HR spring cleaning: Freelancer management edition

Having a workforce of only full-time employees is a thing of the past, and businesses must prioritize the creation of hybrid workforces.

Now is a good time to pause and take stock of your new workforce and the HR practices, strategies, and tools needed to properly manage it. (SOMMAI/Shutterstock.com)

After an unprecedented year, many HR departments across the globe are still ironing out workforce strategies to fit the (very different) world we now find ourselves in — or to fortify the game-time decisions they were forced to make in the heat of unforeseen business circumstances.

Among the most crucial areas of concern? The flexibility of your workforce.

If the recent, tectonic global shifts have taught us anything, it’s that surviving major business disruptions means having built-in flexibility that allows your workforce to expand and contract at a moment’s notice.

Related: 7 principles for rethinking human capital

Having a workforce of only full-time employees is now a thing of the past, and the businesses most likely to succeed are those that prioritize the creation of hybrid workforces that gives them access to a huge community of experts in the form of freelancers, consultants, agencies and gig workers.

The problem? In these companies, no one — including HR — seems to own this part of the workforce. By and large, HR teams still dedicate their focus and efforts only to their employees, while overlooking their non-payroll workers, like contractors, consultants and agencies working for their company. This creates many challenges for their organizations — from reducing productivity to tax and legal compliance issues.

But in order to shift from surviving to thriving, HR teams need to plan their workforces strategically, and reconsider their HR tech stack in light of their new strategy and focus areas.

So don’t put it off. Now is a good time to pause and take stock of your new workforce and the HR practices, strategies, and tools needed to properly manage it. In short, it’s probably time for some HR spring cleaning.

Revisit your approach to worker classification

The biggest difference between employees and non-payroll workers, in the eyes of authorities, is that employees get healthcare and social benefits and companies pay taxes for them, while non-payroll workers get nothing. This is why the tax and legal authorities are creating legislation to ensure companies will properly classify freelancers and contractors.

This means you need to treat freelancers and contractors differently to support the choice of your company to classify them as non-employees.

When your company makes the choice to classify a worker as an independent contractor, you are responsible for making sure that worker qualifies for this designation under applicable federal, state, and local laws.

As important as classifying workers correctly is, many organizations with outdated processes and tools fail to get this one right, as there is no single, clear set of rules to make a determination when classifying freelancer workers. What’s more, trying to manage freelancers in the same system you manage full-time employees will show that you are treating your non-payroll employees like traditional workers, and this could expose you to some serious misclassification issues.

Not only that, but when it comes to freelancers, it isn’t just the IRS’s freelancer classification guidelines you’ll need to consider — the rules of how freelancers are assessed differ even between governing bodies like the Department of Labor, the IRS, and even among different states. All of these entities weigh a variety of different factors, a situation that lends itself to ambiguity and inconsistent application.

In this case, your safest bet isn’t just to dust off your compliance knowledge (which you should definitely still do), but to have systems in place that automatically stay abreast of regulations and new laws, so you don’t have to. Once you have this tool, you can implement the rules and governance policies that align with organizational, regional, and national compliance laws — and then also automatically assess your relationships with contractors periodically to cover all your bases.

Sort and organize your strategies for meeting freelancer management needs

If you have any amount of experience with contract workers, you know their needs look different than those of full-time, traditional employees.

The first difference comes in the early stage – sourcing talent. Freelancers are frequently found through online sources (Linkedin, online job portals, freelance marketplaces) or word of mouth, but based on skills and experience. Job descriptions are usually not posted and the process is significantly shorter — you can take more risk as the relationship is not meant to be long term.

Another difference is the onboarding process. Contractors need to sign different legal documents per their project, like data protection, intellectual property agreements, and more. Storing these documents in old email messages could lead to trouble when trying to organize files for auditing or other financial reasons, so it’s critical to keep them all in one place and easily share them with other stakeholders.

You will also need to collect payment information and tax documentation and send it to your finance team so they’ll be able to pay them.

Additionally, unlike full-timers, you’ll need to iron out and document what levels of access to files and company systems you’re going to share with your freelancer, and get their signature, both to protect your company and to ensure a seamless off-boarding process once their project or time with your company is complete.

If your company does not use a freelance management system that can automate the processes mentioned above, then your teams are probably doing it manually through spreadsheets and emails.

Tidy up your HR tech stack

When it comes to freelancers, old tools or strategies designed for full-time employees simply aren’t going to cut it. Instead, you’re going to need a specialized suite of tools to address their unique needs and protect your company from risk, and this may require gutting your current approaches.

After all, it’s neither practical nor wise to manage freelancer information in the same HRIS you manage your employees, especially since you cannot provide the same benefits, bonuses and more that you give your employees. And yet, some companies take this approach.

I’d also recommend against trying to manage freelancers through spreadsheets and emails, since it’s not very effective if your company is planning to scale its use of freelancers.

Having a standardized system for managing your external workforce is fundamental to unlocking the value they have to offer. Tools like freelancer management systems allow you to maximize freelancer value and keep your company safe by helping you:

So whether you have 10 freelancers or 100, you’ll save time and reduce your exposure to risk by streamlining your operations with a FMS — something I guarantee will “spark joy” for you and your organization.

Shahar Erez is CEO of Stoke Talent,

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