January 26, 2024
January 26, 2024
Employees today expect the companies they work for to take an active role in building a fairer, more equal society. In an age when brand reputation can easily be dented, now is a great time to ensure pay transparency for both permanent and contingent workers.
Though many of the pressures exerted on corporations may feel new, defending your brand reputation is as old as the hills. In the past, journalists, regulators, and trade unions were the main forces that brought unscrupulous companies to book. But now, each employee and customer has the ability, through social media, to publicly scrutinize, critique or support the organizations they interact with.
As a result, age-old inequalities, such as the gender pay gap, are being brought to light. In response, citizens are demanding immediate, positive change—and governments are listening. For instance, the European Union passed the EU Pay Transparency Directive, which aims to reveal and remove pay-related inequalities.
Cynics will regard the directive as a legislative burden and another exercise in penalty dodging. The reality is, however, that the directive is a huge step forward for social equality. Finally, employees will be able to see whether they are paid fairly for their labour, and gender is not the only characteristic in the spotlight. For instance, contingent workers will soon see how their pay packets measure up against those of their salaried colleagues—creating new opportunities for public scrutiny on social media as well as landmark class action legal proceedings.
There have been some very high-profile cases recently, such as Deliveroo and Uber, where the employer and employees have taken very different views of their status and rights. Even where the companies have won, there may have been significant brand or reputational damage.
For example, a large manufacturer in The Netherlands was questioned about the tax status of its contingent workers. The company’s operations relied on a high proportion of contractors, many of whom had worked for years in the same job. If these contingent workers were declared to be permanent employees, the back-taxes and future costs would throw the profitability model into doubt.
Even though contractors were engaged through a procurement process and permanent employees were hired through the HR process, the company found it tremendously difficult to distinguish between the two employment categories. The tax authorities asserted that all the staff were indistinguishably employees, and the manner of payment was the problem, not the solution.
The double-edged sword for this company is that by endeavouring to preserve the contingent status of a very large part of its workforce and protect profitability, it ran the risk of being labelled heartless or ruthless by external observers and commentators. Even if such claims are untrue, they can still cause tremendous reputational damage if they go viral. When this happens, contingent workers won’t think twice about applying for jobs with more transparently reputable employers, and customers will vote with their wallets. In a tight labour market and tough economy, losing employees and customers at the same time could deal a fatal blow for many companies.
In another case, a technology company in France looked to improve its brand reputation by ensuring true pay equality, offering the same terms and conditions to both permanent and contingent staff, without incurring the associated employer’s costs. The danger, of course, is that offering those terms could imply an offer of permanent employment. With thousands of software contractors engaged at premium daily rates, to help it attract and retain their services, the corporation wanted to be seen as a good employer—and simultaneously incurred significant financial risk if those contractors were judged to be permanent staff with taxable employment.
Both of these companies, fortunately, were able to rely on Beeline to provide verification of their contingent workforce management, showing a clear distinction between permanent and contract employees. With a full, accessible audit trail of hours, pay, terms and conditions delivered by Beeline, the employers avoided financial penalties and prevented the wider perils of employee relationship damage.
As the pay transparency regulations are adopted, we can expect many more of these cases to arise, where it becomes particularly important to know, understand and distinguish between categories of worker. Pay transparency insists that people of equal skill doing equal work are equally compensated—a difficult comparison if the spreadsheets generated by the procurement or finance teams do not include skillsets and job roles. What’s more, contingent workers are not managed by HR systems for fear it would imply a different employment status. The gap between procurement and HR leaves companies vulnerable, without insight into their own operations.
Beeline offers solutions designed to provide comprehensive, integrated management of contingent workers, bridging the world of employment and contractors. Beeline empowers full governance and reporting, greatly reducing the risk of mis-categorisation. With clear understanding of worker category, corporations will be much better-placed to defend against challenges to tax and legal status by authorities, or by employees, and avoiding unpleasant brand and reputational damage.
To find out more about effective management of the contingent workforce, talk to a Beeline consultant today.