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4 Things Every Business Should Consider Before Hiring Contingent Workers

The contingent workforce ­– or the “gig economy” – usually conjures images of ride-sharing or food-delivery services. While technically that’s accurate, the contingent workforce also is much broader in scope, and potentially can help your business work more efficiently and effectively.

However, reaping those rewards requires a strategy. Without one, you could end up complicating processes and spending more time and money. Before you hire a contingent worker, take the following four considerations into account.

1. Identify Existing Gaps

Are there departments that need specific expertise to get over a temporary hurdle? Do you see a seasonal influx of work, but one that doesn’t justify hiring more salaried, full-time employees? Would offloading “one-off” projects allow your full-time staff to work more efficiently?

Consider where gaps in your business have developed. Projects completed late, an uptick in employee burnout or a skills gap are all issues you may be able to resolve in a strategic, cost-effective way by utilizing a contingent workforce.

2. Determine How to Bridge Those Gaps

Once you have identified the gaps that need to be bridged, you’ll encounter one of the most important distinctions within the contingent workforce: Do you need to hire W-2 or 1099 workers?

Workers placed on temporary assignment from a staffing agency or hired for a seasonal holiday surge typically are W-2 workers.

Independent contractors – like freelancers and consultants – typically are 1099 workers. An independent contractor (IC) is not an employee, and that’s a distinction that matters under the law. Even if an IC receives a 1099 and not a W-2, treating them as an employee in some respects can result in expensive consequences.

For example, someone hired as an IC generally is treated as an employee, but the company that hired the IC does not withhold taxes or provide benefits, the company may be liable for back taxes or required to pay remunerations. The landmark case, Vizcaino v. Microsoft Corp., is one iconic example of this phenomenon. After nearly a decade of legal back-and-forth, and in addition to paying millions of back taxes to the IRS, Microsoft paid a settlement of $96.9 million to independent contractors who were determined by the courts to be “common-law” employees and, thus, wrongfully excluded from Microsoft’s employee benefits.

3. Set Clear Expectations

Know what you need from your contingent workforce. Explain it as clearly as possible to stakeholders, including hiring managers, leaders in your organization or anyone directly engaging with contingent workers. Make it a priority for them to communicate the needs of the company specifically and clearly, to ensure you are hiring contingent workers who actually can deliver.

A job description may be useful in the case of temporary or seasonal W-2 workers, particularly if you are hiring a large number of individuals to carry out similar jobs. For your 1099 independent contractors, a conversation between stakeholders on your staff and the contractor can ensure you’re paying for the work you expect to receive, and not paying for someone to figure out what you want.

If your ICs don’t understand the context of your expectations, you will waste time and potentially money. If your temporary or seasonal workers do not understand what is expected of their position, those positions likely will become time and energy sinks as your hiring managers continually have to find replacements.

4. Train When Appropriate

Depending on the contingent workforce you hire, training might be essential — or illegal.

When you hire additional W-2 employees to fill contingent roles, training on your policies and procedures, time tracking, attendance and job-specific tasks can provide a quick, efficient ramp-up.

However, independent contractors – like freelancers and consultants – should receive minimal training and onboarding. You are hiring them for their expertise, and if they don’t have the expertise you need, they aren’t the right fit for bridging the gap in your company.

In addition, allowing an IC to access your HR and payroll employee self-service software or participate in certain onboarding tasks from HR creates an ambiguous situation where they are being treated as an employee in some ways, but not others – like receiving benefits or tax withholding. Keeping those distinctions clear can be tricky. Seeking legal guidance in this area is probably your best bet.

Depending on your needs, it may make sense to incorporate contingent workers into your workforce. That can give you a targeted, cost-effective approach to streamline your current processes, get over a temporary hurdle in your company or provide insight or expertise that your current workforce does not yet possess. Doing so in an informed manner can help you maximize benefits and minimize risks.