Organizations across the globe are restructuring their staffing needs to meet changing economic demands. Companies face a large-scale shift to remote work and economic uncertainty that complicates long-term business planning. Organizations need more talent, but may not want to commit to full-time employees. This is where the gig economy steps into the spotlight.
While 45% of hiring managers have frozen permanent hiring at their organizations, up to 73% of hiring managers intend to maintain or increase hiring of independent professionals. “Contract staff is a great option when a company is going through growth or a quick ramp-up,” says Robin Schooling, future of HR consultant and managing partner of HR and people strategy at Peridus Group. “Organizations can reap the benefits of flexibility to deal with business needs in times of growth or when dealing with an immediate, but perhaps not long-term, need.”
Here’s how to help your company thrive in a gig economy by staying compliant with changing contingent labor employment laws and supporting your gig workers’ success.
There are specific labor and employment laws that must be followed when hiring contract workers, Schooling notes. “HR leaders should first and foremost ensure they are complying with both state-specific guidelines and the IRS’ 20-point test to determine whether an individual should be an independent contractor or an employee,” she says. If the business has the right to direct or control the worker’s projects or working time, for example, then that worker should be classified as an employee. If the worker has the right to deny projects or services, on the other hand, that worker can be classified as an independent contractor. Similarly, independent contractors have more freedom to negotiate pay and set their rates than employees.
You can avoid issues of classification by using an agency or service. “Consultants or agencies provide workers under a business, not ‘employment,’ relationship,” Schooling continues. Instead of negotiating directly with a contractor, the agency sets the terms of the relationship to comply with contingent labor employment laws.
Several states and cities have considered or have passed new penalties for misclassifying workers. The ABC test, as it appears in California’s controversial AB 5, could become a new standard for classifying independent contractors. Similar to the TRS requirements, the ABC test requires that independent contractors be free from the organization’s control. It also requires the work assigned to the contractor fall outside of the usual course of the organization’s business and that the independent contractor be customarily engaged in the occupation, trade or service they are providing. Under the California law, for example, Uber drivers are no longer classified as independent contractors, but instead as employees of Uber. Consequently, they are entitled to employee rights and benefits (including the right to unionize).
On a federal level, legislation challenging traditional classifications recently passed in the House. Though it’s unlikely to be picked up in the Senate, employers should exercise caution when classifying workers as freelancers.
To integrate freelancers into your workforce, establish a standard onboarding process for contingent workers, suggests Olga Mizrahi, author of The Gig is Up and business blogger for the freelancer workforce. If you’re working in an office, provide freelancers with a designated space. Supply them with a company email address, as well as the technology and login information they need to get started right away. Establish an accessible point of contact to help them acclimate. “Make sure there’s someone who has the time to give the freelancer clear direction, both as they begin and as they progress,” Mizrahi says.
In lieu of an employee handbook, create a freelancer guide offering a window into your company policies and culture. “Create a ‘Contract Worker Guidebook’ outlining expected conduct such as your anti-harassment policy while also connecting them to your mission, vision, values and culture,” Schooling suggests.
Connecting contract workers with your company culture supports healthy work relationships and better project outcomes. Include freelancers in relevant meetings and establish transparent guidelines for communication and project management. “Encourage freelancers to ask questions,” Mizrahi says. “Give them an organizational chart with contact information so they know who to ask about what.” Make sure relevant contacts or managers are accessible and check in on a regular basis and include freelancers in team emails and updates.
Include gig workers in company culture to foster connections between contract workers and their project teammates. “Include long-term contractors in company events (such as holiday parties) and social happenings (like team bowling night),” Mizrahi suggests. And when freelancers perform above your expectations, give them recognition like you would any other team member.