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Throughout the world, companies have substantially accelerated the use of contingent contract workers as part of their overseas expansion plans or as an alternative or supplement to their full-time internal workforce. Many economists are referring to this trend as the “Fourth Industrial Revolution” — with some projecting that 30% to 50% of the average corporate workforce will be classified as “contingent or flexible” (independent contractor, corp. to corp, freelancer, temporary or robotics) by 2025.
Contractor Engagement
Remote working has exploded in the last couple of years following the events of 2020. Companies have been forced to re-evaluate their workforce strategy and how they engage workers. Adapting to remote work models has also allowed companies to engage talent anywhere in the world. Global workforces have subsequently become a mix of different types of workers. Companies often classify these workers as independent or corp.-to-corp contractors, as it can mean internal cost savings for the company. However, Governments around the world have realized that many of their working citizens are now providing services for multi-national companies outside of their borders. While excited that their citizens are working and participating in international opportunities, there is also growing concern about how these contractors are being paid and whether taxes are accounted for.
Worker Classification
In addition to contractor engagement, worker classification and structure are being examined for compliance with laws and policies. Companies naturally don’t want to put themselves and their contractors at risk, but without a compliance firewall, detailed knowledge of local employment, tax and banking legislation, many of these engagements are potentially at risk. With companies expanding overseas and utilization of global talent expands, it is essential that correct worker classification is implemented.
Worker misclassification can have serious tax and business operations consequences on both the company and contractor. The misclassification of workers can lead to business interruptions and can effect the right to conduct business in a country or economic treaty zone. CXC is a leading global contractor management company and for the past 29 years has been providing compliant solutions to corporations, contingent workforce providers and recruitment firms.
CXC
CXC are proud to present to market our updated and digitally automated online platform CXC Comply. CXC Comply is world class saas global contractor classification platform, built to assist corporations to minimize worker engagement risk.
CXC Comply Enables:
- interactive contractor vetting
- validation classification for independent or corp.-to-corp. contractors
- assesses a contractor right to work in country
- compliance checks with required insurances and background screenings
All in one platform
Governments globally are instituting new laws to ensure any worker who is engaged as an independent or corp.-to-corp. is compliantly classified and reporting income properly.
Below are a some of the recently enacted laws and government actions to prevent contractor misclassification.
AUSTRALIA — The Fair Work Ombudsman Act, 2019 “crackdown” levies penalties for “sham” contracting. Mitigating factors, control, super-Annuation, time reporting, tax and risk.
BRAZIL — Independent Contractors “Pessoa Juridica” (PJ’s) should be used on a project basis only. Contractor must register for tax and no exclusivity in work or agreements
CANADA — Independent contractors assessment on control, economic reality, entrepreneur assessment required and held for documentation. Self-Employment set up of Sole Proprietorship, Partnership or Corporation with proper government forms and insurance.
CHINA — China’s Labor Contract Law, employment relationship exists regardless of the party’s agreement if the individual is subject to any of the company’s internal rules and regulations.
FRANCE — Independent Contractors must be registered on the Commercial and Companies Registry or the Commercial Agents Register.
GERMANY — In differentiating between independent contractors and employees, the government and courts look at the parties’ agreement and level of control, and if the contractor can freely determine how, when and where to perform its services.
INDIA — Independent contractor agreements must undergo a formal stamping process in order to be admissible as evidence in court in India.
JAPAN — Contractor relationships may not be exclusive or subject to any restrictive covenants. Contractors should not be subject to a company’s internal rules or regulations.
KOREA — The Supreme Court of Korea has a list of 10 factors that are relevant to whether a contractor is improperly classified.
NETHERLANDS — To be treated as an independent contractor for tax purposes, any individual contractor needs first to obtain an exemption from the Netherlands tax authorities.
UNITED KINGDOM — IR35 targets contractual workers who operate through an intermediary, usually a limited company, to offer and provide services to an end business.
UNITED STATES — 1099 independent contractors must be validated as well as the company’s operations to determine the level of control the contractor has over the project. Contractors right to accept other work and if any full-time company employees are doing similar roles.
Modern Workforce – Risk Heat Map
The heat map illustrates where businesses are encountering workforce classification risk when engaging Independent / Freelancers, Corp. to Corp. and Statement of Work Contractors internationally.
How Do Companies Engage International Workers?
The hybrid workforce model continues to be utilized by businesses around the world. Talent is sourced from a multitude of channels including: Talent acquisition platforms, Talent Pools: public/private and open talent pools. These channels are becoming the most prevalent ways to source talent. Contract workers / Contingent Talent / Independent Contractors have embraced the new technology and talent platforms as a way to promote their services avail themselves with the multiple types of talent pools. We are seeing a gradual transition from or unbundling of the traditional MSP model and its vendors are recruiting candidates for open position requisitions.
We are seeing a trend towards companies today identifying their own contingent talent and developing pools of workers, which can be classified as independent contractors or employed. They can contract with public cloud companies to source available workers, or create internal talent pools that are populated by invited and known contractors.
How Does CXC Assist?
CXC has amassed substantial in-depth knowledge over our 29-plus years globally and from the hundreds of thousands of contractors we have properly classified and managed. CXC’s core value to our clients, partners and contractors is ensuring compliance in every major and emerging countries throughout the world with our tenured experienced team and true global footprint. As more companies are self-managing their programs or using a hybrid approach, they want that compliance guardian to help navigate their global journey. And that’s where CXC sees itself — we are that compliance guardian, helping companies ensure that wherever they are engaging contractor and, in every solution, compliance is thorough, accurate and validated.
CXC assists companies to manage their talent private and public pools. Although CXC is not a recruiter, we are able to provide support by making sure that contractors in the talent pools have been vetted and screened. This enables hiring managers to engage a worker in the pool, knowing that worker is in compliance, has been validated and is ready start with minimal time lag and faster onboarding. Speed up time-to-fill, with fully vetted and validated workers and increased access to talent.
CXC & CXC Comply – Global Trusted Partners For 29 Years
The CXC Comply online SaaS platform ensures your independent and corp.-to-corp. contractors globally are compliantly classified at the time of vetting and throughout the term of the project. The technology is a salesforce-based service delivery platform that performs contractor vetting and validation, ensuring compliance in minutes and reporting with a comprehensive audit file for each contractor. In 2019 CXC Comply classified over 2,500 contractors. Recent enhancements to CXC Comply provides for global background investigations and comprehensive right-to-work documentation.
Talent acquisition is shifting beyond a predominant focus on recruiting full-time hires to accessing people with the right capabilities in new ways. The explosion of remote work has meant companies have had to shift their workforce strategy to one that is more flexible and agile and allows them to engage talent anywhere. Looking to internal mobility, the alternative workforce, and new technologies to facilitate access to talent is essential.
