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Understanding Contingent Law

By Ms. Elizabeth Rice, SPHR

As businesses in the US are increasingly seeking to find new ways to maximize productivity by utilizing the services of specialized workers, relationships between employers and contract employees that make up the contingent workforce are undergoing a period of significant development and reconstruction. "Contingent" employment encompasses a number of part-time or short-term work agreements, including independent contracting, subcontracting, outsourcing, temporary employment, project-centered and part-time work. This broad range of employment arrangements and the various hiring and classification practices involved in each situation can create complexities for the HR professionals involved.

IES recently interviewed attorney Ron Wainrib, editor and publisher of Temp Law Online to discuss current issues related to law for contingent employees. Wainrib has written, edited, taught and published legal educational material on new developments in labor, employment, and employee benefits law for more than 20 years.

The importance of staying current on contingent law

Temporary and contingent employees are affected by a number of regulations regarding taxation, labor and employment, employee benefits, immigration, workplace safety, and more. These laws are also revised and updated more frequently now, as the rising number of contingent employees creates a heightened interest in and demand for employer benefits for contract workers. Therefore, it is becoming important for employers to maintain an up-to-date understanding of the laws relating to contingent employment.

Laws for contingent employees vary from state to state, and cover a variety of hiring and tax classification procedures that often differ from those of full-time, regular employees. Keeping up with requirements and obligations to contingent workers, which vary based on area of law, circumstances, and the nature of employment, is time consuming for HR managers.

Additionally, in recent years the demographics of contingent workers have shifted creating an increase in employer regulations. Wainrib points out, "A huge myth of the contingent workforce is that they are all support staff." Typical contract or part-time jobs for temps, independent contractors, and those working with temporary visas are indeed part of the contingent workforce. "However," he continues, "today more CEOs and high-level management employees are contractors instead of employees, and serve key roles in the workforce as well."

Getting the facts on contingent law

Often, the reason most employers choose to hire contingent employees is to reduce costs. "Contingent employees appear to offer advantages of flexibility, no commitment to payroll, fewer tax liabilities, and generally no workers' compensation" notes Wainrib. However, these perceptions can sometimes be inaccurate. "The primary misconception about contingent workers is that they have fewer rights to benefits like insurance and retirement. That is, that the contingent employee has fewer rights protected by workforce laws," he says. In reality, while contingent employees do offer advantages such as flexibility and freedom from a payroll commitment, employers must still pay taxes and insurance within their bill rate for contingent staff.

Talk of mandating benefits for the contingent workforce has begun to appear in some states, meaning employers must pay close attention to any changes in legislation with regard to employment law. In some states, recent proposed legislation calls for benefits for contingent workers. Rising trends also indicate that companies using staffing agencies to recruit contingent workers should offer these employees benefits comparable to those of the company's other employees. Often times contingent workers are aware that they are not receiving the same benefits as core employees and will negotiate a higher salary to offset the loss of benefits.

Putting contingent law into action

In order to better manage contingent staff and ensure compliance with government regulations, employers should try to stay educated and informed on the latest legislative practices with regard to hiring non-core employees and classifying them for tax purposes. Some types of contingent employees are more subject to changes in the law than others. "For example," Wainrib states, "immigration law is one area that is constantly changing. Companies looking specifically for visa workers find themselves in a bind when this happens, because noncompliance can result in legal issues. Staying up-to-date on the dos and don'ts of managing the contingent workforce is an HR 'best practice' that can help prevent unwanted scrutiny."

Employers may also want to consider using a third party HR administration service such as IES to act as the employer-of-record for contingent workers, saving a company's HR department the complicated process of hiring and correctly classifying them. Because HR administration services stay updated on the latest legislation for non-core employees, they often help minimize hiring and classification slip-ups, saving both time and money associated with errors and misinformation.

About the author:
Ms. Elizabeth Rice, SPHR is the President of Innovative Employee Solutions® - a San Diego-based company specializing in payroll and HR administrative services for the contingent, non-core workforce. Ms. Rice has more than 20 years of experience in HR and executive management and is noted both regionally and nationally for her particular expertise in employee relations, women's workforce issues, and temporary employment. Ms. Rice can be contacted at erice@innovative-es.com

About Temp Law Online
Temp Law On Line provides its visitors and clients the opportunity to obtain legal information they need quickly and easily. Ron Wainrib, Esq, is editor and publisher of Temp Law On Line and President of REW Associates, Inc, a Massachusetts corporation. Ron provides consulting and legal research to business managers and other professionals on workforce legal issues and compliance with workforce laws. The timely and convenient information, user-friendly format, research and consulting services on a wide range of legal issues provide clients with quick access to the information they need, when they need it through publications, seminars and legal research and consulting services.