Contingent Labor: Getting The Gig Economy Right
“Part of CXC Global’s mission is to educate and share knowledge with companies around the globe on compliance trends. When it comes to Global Compliance, the #GigEconomy and changes in regulation, we are committed to staying ahead of the game. We are honored to have collaborated with Forbes and be featured in their article on Contingent Labor, and to be recognized for our expertise in Global Compliance and the Future of Work” – CXC Global
Recruiting, managing and retaining workers who are important to the success of a company, but not necessarily directly employed by it, is difficult to get right, but when it’s done well, it can be a game changer. Call them “gig workers” if you like, but they’re nothing more than would-be full-time employees who have opted instead for self-employment. And their numbers are surging to a point where the effects on the traditional corporate employment model could be permanent.
It’s time to get rid of those traditional thoughts about “temp labor” because they don’t apply here. Today’s contingent workforce includes highly skilled specialists, consultants of all stripes and industrial workers. This workforce is multifaceted, strategically important, growing and already changing how companies large and small are hiring.
The movement is unprecedented and here’s why: Historically, in good economic times companies hired Full Time Employees (FTEs). In not-so-good-times they hedged their bets and bring on contingent workers. As Mike Etting, anSAPdivisional president put it, “once in a while, history doesn’t repeat itself.” Mr. Etting’s point was reinforced in a Workforce 2020 study conducted by Oxford Economics and sponsored by SAP, in which 83% of surveyed executives indicated their increasing preference for contingent workers, regardless of economic factors.
Contingent labor presents enormous compliance issues. For example, if workers are mobile, where do you pay them, what currency do you pay them in, who pays them and how do you resolve payment disputes? And what about taxes? We’re familiar with companies that relocate to shelter themselves, so how do they deal with workers who have similar objectives? The list of questions and considerations seem endless: how is confidential information managed? And how do you measure performance? Obviously, companies are using contingent labor to reduce costs, but does that mean they’re free of pension or healthcare liabilities?
When considering that most every region of the world has different and changing employment law, getting it right, especially for global companies, is definitely not a simple proposition.
In response to the increasing number of individuals that are walking away from the traditional employment relationship, specialized human resources companies are emerging. They’re not only catering to the workers, but they’re helping global companies find and manage them properly. Take CXC Global, “a global contractor management and payroll company that bills itself a leader in “globally compliant workforce solutions.” I was introduced to them through Andrew Karpie, an analyst with SpendMatters who covers the space. “Generation Y’rs are making it clear they intend to be their own bosses,” said Mr. Karpie, “so getting this (contingent workforce management) right –from how your source these people to how you manage them— is an essential new skill.”
John Smith, Managing Director of CXC Global Americas, put it a little differently. “While most companies can’t be sure if they’re winning the talent race, all companies know when they’re losing it. Developing the know-how to recruit and manage high caliber people has always been mission critical. Properly classifying the self-employed and ensuring compliance to the correct set of governing regulations is now basic-level.
The so-called “Gig Economy”
No doubt about it, it’s a trendy topic that often finds its way into discussions about contingent workforce management. And while there is not yet any solid evidence supporting the revolution that “giggers” keep talking about (e.g. it might help if we actually knew who they are), what we do know is that technology has lowered the barrier or “democratized” the ability for skilled workers to deliver their services. We also know that companies have an increasing appetite for the terms and conditions of this style of engagement. And finally, we know that clever people are investing in their own income diversity and that technology is enabling them to do it. However, according to CXC Corp Services MD, Connor Heaney, “Companies operating and engaging workers in the gig economy face two major headwinds. The US Department of Labor is set to focus on the employment status of those workers and will be challenging those companies to ensure that workers are bona fidae contractors and not disguised employees. The second major headwind is the workers themselves, who are bringing class actions to against the gig companies to ensure that they are recognized as employees, not contractors. The implications of this are huge as the gig economy companies presently can keep costs down by engaging contractors but if those contractors become employees then its likely that costs will go up and the gig companies will lose one of their major competitive advantages.
Common sense tells us that companies who employ these people and get it right from a compliance perspective will reap a share of the resulting added value.
Contact one of our global teams to discuss how we assist companies in over 60 countries with compliant contractor engagement and management.