A re you unsure if you are complying with federal, state and local policies regarding your independent contractors? Well, you are not alone. Only 27% of organizations have the ability to measure compliance of their independent contractors and only 49% of organizations have an internal review process in place for measuring compliance.

As today’s contingent workforce grows in complexity, organizations must do a better job of not only properly classifying employee types but also, continuously monitoring, tracking and reexamining compliance. According to Aberdeen research, when organizations make a commitment to compliance, they are more likely to improve visibility into their contingent workforce, gain executive support and measure the effectiveness.

Best-in-Class organizations (74%) recognize that compliance is a key component of any workforce management strategy and more likely than Industry Average or Laggard organizations (43%) to address this issue. Below are a few recommendations that organizations may want to consider when staying compliant.


  • Internal Review Process: An internal review process can act as an oversight of compliance and consistently monitor and track changes in policies. Standardized internal compliance review processes can also ensure that companies avoid federal audits and the risk of co-employment. Best-in-Class organizations are twice as likely than Industry Average to have a process in place.
  • Clearly Classify Employee Types: Organizations must not only clearly classify employee types but also determine a strategy for classifying employs. The IRS had created a survey (“The Twenty Factor” test) to help organizations with this task and determine the nature and characteristics of the relationship with their workers. Currently, 68% of Best-in-Class organizations have clearly classified employee types compared to 48% of All Others.
  • Invest in Services and Technology: It is no surprise that organizations that invest in contingent workforce solutions are more compliant. Best-in-Class organizations are leveraging a variety of solutions including Vendor Management Systems (VMS), Managed Service Providers (MSP), and Independent Contractor Engagement Specialists (ICES). These solutions will not only assist organizations in managing the day-to-day operations of contingent labor management but also offer support in mitigating risks associated with 1099s and ensuring compliance.

Staying compliant is one of the most important aspects of managing independent contractors, yet few organizations understand how to handle changing federal, state and local policies. By making a commitment to stay compliant and following some of the recommendations from Best-in-Class organizations, companies will not only be able to reduce costs but will help to drive business outcomes.

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