Independent contractor or employee? 5 things to consider before hiring someone new

As the need for contract workers continues to grow, organizations looking to attract and retain independent workers should implement a number of considerations to achieve this goal.

Businesses should think about independent workers as an extension of W2 employees and be sure to offer the same levels of engagement within the organization to both groups. Areas like compliance, onboarding, and payments also need to be taken into consideration to ensure you are meeting your independent workforce’s needs.

Likewise, employer brand and communications should be developed so that contingent workers can be a part of the vision and have something to align with while they are working for and representing your company.

Consider whether you have the technology in place to support an independent workforce, offering flexible payment options and features to track compliance requirements and manage a large number of independent workers at any one time.

The following pointers can help in making sure your organization is ready to make the best use of your independent workforce:

No. 1: Ensure compliance requirements are met

One of the most critical areas of compliance when hiring a new member of staff is classifying them correctly as an employee or independent contractor, particularly now since the DOL released a proposal in October on how it will approach independent contractor status under federal wage law. This has implications for tax requirements, benefits eligibility, and payments terms, among other things. Depending on the state or locality, there may be several guidelines that must be adhered to when classifying a worker as an independent contractor.

When considering these compliance needs you must take into account relationship considerations, behavioral considerations, and financial considerations. Streamlining your processes and utilizing the right technologies to automate these processes can help you avoid mistakes that could lead to potential compliance penalties.

No. 2: Provide an efficient onboarding process

Think about whether your infrastructure has an efficient, compliant way to onboard independent workers. It can save you significant amounts of time, reduce risk, and can also contribute to the positive experience your independent workers will have when joining the organization.

Using a digitized onboarding process can be extremely beneficial, especially since most contractors are remote with no reason to physically come into the office. Allowing them to onboard via an online platform they can access from a secure computer or smartphone offers a streamlined process that is appealing and easy to engage with.

Also, think about developing role-specific onboarding processes. Contractor roles are often specialized, so it makes sense that the onboarding process is tailored to fit the role being filled.

No. 3: Offer fast and flexible payment options

While paying your independent workers quickly and on time is critical, there should also be flexible payment channels through which you can make payments. The more flexibility you have in addition to traditional check payments will make your organization more desirable to contract workers who often depend on getting paid in a timely manner.

For example, consider offering real-time payments via ACH deposit rather than a check, or flexible payment options such as card payments and options for international workers. You may also have independent workers who are unbanked and prefer to be paid outside the banking system. Having systems like pay cards in place can allow for this and help prevent you from being caught off guard by a worker asking to be paid in a way that you can’t accommodate.

Data shows nearly 80% of workers on ADP’s freelance management software, WorkMarket, select ACH over other electronic methods to receive payment. In addition to how you pay your contingent workers, make sure you pay attention to how quickly you pay them. Both can have a significant impact on your retention rate and influence your ability to attract new workers.

No. 4: Work on your employer brand

Working on your employer brand can help give your independent workforce a vision to which they can contribute.  Be sure to communicate your company vision effectively to ensure your independent workers are aligned with it when representing the organization, but also so that they feel like an extension of your team.

To ensure your freelance workers are engaged, make sure they are valued the same as the full-time workers on the team. Have systems in place so 1099 workers are on the radar of the HR team even if they are hired directly by a business unit and paid via the accounts team. HR can then help develop engagement and workforce strategies at the company level.

Related: ICHRAs: A way to unlock better health care benefits for hourly, part-time or gig workers

Additionally, have clear expectations laid out for both the organization and the contractor that are agreed upon at the onset of the relationship, and answer whatever questions your contractor may have about the company and the project in a timely manner.

No. 5: Communicate and meet the needs of your independent workers

You can meet your independent workers’ needs by setting expectations effectively. Provide a clear scope of work, including expected deliverables, how much the project pays, as well as how and when they will be paid.

This level of communication is critical for independent workers because they’re not typically privy to internal conversations that go on, or the internal systems that are being utilized. Give them a clear understanding of what’s expected and provide a framework for success. Finally, ask for feedback – just as you would provide feedback to them.  This will help build a strong relationship.

By addressing these five areas, your organization can offer independent workers an environment where they feel valued. Having technology in place to meet these needs and building a streamlined infrastructure can make onboarding easy for both the organization and contractor, as well as offer a straightforward route to worker classification and compliance.

Bridget Quinn Kirchner is Senior Director, Client Experience, at WorkMarket, an ADP Company.