survey conducted by research firm Ardent Partners found that about 30 percent of company workforces are now made up of non-full-time employees, growing to 50% by 2020.

Quoted source: peoplefluent.com/blog/contingent-workforce-continues-to-grow

As a result, we see growth in offerings of technology systems to help companies manage compliance with the rules and regulations that define what an independent contractor is as distinct from a regular full time employee. This ensures compliance with tax, wage and hour and other employment related rules. But is that enough?

Is the company adequately protected by addressing the regulations around use of contingent workforce? What about the compliance risks that the contingent workers and their tasks create?

Using contingent workers can save money, offer flexibility and bring unique skills to your organization. But beyond the direct compliance risks that arise from misclassifying contingent employees, the full range of non-compliance and risk problems that can occur during operation of the tasks assigned to these employees must be considered.

Regulatory Compliance – If they are engaged in any activities that are subject to regulatory compliance requirements or company policies or procedures they need to have communication and training.

Operational Risk – If they are engaged in critical tasks can affect business continuity, quality control and operational schedules they present operational risk that must be adequately managed.

Information Risk – If they handle confidential data they present an information security risk and controls must be put in place.

Even if the contingent workers are provided by a third party supplier, in today’s world of fast paced information, there is a huge reputational risk associated with any significant data breaches or instances of regulatory non-compliance. Penalties and costs of remediation may also fall at your door.

It should be obvious that the contingent workforce must be managed appropriately to ensure they receive communications and training needed to address your risks and compliance requirements overall. They must be integrated into the company culture and understand the established policies and guidance around risk tolerances and limits. Their roles and tasks must be clearly defined so that they receive the same consideration as employees engaged in such roles and tasks. A clear record indicating ownership of the relationship with each contingent worker, defined roles and tasks, communications, policy distribution, attestations of understanding, and risk-based training must be created and maintained.

Using contingent workers has its benefits, to be sure. But if that workforce is not managed properly, the costs to your company will far outweigh the benefits. As in every aspect of your operations, balancing the risks and rewards is essential, and having an effective management system in place is critical.