4 Key Contingent Compliance Challenges to Navigate

The contingent workforce is growing. In the wake of the pandemic, the rise of remote work, and ongoing economic volatility, more and more companies are employing contingent workers in parallel with full-time employees. In fact, according to McKinsey, the contingent workforce — including freelance, gig, temp and/or short-term workers) makes up approximately 36% of employed respondents. That’s about 58 million Americans under-represented in labor market data.

Contingent workers were a huge reason businesses succeeded amid last year’s challenging market. However, complex regulations and co-employment laws are forcing employers to shift their approach to this modern workforce. For example, as the workplace becomes more data and tech-driven, regulations and risks associated with employee data privacy, diversity and inclusion, work-from-home protocols and more become more elaborate – especially for organizations expanding their workforces globally.

As organizations navigate the evolving regulatory landscape, there are four key compliance challenges business leaders must look to overcome:

1. Get the C-suite involved

The companies that have stood out were those with teams that were fully committed to regulatory compliance --- from C-suite to entry-level employees. Now, with regulations and guidelines getting more complex around the contingent workforce, it’s critical that everyone is involved in the compliance process, and executive leaders in particular. This can mean having your CEO be part of the compliance program’s planning and execution or engaging in regular communication with managers and other stakeholders about changes to the regulatory landscape. It can also be as simple as allocating funds to partner with a Managed Service Provider (MSP) and/or Employer of Record (EOR) and supporting the research process. 

2. Don’t just address missteps, avoid them entirely

With so many new regulations and guidelines in play (which increase tenfold with geographically dispersed teams) it can be challenging to keep up --- and accidents do happen. While many companies believe that remedying compliance issues when they arise is easier and more cost-effective than avoiding them outright, the consequences of this are much more serious than many realize.

For example, a recent rule from the Department of Labor helps to guide employers through employee classifications to ensure basic rights and protections. If a company fails to follow this rule, while they may be able to pay a fine or settle a lawsuit, it could greatly impact their current and prospective clients, partnerships, stock value, and public trust. So, while investing in partnerships and solutions that can help avoid compliance missteps may not seem like the most exciting use of budget, it’s likely to save the company money and protect the company brand in the long run. Discover the latest changes in workforce legislation in our regulatory newsletter. 

3. Create a scalable compliance program

Just because a company has “figured out” how to get its contingent worker program compliant doesn’t mean it’s going to stay that way. Regulations are always changing; it’s important that leaders build programs that are designed to keep tabs on the regulatory landscape and the agility to keep up as guidelines shift.

It’s also important that these programs are designed to accommodate changes in workforce composition and any variations in guidance related to growing footprints, as needs may change alongside worker demographics or locations. As the balance of hourly, full-time, contingent, scope of work, remote, hybrid, and other types of workers changes, the rules and regulations that apply within the business may do the same. As such, employers should seek out solutions that are scalable and agile enough to accommodate these uncertainties and the diverse needs of employees across the enterprise and geographies where applicable.

4. Contingent compliance is just as important as full-time labor concerns.

There was a time when contingent workers were viewed as a backup plan for employers looking to fill open roles quickly. Today, they’re integral to employers’ workforce needs, and they know it. Just like their full-time counterparts, today’s contingent workers know their worth and the benefits and protections to which they are entitled.

Similar to the full-time labor market, competition for contingent labor is high. Companies can’t afford to make contingent worker experiences an afterthought, nor can they afford hits to their employer brand that come with compliance issues. Not only can failures to comply push existing contingent staff to seek other opportunities, but it can prevent prospective contingent candidates from engaging in the first place. Gain proven insights for managing contingent worker compliance when you download our ebook. 

Maintaining Compliance Requires a Multifaceted Approach

Compliance is complex, and many businesses need support to ensure that they’re hitting the mark. Leaders can invest in an in-house legal team, develop and implement training programs, deploy software to support ongoing improvements, and/or partner with an MSP to make compliance a C-suite priority without drawing their attention away from the business’ core objectives.

Altogether, these solutions can give companies the perspective they need to maintain compliance, educate leaders on the landscape, and even take on the day-to-day administration of payroll, benefits, and risk management. While it may take some time to find the right solution, doing so can give leaders the peace of mind that everything is up to par in the coming year, no matter what your enterprise workforce looks like.

Interested in understanding how to navigate the latest changes in contingent workforce management? Dive into our ebook, “4 Contingent Employer of Record Trends Shaping the Future of Work.”

Disclaimer: The content in this blog post is for informational purposes only and cannot be construed as specific legal advice or as a substitute for legal advice. The blog post reflects the opinion of Magnit and is not to be construed as legal solutions and positions. Contact an attorney for specific advice and guidance for specific issues or questions.