The Rise of the Gig Economy: 4 Strategies for Compliance Management

As part of our blog series on the growing popularity of the gig economy, VectorVMS’ Product Manager, Taylor Ramchandani, looks at managing the compliance requirements of a non-traditional workforce.

We all know that the best approach to any type of labor management involves both automation and a human touch. Think of your traditional staff augmentation, for example. A vendor management system (VMS) provides the automation, while the program managers provide the services needed for complete program success.

The gig economy works the same way. In our previous article, we talked through the different technology that can help you better manage the growing gig economy. While this will help you with the visibility and organization of your extended workforce, it’s just as important to think about the management and compliance additions that come with working with non-traditional staff.

When working with contingent labor through the traditional staffing model, you have the added sense of security of having a staffing supplier to act as the employer of record (EOR). As we mentioned in ‘Rise of the Gig Economy: What Is It and Why Should I Care?’, more often than not, gig workers are independent contractors that are self-employed. That’s why it’s so important to consider your compliance options when including gig workers in your workforce.

Before adding gig workers into your organization, we recommend creating a plan for the following:

  1. How to vet independent contractors
  2. Payment planning
  3. Insurance requirements for ICs
  4. Background check processes

You might also like: ‘Temp vs SOW: Why Contingent Workforce Classifications are Essential

1) Independent Contractor Vetting

Often when I talk to current and prospective clients about how they validate that workers are actually independent contractors, I hear “our legal team handles that”. While this may be a viable option for some, I would highly recommend utilizing an organization that specializes in these types of classifications to eliminate the chance of costly lawsuits.

When looking for a vetting partner, one thing that should be top of mind is whether or not they provide indemnification for misclassification. This allows you additional protection when adding in another type of non-employee labor to your program. For example, our partner Atrium has a great IC vetting process in their tool, Engagent, that allows experts to properly vet and indemnify your workers.

Handpicked for you: ‘How COVID-19 Is Changing the Rules for the Gig Economy

2) Paying Your Gig Workers

While your staffing suppliers act as an Employer of Record (EOR) for your traditional contingent labor, with your gig workers, you need to determine whether or not you want to use an Agent of Record (AOR) for contractor payment. This can go hand in hand with your vetting provider or you can separate the two—it’s really up to what you need.

Depending on how you want to handle classification and payment you can:

  • Classify and pay the worker yourself
  • Classify the worker yourself but have a third party pay the worker
  • Outsource the classification but pay the worker yourself
  • Outsource the full classification and payment of the worker

For the most protection, organizations utilize the last option to outsource the classification and payment of the worker. We typically see this done by having the vetting organization determine if the worker is an independent contractor or a temporary worker. Once that determination has been made, the provider will act as the AOR or the EOR respectively.

Related reading: ‘4 Steps to Building a Talent Ecosystem

3) Insurance Requirements

As part of the vetting process, proof of insurance will be required from the gig worker. Due to the nature of the work, it can be cumbersome for a self-employed individual to have insurance all year round. This is where innovative services like Bunker have emerged to provide in-the-moment insurance for gig workers.

By having this option available, the worker can design a coverage plan that matches the length of their contract. This helps them save money on insurance costs and get a plan that is custom to the work they’re doing. If you’re working with independent contractors, you can always recommend this service to them so you get the insurance you need and they get a plan customized to how they work.

Also read: ‘What Is a Vendor Management System and Do I Need One?

4) Automated Background Checks

This may seem simple but this step is commonly overlooked with the gig economy. Even though this person doesn’t work directly for you or through one of your staffing suppliers, they’re still working for your organization. By having a pre-selected background check provider, you can determine the indemnification requirements you have for your gig workers and create an automated process to ensure that background checks are completed for your entire workforce.

Many freelance technologies now have this integration built in for your gig workers. So make sure to ask during your tech demos who they use to run background checks on new workers.

Download this: ‘9 Steps to SOW Success: How to Build a Best-Practice Services Procurement Program

Putting the Gig Economy to Work for You

As we continue to navigate the unknown, one thing is certain: the gig economy is growing, with no plans of stopping soon. As the use of gig workers continues to rise, our contingent labor programs will need to evolve to automate the management of these workers, and our compliance process will need to expand to ensure that organizations are properly mitigating risk.

Hopefully you found this series helpful (as a reminder, here’s part 1 and part 2) as we all navigate the ever-changing landscape of the contingent workforce.

For more on this subject, check out our eBook ‘Talent Without Borders: Using Technology To Build a Talent Ecosystem’. Download your copy today.