Corporate Blog

The Benefits of Independent Contractor Compliance

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There is a lot said in the staffing industry about independent contractor compliance, and one of the most cited emotions that companies use to induce action regarding compliance is fear. While it is reasonable to fear an IRS audit, it is better to have the processes in place to ensure all of your resources are categorized correctly.

In a recent decision by the Court of Appeals in California, the Court concluded that an employer within a supply chain may be liable if they had knowledge of the misclassification of workers, even if they were not the employer who made the determination. This means that if an employer partnered with a supplier who misclassified one of their contingent workers, then the employer is liable for their supplier’s mistake.

These risks and possible pitfalls could be happening to any company that engages suppliers in a business relationship without the proper processes in place.

While there are certainly risks involved in employing independent contractors, successful business operators know that there are solutions to internal problems that expose companies to these risks.
This is why independent contractor compliance programs have been growing rapidly, as companies have found the value in maintaining highly flexible workforces. Creating a program that enables your contingent workforce to run efficiently and seamlessly within existing HR plans not only creates cost savings, but increases efficiency.

What are some of the benefits of independent contractor compliance programs?

Compliance
Whether it’s misclassification, insufficient insurance, or rogue suppliers, staying compliant is critical when facing governmental audits by the IRS. Each year the IRS loses billions in revenue from unpaid taxes as a result of misclassification. In recent years, they have stepped up their efforts to recoup these losses by auditing your business’ books. Through an IC compliance program, the compliance risks and penalties associated with improper classification can be avoided through partnership with a company that specializes in classifying and engaging ICs. Studies have shown that companies who deploy IC programs achieve a 56% higher rate of compliance.

Productivity Management
Eliminating time-consuming processes can significantly boost a company’s productivity and, with an IC program, that is no different.
Through automated technologies used to manage ICs, a lot of the administrative duties that are associated with engaging ICs have been eliminated. Thus, key stakeholders have more time to devote to critical projects and day-to-day duties.

Cost Savings
By eliminating administrative burdens and liabilities, companies experience heightened cost savings—money that they would otherwise have been spent on overhead.

Visibility
Providing the ability to manage rates and analyze IC-related expenditures, an IC program gives its stakeholders visibility into the expenses, profitability and contract length, while also offering an avenue for seamless re-engagement.

Want to learn more about mitigating risk and increasing productivity? Click here for our latest presentation, “Three Best-in-class Workforce Strategies.”