Depending on which circles you move in, the term “Independent Contractor” can evoke some pretty serious emotions. Many of the conversations on this topic that I have had in the last few years have centered on some of the not so nice emotions.
I have heard words like “misclassification”, “fines” and even “penalties” being used. Many say “I am not touching that type of worker with a 10 foot pole!” (Ok, so I’m paraphrasing a little, but you get the idea.) Recently, I even read on staffingindustry.com how a firm had to pay more than $500,000 in back wages for misclassifying employees as independent contractors. Sadly, they are not alone and this type of thing happens frequently.
I honestly hate to hear the term “Independent Contractor” spoken like it is a dirty word. I have spent a lot of time and energy on this topic not just talking to people, but researching and working through ways to make managing independent contractors easier. And after all that, I feel confident in saying that with a bit of education and the right tools, utilizing this valuable segment of the flexible workforce can be done and done with success. (a la’ no misclassifications!)
Who are independent contractors?
It is not always easy to distinguish just who is an independent contractor. The IRS in the United States advises that companies look at three main aspects: financial control, behavioral control, and relationship between parties. You can find more than one checklist out there, but a few things to remember are that independent contractors typically:
- Offer their services to the general public
- Control when, where, and how they complete their work
- Have a particular skill set that is hard to find or replicate (e.g., non-commoditized specialists)
- Provide their own tools, equipment, and resources when working
- Are typically managed by a pass-through vendor (e.g., MBO Partners, Vendor Pass)
- Are engaged through a small Statement of Work (SOW) outlining commitments to deliverables and milestones as well as how they are paid
- Paid by month or deliverable