Change can be a scary thing. In our modern world we have the ability to effect and control things that would have seemed like science fiction not that long ago, but two things we have yet to figure out how to control are time and change. They happen whether we want them to or not. Whether it be the seasons, our age, technology, or tradition. Look out the closest window from where you’re reading this; it’s happening right now. Most of us fail to notice daily change and even less find the time to think about the big picture. Tasked daily with the duty to fulfill the needs and requirements of our jobs and busy lives outside of work it’s easy to forget to stop and think about change in the context of the big picture. There’s mortgages, kids, education, retirement, and (hopefully) a little vacation and social activity to worry about as well. However, it’s long term and big picture thinking that keeps us motivated, helps us shape and sharpen the daily decisions of our lives, and give us the ability to remain focused even through short term pain or discomfort (See: that fitness plan). Change, both large and small is a healthy and natural part of our human existence. So, as we’ve continually heard that a business is only as good as the people it employs, and corporations are in fact people under the law, then perhaps it’s time to start applying the rules that work for people, to enterprise.

In an interesting piece on Strategic Sourcing, that is, a specific plan of action regarding the procurement and hiring of top talent, Argentus Talent Acquisition poses the question: Who is better to Effect the Toughest Changes in Strategic Sourcing? Your Permanent Team or Third Party Contractors? (Go here for the full article) They deduce that the contractor/consultation model allows for greater opportunity for change within your organization by allowing for a fresh perspective and minimizing the personal and political hurdles that can stop an organization from moving away from the status quo.

If we apply this same line of thinking to the larger context of Contingent Workforce Management, it may be time to ask: When is the last time your enterprise truly thought about the long term goals regarding your Contingent Workers? And are small steps being taken daily to effectively embrace that strategy? As we’ve already discussed, change is happening, the only variable is how we respond to it.

 

Ardent partners are set to release new research later this month that indicates that Contingent Labour is set to rise 30% over the next three years, a figure that they state “Accurately represents the growing reliance on the non-traditional workforce.” If you follow Contingent Labour, deal with mitigating risk on independent contractor compliance, or Talent Management and Procurement, you know the stats already.  It’s very easy to get lost in them. While effective, they can also over complicate the matter at hand. Enterprise at its core needs to innovate, it needs to be adaptable, and it needs skills present to make those first two things achievable. If the big picture is growth and competitiveness in the marketplace, then it’s a major priority to always make sure the base needs of innovation, adaptability, and skills are constantly being met.  Even if the path to get there requires some short term pain or discomfort.  (See: that fitness plan again) More and more, it is Contingent Labour that is being utilized to meet these needs—and while cost savings is usually the most immediate and alluring statistic in moving an Enterprise into this type of model, it can’t be the only thing. Sure, in the short term, it’s easy to be won over by the idea of utilizing IC’s (independent Contractors) to have flexibility in staffing, or save money on taxes and entitlement & benefit programs, but cost savings needs to be looked upon as daily actions of a larger goal, not the entire plan. Or, as we’ve looked at it previously, the small change that sets up the big change.

Long term change, requires long term strategy. If Contingent Labour, is at the core of your business than it’s time to start putting the plans in place to manage it. Whether it be through an Administration or Payrolling Service for your Contingent Workforce, Managed Services, or through Consulting. Not thinking long term about the inevitable change, management, and caliber of your Contingent Workforce may get you through today, but perhaps it’s time to turn that age old interview question on your own Contingent Workforce Management plan. Where do you see it in 5 years? How about 10?

Amidst a flurry of political and social controversy, the Olympic Games are underway, and for the international firms responsible for staffing the Sochi Games, they hope it’s all downhill from here.

Sochi’s three official staffing Suppliers: Adecco Group, Kelly Services, and Russian firm Exect Business have put three years of work into building the Contingent Workforce for the Olympic Games and the sheer numbers are staggering. The total number of temporary workers for the games may top 150,000 people, and that isn’t counting the roughly 25,000 volunteers that will be lending a hand to make sure the games run smoothly. Among those 150,000 workers 65,000 are skilled workers. These skilled workers were culled from a worldwide recruiting search, offering the opportunity for the organizing committee of the games the chance to hand pick expertise from the very best the world has to offer, as well as the chance for those skilled workers to show off their talents in front of an audience like no other. On paper it’s the perfect trade off, but somewhere along the way things went off the rails. Sochi-2014-Company-Olympics

Vancouver temporary worker Johnnie Balfour’s exposing blog posts and statements about the treatment of himself and his team at the games has been well documented. (Go here to catch up) Even an entire twitter feed, @SochiProblems emerged to document all the issues journalists and athletes alike had encountered upon first arriving in Sochi. Littering news feeds around the world with pictures of brown water and unfinished construction. While these images weren’t exactly the image that the staff and Olympic Committee wished to have us see, the big picture moment of truth for the staffing agencies of the games going forward may not be boiled down to pictures or politics. It may boil down to the larger issues of transparency and control.

For those in the business of the Contingent Workforce this is an issue of risk debated and managed daily, as the decision to either outsource or direct source (hire from within) is weighted against the factors of cost, availability of resources (skills), and time. As the world’s eyes turn to Sochi for the games, administrative/payroll miscues and a lack of communication is not the way to put our (those in the contingent workforce solutions business) best foot forward. In this case, while a pool of extremely talented and eager workers were recruited and gathered for the games, it seems as though when they got there, the communication regarding their income was (at least according to Balfour) left open to interpretation . There is nothing that will turn an IC (independent Contractor) off faster than the notion that they’re not getting paid, and in Balfour’s case, seemed to be the last straw.

As an Employer and a Business you only get one chance to make a first impression with your Contingent Workforce and Independent Contractors. Making sure your T’s are crossed and your I’s are dotted is an absolute must in an industry where word travels fast.  If your goal is to recruit and retain top talent, miscues are simply unacceptable. In the case of Balfour, the simple and affordable option of an IC Compliance and Payroll service could have been made available to figure out payment options and schedules before he even left for Sochi, and in the process, saved the staffing agencies responsible for 150,000 workers the potential firestorm of being made to look as a willing participant in the headache inducing and livelihood threatening payroll practices of the Sochi Games.

There is truly no replacement for transparency and efficiency in this business and the sheer size and publicity of this only goes to remind us that even a small administrative miscue or oversight can become a giant problem.    

If all goes according to plan when the games close on February 23rd, viewers will hopefully be inundated with images of the athletes’ fists in triumph, their tears in defeat, and memorable moments of sportsmanship and diplomacy. Not pictures of brown water, unfinished construction, and the supposed mismanagement of temporary workers. If the stumbles in the weeks leading up to the event are any indication, the staffing agencies may be the ones in the front row cheering the loudest for the athletes to steal back the spotlight.

Attend any recruitment or Human Resources conference and you’ll know that these industries are filled with mind boggling industry jargon. It can be overwhelming to try to understand all of it. One term that is particularly confusing is “co-employment”; however organizations face huge risks by not understanding this concept and taking the necessary steps to ensure they are protected against it.

Co-employment occurs when two or more legally separated employers share potential or actual employer responsibilities with mutual employees between the two organizations. It means that the two companies jointly employ the worker.

While this situation can be intentional, employers do not want co-employment situations when they are hiring contract workers. Employers do not want to be responsible for employment responsibilities and liability for their contingent workforce.  However, while employers may think that their agreement outlines that the contract worker is self-employed, the CRA may actually find that a co-employment arrangement actually exists.

What happens if the CRA does find that your organization has a co-employment arrangement with your contingent workforce? The classic example of the consequences of co-employment is a case in which Microsoft had to pay $97 million to a group of temporary workers that were deemed employees. Because these people were deemed employees, they were therefore entitled to benefits and additional pay, and Microsoft had to pay these workers what they were owed, along with a hefty fine. Other organizations could be faced with similar penalties if the CRA finds that their contract workers are actually employees.

This is a huge risk that companies need to address. Co-employment sounds like another industry buzz-word, but employers cannot afford to ignore or misunderstand the consequences.  The CRA has recently begun to increase its investigation into co-employment and contingent worker classification, and so you need to make sure that your organization is compliant with employment laws in order to mitigate your risk.

For more information about how you can mitigate your risk against co-employment, visit the CWS website or contact:

Christina Fabugais
Contingent Workforce Solutions Inc.
Direct Phone:  416-642-9077
Toll Free:  1-866-837-8630 x9077
Email:  christina.fabugais@cwsolutions.ca

Hiring contractors is generally deemed necessary in most organizations for a variety ofreasons. The main reasons for hiring contractors are: where a company requires external resources to augment a core group of internal employees for a set period of time or when a company lacks a certain set of expertise that cannot be found internally. In any event with the Demographic shifts and the war for highly skilled talent still alive the hiring of contractors is a growing trend not a declining one.

Unfortunately many HR folks still may not view the use of contractors as essential. In fact many HR professionals are often unaware that hiring contractors is happening right under their noses. This is often since contractor hiring takes place at the decentralized line manager level and is handled through an invoicing scenario vs. a HRIS system. Now due to the volume of expenditure on contractors there is a growing trend of Contractor Program Management becoming the domain of Procurement versus HR.

I am hopeful that HR’s prerogative will soon change since there is a growing need for contractors to be included in companies overall Talent Management strategies vs. seen as an external short term occurrence. With this need in mind, HR and Procurement will need to work together to manage this essential source of Talent as partners in order to balance the spend management vs. talent management dynamic.

Most of the information published publicly focuses on how contractors can ensure that they are to be deemed “self employed” vs. an employee and not much has been published on how employers can help protect themselves and mitigate the risks of co-employment (i.e. having your contractors deemed employees of your company by CRA or another government body).

In saying that, employers should not dismiss information written so far when developing their policies around the hiring and usage of contractors. These writings are good “tests” that will help in understanding some of the clear differences in day-to-day working scenarios. Also, the more that both employers and contractors do to ensure proper classification of their employment status the better.

First let’s understand why employers would want to ensure that their contractors are NOT deemed employees by CRA. The following are some of the consequences or risks that employers face if they have the unfortunate situation of having their contractors deemed employees:

1.Government Payroll Deductions: Your Company would be responsible for the Government Payroll deductions. This not only includes the EI (Employment Insurance) and CPP (Canadian Pension Plan) retro actively, but also the Income Tax deductions that you as the “employer” would have been responsible to withhold. Therefore if that “Consultant” happened to be aggressive on their tax returns you may be deemed liable by the government. In most cases this equals big dollars.

2.Law Suits for Employee Benefits: Your Company could be liable for the retroactive benefits that that those contractors would have been eligible for if they were employees of the company during that period of time (i.e. benefits, termination, pension, etc.). The precedence setting case on this topic was Microsoft who got hit for over $97 Million in benefits in addition to the ongoing legal cost of defending themselves.

3.Reputational Risk:This would tarnish your company’s brand that it portrays in the market place. Headlines reading “improper accounting practices” or “leaves employees hanging without unemployment insurance” are generally not the branding that any company seeks out.

Many of you are saying to yourselves OK these are only risks if we get caught.

Guess What?

With the economic uncertainty, these are the times that there is a higher probability that you will be caught.

With people being let go and contractors being terminated this is the time when your “contractors” are applying for employment insurance and it is at this time when both the contractor and the government become aware that the situation may have not been managed properly and the government investigation starts.

If you currently do not have a contractor management policy in place I would recommend you have one in place before a CRA or EI audit takes place. It helps to have documented procedures and processes in place to display that effort has been taken to manage things properly.

To help you define or enhance your policy to mitigate risks when hiring and using contractors the following are some best in class ideas:

NOTE: Before getting into the checklist the best advice I could give any employer would be to: BE ORGANIZED and BE DISCIPLINED!

It’s great to develop policy but if no one takes them seriously, ensures completeness of process and your process is made up of lots of “exceptions” you are not doing anything to ensure that you will come up clean during an Audit. Ideas that could help reduce the Employer Risk of Co-Employment :

1.ContractDocumentation–There must be a documented contract in place (signed and stored in a secure place) that clearly outlines the relationship, the responsibilities and meets the test of defining an independent contractor relationship.

2.Contractor Classification–Within Canada there are various classifications of “self employed individuals including incorporations. In actual fact companies can deal with all classifications of contractors as long as they are administered properly. Having all of your consultants classified as incorporations is positive but not bullet proof in proving separation. There have been many cases that CRA has disqualified an incorporation based on the situation. From a talent management standpoint only dealing with Incorporations may restrict your company from dealing with certain resources that you would like to engage with. Key points to ensure your contractors are classified properly include having proper proof of the business entity and associated tax numbers and ensuring that proper payroll remittances are being done.

3.Proper Government Payroll Remittances–One of the keys to mitigating risk is to ensure that proper payroll remittances are being completed. If the Government is receiving its remittances then there is no reason for them to investigate a situation. In saying that it’s important to monitor that the contractors or the 3rdparty that you have engaged to administer the contractual relationships to ensure they are making the proper remittances on the contractor’s behalf. Having the contractors on your own employee payroll is a big NO NO. Although it will allow you to monitor proper government payroll remittances it will be potential evidence that this resource was acting as more of an employee than a separate contractor. Auditing each one of your contractors payroll accounts is burdensome and not a realistic option. Generally 3rd party companies that specialize in providing contractor and payrollingsolutions are your best bet to ensure completeness and real-time reporting. As an FYI these companies are not the ADP’s and Ceridian’s of the world although they may tell you they may be able to do it for you. Running them through ADP or Ceridian without a 3rd party administering the contracts is similar to running them through your own company payroll and should be avoided.

4.”Looks like a Contractor, Smells like a Contractor” Test -I will refer you to my previous post on this string that described some of the things that can define the day-to-day working relationship i.e. tools used, direction given, profit or loss risks, integration with your employee workforce, etc. Although these are often written to help guide the contractor it’s important to that these types of issues are addressed and adhered to when creating employer side policy.

5.Contractor Commercial Insurance -This sounds like a weird one. But it is actually a very clear test of self employment that gives proof to a self employed mentality of a contractor. If the contractor has paid money and taken the time to obtain commercial liability insurance and or errors and omissions insurance, the government sees that as a true effort in being made to be a separate enterprise. In saying that, in my experience I know only a very small percentage of independent contractors that have insurance or are willing to pay the large premium that this type of insurance may cost. Often some 3rdparties or staffing agencies will offer umbrella coverage under their policy. Although this sounds good it does not help mitigate the risk of co-employment. The contractor must have its own insurance to protect the employer and I advise that employers gain proof of this insurance when signing up a contractor. As a solution a few innovative 3rd party payrollingcompanies may be able to facilitate contractors in obtaining separate insurance at reasonable premiums and then tracking the proof of this insurance as part of their overall process.

6. Documented proof of Contractor Classification Education–One of the reasons the Government has put legislations in place concerning co-employment was to protect contractors/employees from unscrupulous employers that hire the resource as a contractor vs. employee in order to avoid paying taxes and benefits. When a process of educating the contractor is well documented to prove the contractor was well aware of the situation, the pros and the cons, as well as their responsibilities etc. the risk of being deemed in the wrong is lessened and it should hopefully help in avoiding an Enterprise wide audit of ALL contractors across the organization.

7.3rd Party Representation of Independent Contractors-One of the cleanest ways to ensure a separation between your contractors and your company is to have a 3rd party represent them and administer their contracts on your behalf. This passes the contractual employment relationship to the third party. In doing this please BEWARE that passing this responsibility on to a company that is not properly administering the contracts or completing government payroll remittances correctly does not protect you. Without proper administration and remittances as well as complete proof and documentation of the separation, CRA and other government bodies will look at the final end-employer (that usually has the deepest pockets) to investigate. Good 3rdparty firms will advise you on policy and methodologies to ensure risk is mitigated and follows up to manage the contracts and payrollingto ensured a disciplined complete approach is in place.

Whatever you decide to do –it is also wise to seek the advice or approval of appropriate legal counsel within your organization –every company is different and your legal counsel is there to advise you on what works for your organization.

When redesigning a Global  recruitment and staffing process there is a rule of thumb: Policy defines process! When you impact the policies you impact the process and how it should be executed.  Whether it is full time or contingent workforce policies, they are written to create consistent practices and protect the organization Country by Country.  Below is a list of articles that are helpful when considering different types of employment scenarios inside the organization. Additionally it begs the question how best to manage these changes. I always appreciate the reality check and hope you do as well.

North America

PEO trend in small to mid-size employers
Dykema Gossett PLLC USA – August 31 2009
However, for purposes of the Fair Labor Standards Act, the courts have determined coemployment status by applying an economic realities test, which considers (1 

DOL and IRS to scrutinize misclassification of independent contractors
Barnes & Thornburg LLP USA – April 26 2010
… In addition to the DOL, the Internal Revenue Service (IRS) will be scrutinizing independent contractor arrangements. As part of …

New $25 million blockbuster – coming soon to an employer near you!!
Strasburger & Price LLP USA – April 19 2010
in confirming the proper classification of its workers as contractorversus employee  the factors in classifying a worker as an employee orindependent contract. 

The Department of Labor (DOL) has been given funds and a clear directive from the President to step up employee misclassification enforcement efforts. U.S. Secretary of Labor, Hilda Soliz, has announced a new program to advise workers of their labor and employment rights. The program, called “We Can Help,” was launched last week. The We Can Help website provides a toll-free hotline for an employee or contractor to raise questions or concerns about how she is being paid. The worker is promised confidentiality and undocumented workers are protected from immigration enforcement for complaints about wage violations. To aid its efforts in getting the word about the We Can Help program out to workers, the DOL has teamed with various employee advocacy groups, including the AFL-CIO and others to educate workers. Plans include distribution of litera…

United Kingdom

Equal pay for temps
DWF LLP United Kingdom – March 25 2010
Ahead of the implementation of the Agency Workers Regulations in October 2011, Asda and Unite have struck a deal that will give temporary agency workers in 

Singapore

MOM issues “Tripartite Guidelines for Re-employment of Older Employees”
Allen & Gledhill LLP Singapore – March 30 2010
On 11 March 2010, the Minister for Manpower Mr Gan Kim Yong announced the finalised set of Tripartite Guidelines for Re-employment of Older Employees (the “Guidelines”) at the Committee of Supply Debate.

Sweden

Sweden – Lower rate of increase in the number of unemployed

According to original data, published today by Statistics Sweden (SCB), 448,000 persons aged 15 to 74 were unemployed in March 2010…

What does this all mean to me? ( I know you are wondering)

There is no such thing as ONE global process.  There is such a thing as a global framework, however the HOW will change by country. I call this A Global Framework with localized practices. Think of your technology as the vertebrate and the function that must perform according to country requirements. (Even the technology must meet country standards!)

Full-time recruitment

1.  Education

2.  Expat Management – Educating managers who go abroad what they can and cannot do, based upon country legislation and
policies.

3. Recruitment process and benefits discussions based upon geography

4. Recruitment on-boarding processes

5. New program’s to support retiree’s

Contingent Workforce

1.  Managed services as we know in the United States is not the same when you go across the pond

2. Supplier management as a common framework will have a different RASIC chart (roles and responsibilities chart) by country due to legislation.

3. Unemployment rates impact to supplier resume submittals.

4. New programs to support retiree’s.

Yes there is more that can be added to this list, but it goes to the saying policies drive process.  Therefore making recruitment and staffing one of the most misunderstood function both internally and outsourced today.

http://wp.me/pS7VR-1d

I recently joined Brightfield Strategies, the premier consultancy in contingent workforce strategy. Colleagues are asking WHAT IS IT YOU ARE DOING TRACEY?   So I thought I would share a part of what we do at  the firm, because learning the different perspectives that the team offered, had an impact on my thinking.

I have enjoyed my work on the design of our audit practice. I work with Frank Lyons, a practicing attorney in the contingent workforce space, and Erika Halverson, a consultant with experience in contingent workforce management.  Combined, the industry experience on this team enables us to analyze an issue from multiple perspectives and create a set of solutions that can bring a sharp perspective to the details that can make or break a contingent workforce management program.

Today we asked ourselves WHY companies reach out to Brightfield.  We honed in on uncovering the risks that lurk inside your contingent workforce program.

As a team we decided to share a few elements in the management of your contingent workforce program where you may find goblins lurking:

  • Staffing and MSP Contracts
  • 1099 (IC Compliance)
  • Policies and practices
  • Temporary worker assignment longevity
  • Contingent labor documentation (Non-employment, IP and  Confidentiality agreements)
  • On-Boarding and Off-boarding
  • Insurance
  • Utilization of Retirees

Two risks I will discuss in greater detail are seemingly simple items, but according to Frank Lyons can expose a company to significant risk.

Documentation

With any audit, we look at documents, processes and policies that protect the client.  In addition to any specific items identified by the client, our Audit team makes sure that each individual temporary worker has in place:

1. Non-employment acknowledgement

2. IP assignment document

3. Confidentiality agreement

The non-employment acknowledgement requires a temporary worker to state in clear, unambiguous language that s/he is NOT a client employee.   This provides extra protection around benefit taxation risk as discussed in the Staffing Industry article at: http://bit.ly/9nBpcf

IP assignment protects a company from losing intellectual property when a temporary worker walks out the door at the end of an assignment.

Finally, the confidentiality agreement offers a client some assurance that proprietary information disclosed to a temporary worker will be protected both during and after the temporary worker’s assignment has ended.

This documentation should be kept on each worker and should be available through your MSP or the Contingent Workforce Program.  The loss associated with not having these documents accessible is typically unknown until an issue gets escalated, and by then it’s usually too late to look for other relief.  The reality is, why take the chance?

Retiree Utilization

Scenario: An employee retires or takes a package from the company, than returns to the company as an independent contractor.  If the retiree is not properly classified as a valid Independent Contractor, your benefits director would be more comfortable sitting directly on top of Eyjafjallajökull. (By the way, our attorney spent two-and-a-half years in Iceland and is one of the few people in North America who actually knows how to pronounce the name of the volcano that shut down half of Europe’s air space.  An added Brightfield benefit!)

Properly deployed, retirees are a true source of talent.  Many in the MSP world are building out retiree portals leveraging the VMS system. How these retirees are paid as contractors can sometimes be obscure. Especially if it is not carefully controlled by contract, and if random audits are not conducted regularly, a company can find itself unknowingly exposed to enormous potential liability.  A retiree contracted through an agency to his or her old employer, where the agency allows the worker to be a 1099, exposes the former employer to unimaginable risk. The risk is greatest if the retiree is receiving retirement benefits from the organization and is NOT a valid 1099.  If you think you may have this exposure, Brightfield suggests you consult with qualified benefits and tax experts immediately.  In the opinion of our counsel no amount of risk is acceptable.

The fact is there is risk in everything we do.  Contingent labor is projected to be 25% of the workforce in 2010, so managing the special risks associated with this workforce segment is an essential element of running an effective program.   Our audit leaders recommend first understanding the exposure and risk in your program and then determining the best strategy to managing the risk.

To learn more about contingent labor risk, Staffing Industry Analysts is hosting the Contingent Workforce Risk Forum in May. See their websitewww.staffingindustry.com or send me an emailtfriend@brightfieldstrategies.com.