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Sourcing Contractors for Your Business: Pooling From the Right Pond

Posted on 10-25-2019
Sourcing Contractors for Your Business: Pooling From the Right Pond

By Annabella Green, SPHR, SHRM-SCP, AAAPM

The last time the U.S. unemployment rate was this low at 3.6% was in 1969. Believe it or not, that was the year the internet was conceived, Neil Armstrong landed on the moon and Wal-Mart was incorporated.

Today, about half of the world’s population is online, using the internet for everything from shopping. refilling prescriptions and banking, to ordering takeout food and sending photos halfway across the world.

We are also using the internet to find opportunities for employment. Employers looking for talent keep searching in different pools of available professionals ready for full time employment. Business use and application of the internet enables people to make their professional profile and work experience available to prospective employers.

Although information about employers and employees is more readily available than ever via the internet, the low unemployment rate indicates that the pool has a limited number of people with the right skills and experiences available for employment. Going to the same pool to look for available talent and leaving empty handed seems to be an all too common routine, and one that can only be broken by thinking outside the box.

What if organizations could find a different pool of people who could “hit the ground running” and could immediately, upon engaging, be capable of performing the job with little to no supervision? This pool of experienced individuals could be part of the workforce under a different type of agreement than a full-time employee. They could fill the gap left by the lack of talent available for full employment. These are highly skilled professionals, who may prefer the lifestyle of the self-employed freelancer, enjoy working a flexible schedule, or work only on specific projects requiring specialized knowledge.

The pool of talent available to be hired as contractors continues to grow, as more and more people select an alternative work/lifestyle or even reach an age where there is a desire to wind down either to explore other interests or handle personal businesses that necessitate more flexibility.

However, the term “contractor” has not always been favorable. For a long time, contractors have been part of the workforce, but were used as a sub-class type skilled worker. A contractor has usually been a worker who is perceived as nobody at the organization, one who does not belong to the “family.” These have been individuals who are often faceless and nameless to the rest of the organization.

Times have changed! In reality, these contractors could enhance the capabilities of an organization with valuable reinforcement of contingent talent ready and able to provide just-in-time services.

Because contractors are not treated as employees, the hiring process is most often done without going through rigorous screening of skills assessments, background and reference checks usually performed by human resources. Instead, the hiring is based on a recommendation or referral by a known source, and after the signing of a contractor’s agreement, the person is given the project or task to be performed.

Yet, because of how contractors were used in the past, organizations have difficulty adjusting to the thinking of hiring a freelancer/contractor to provide professional services. Why? There is fear about the loss of confidential information when using contractors. Organizations feel that because these are not employees, utilizing a different type of workforce could increase legal and security risks companies are unwilling to undertake.

Ironically, organizations are more willing to send work overseas to be processed by foreign workers than offering the same type of work to a local contractor. Labor is cheaper, and doing so removes the risk of breaking federal and/or state laws for misclassifying an employee as a contractor. Misclassification of an individual as a contractor would create tax liabilities, fines and penalties for the organization.

The challenge for your business to tap into this source of talent without getting in trouble of misclassification is real:

  • Contractors do not enjoy the benefits an employee enjoys, including minimum wage, healthcare, overtime, meal and rest breaks, and unemployment benefits.
  • Unlike employees, contractors are free from the control and direction of the organization in connection with the performance of the work, including the hours when to work, and whether the contractor can delegate the work to a sub-contractor, if they choose.
  • Organizations cannot supervise the performance of contractors in the same way they supervise the performance of an employee.
  • The organization cannot provide training to the contractor because the contractor should be an expert in his/her field and, in fact, the contractor should be engaged in an independently established business providing to others the same type of services.
  • The organization cannot provide the contractor with any equipment.
  • The state of California recently made it more difficult for organizations to hire professionals contractors by adding a requirement that a contractor’s work must be outside the usual course of the hiring organization’s business.

This freedom from control or guidance is what appeals to certain professionals who prefer to dictate their own schedules and location of work. As the pool of talent available for hire as full-time employees gets smaller and smaller, organizations that can create internal systems to manage the challenges of complying with the law, and recruiting channels for accessing and vetting this type of workforce, will have a leg up on the competition.

This article was first published in the Leading Edge Digital Magazine Summer 2019 Edition.