Security breaches by improperly vetted consultants … novices masquerading as skilled professionals … discrimination lawsuits … worker misclassification penalties and fines … the list goes on. Employment is risky business, and the consequences of hiring missteps are serious.
With an astonishing 54 million American workers now freelancing full- or part-time according to a 2015 survey, companies doing the hiring are scrambling to find the proven, trustworthy talent they need in order to thrive. What’s more, the thicket of complex labor and tax laws puts organizations that use independent consultants at risk of misclassifying workers and incurring steep fines.
Staffing agencies offer employers a cost-effective and dependable way to use contingent workers. And with the workforce predicted to be 50 percent freelance by 2020, now’s the time to understand the benefits of contingent labor, the considerable risks in hiring independent consultants directly and the advantages of using a professional staffing agency to mitigate those risks.
An independent contractor—also referred to as a freelancer, contractor, consultant, 1099er, temp, and/or contingent laborer—is a worker hired by an organization either for a specified time period or for the duration of a project. Independent consultants are responsible for their own employment tax payments, health insurance and benefit arrangements, and professional liability insurance. A business may terminate a consultant’s employment immediately and without cause.
An employee is a worker an organization hires for wages or a salary. The employer is responsible for employment taxes, health insurance plus other benefits payments, and liability insurance. The termination of an employee’s contract is subject to state and federal legislation regarding notice of termination, severance pay arrangements, and COBRA payments.
By using contingent labor, employers can enjoy significant benefits such as:
- Improved Productivity. An organization improves the productivity of their workforce when they engage the right consultant for just the right amount of time versus using an internal employee who happens to be on hand and available.
- Financial Flexibility. Organizations have more financial flexibility when they shift the fixed costs of permanent employees to the variable costs of contingent labor.
- Access to Better Talent. As technologies advance rapidly, workers with the skills employers need become harder to find, and organizations turn to consultants to fill the skills gap.
- Exemptions from Certain Taxes and Labor Laws. Employers engaging contingent workers are not required to pay certain employment-related taxes or offer benefits, and are exempt from many labor and immigration laws they must comply with when hiring employees.
*Excerpted from The_Contingent_Workforce