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Having a contingent workforce is a great way to improve efficiency and effectiveness in your organization, but it does open you up to additional risks. How do you mitigate risk in your contingent workforce, from compliance violations to reputational damage? Here are a few strategies to identify these risks and protect your business and workforce.
Streamline Your Contingent Workforce
Co-Employment Risks
Having a contingent workforce introduces co-employment risks for companies. Co-employment is when the staffing agency or vendor and the client company share responsibilities and liabilities toward the contingent workers. These risks can arise due to misclassification of workers, inadequate management of the employment relationship, or failure to comply with labor laws and regulations. The potential risks include issues related to worker classification, wage and hour compliance, benefits eligibility, workplace safety, and discrimination or harassment claims. Co-employment risks can lead to legal disputes, financial penalties, damage to the company’s reputation, and operational disruptions. To mitigate these risks, companies must establish clear contractual agreements with staffing agencies, ensure proper worker classification, maintain open lines of communication, and actively monitor compliance with employment laws and regulations.
Worker Classification
Worker misclassification risks are a significant concern when managing a contingent workforce. Misclassification occurs when a worker is classified as an independent contractor or temporary employee when, in fact, they should be classified as an employee. This misclassification can lead to legal and financial consequences for companies. The risks associated with worker misclassification include potential violations of labor laws, such as minimum wage and overtime requirements, failure to provide employee benefits, and non-compliance with tax regulations. Additionally, misclassified workers may file legal claims seeking employee rights and benefits, resulting in potential lawsuits and liabilities. To mitigate these risks, companies should carefully assess the nature of the working relationship and ensure proper classification based on established criteria set by governing bodies.
Decentralized Compliance
Decentralizing compliance is a significant risk when utilizing a contingent workforce. With a decentralized approach, each department or manager may have varying interpretations of compliance requirements, leading to inconsistencies and potential violations. When compliance responsibilities are dispersed across different departments, there is a greater chance of overlooking or mismanaging compliance obligations, such as employment laws, industry regulations, and internal policies. This lack of centralized oversight can result in compliance gaps, legal liabilities, and reputational damage. It can also hinder efficient reporting, tracking, and monitoring of compliance-related activities. To mitigate these risks, companies should establish a centralized compliance framework, clearly defining compliance responsibilities and ensuring consistent enforcement of policies and procedures.
Managed Services Providers
Using a managed services provider for staffing can effectively mitigate the risks of co-employment, employee misclassification, and decentralizing risk. MSPs specialize in managing contingent workforces and assume responsibility for overseeing the employment relationship, compliance, and risk management. By partnering with an MSP, companies can transfer certain risks to the provider, as the MSP becomes the employer of record for the contingent workers. This helps alleviate potential legal and financial liabilities. By centralizing the management of contingent workforce-related compliance, MSPs help mitigate the risks. They establish standardized processes, consistently adhere to employment laws and regulations, and provide comprehensive reporting and tracking capabilities.
Learn More About Working with an MSP
Anserteam Workforce Solutions represents North America’s very best staffing agencies aligned together to deliver world-class workforce management solutions. We offer end-to-end talent services that can be customized for any size business, utilizing our Managed Services Provider (MSP) model and Vendor Management Solutions (VMS) technology. Is your organization seeking a WBENC-certified diversity partner to provide measurable results and substantial cost savings? Contact us today.
