Worker classification lawsuits are becoming more and more common, and so are the federal government’s efforts to combat worker misclassification. You need look no further than recent news and history to see the damage a lack of a centralized process and system controls, and the absence of automated compliance procedures can do in exposing your business to significant contingent workforce vulnerabilities. The U.S. Department of Labor continues to expand the reach of its “DOL Misclassification Initiative,” where the Wage and Hour Division (WHD) is partnering with the IRS and 29 states to share information and coordinate enforcement. In Fiscal Year 2015, WHD investigations resulted in more than $74 million in back wages for more than 102,000 workers.
Do you have a strategy in place to protect your company from liabilities related to contingent workers—in particular, contingent worker misclassification?
Contingent worker misclassification violations can be intentionally committed by companies acting in bad faith. But these violations are much more frequently the results of avoidable mistakes by companies that don’t understand the rules or that lack end-to-end visibility into the workforce. Either way, the outcome and financial risk is the same.
Consider this: According to Staffing Industry Analysts, companies misclassify 46% of all contract workers. That’s a significant amount of risk and potential fines across businesses globally.
So how can you mitigate the risk of misclassifying your contingent workers? With a combination of contingent workforce management technology, automated workflows and best practices. A vendor management system (VMS) can provide the framework for the end-to-end visibility and business processes that help you eliminate misclassification risk. Compliance functionality can for example guide your users in selecting the correct classification of contingent workers. Best-practices guidance from your VMS vendor or MSP can keep you informed on trends and legislation related to contingent labor classification, and help you manage your contingent workforce with risk mitigation top of mind.
The benefits that you can reap in integrating contingent workers into your workforce strategy well outweigh the risks—a big one being contingent worker misclassification. Just be prepared; don’t let the risks catch you off guard.
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An Introduction to Funding Models and Pricing Methods for a Vendor Management System (VMS)