The Challenge: A Long-standing Practice Faces a New Legal Reality
When California’s Assembly Bill 5 (AB5) went into effect in 2020, businesses across the state were effectively forced to stop paying most workers as independent contractors (ICs) – or face damaging penalties and heightened ongoing legal scrutiny.
One prominent public California university recognized that it had to act quickly. It had been paying roughly 150 virtual trainers as ICs for years, but it knew that regulators now had the authority to reclassify them as employees. “The legalities were confusing, and the ramifications were significant,” a university representative said. “We needed a compliant W-2 solution for these workers. We couldn’t afford to get it wrong.”
It considered making the workers become W-2 employees of the university. “But we didn’t have the time, resources, or knowledge to handle this compliantly and keep our workforce happy,” the representative added. Managing the added employment, timekeeping, and payroll responsibilities for this group – which works inconsistent hours and durations – was more than the university wanted to take on.
The Solution: Compliance Becomes a Springboard to Broader Value
When the university selected IES to provide W-2 Employer of Record services to this group of independent professionals, it knew it had found the right partner to steer it through the regulatory minefield. The university, with IES’s expertise, could ensure ongoing, air-tight compliance for its independent trainers – not just with AB5, but with all local, state, and federal employment laws.
But the IES solution didn’t stop there. It also relieved many of the administrative burdens that come with using a non-employee workforce. When IES began processing all payrolls, tracking time against multiple assignments per worker, and managing benefit administration for qualified workers, a wide range of tasks were instantly taken off the university’s plate.
“IES didn’t look at our situation just with an eye toward compliance. It got to know our company’s needs at a deeper level and had the vision to address all the places we needed help – not just legally, but also operationally.”
The Results: Security and Savings Lead to a More Widespread Program
IES’s solution provided a wide range of benefits for the university:
Reduced Risk
Through its compliant W-2 payrolling solution, IES mitigated the university’s AB5-related reclassification risk and “future-proofed” its risk profile.
Talent Retention
Thanks to the appealing nature of IES’s program and careful change management strategy, the university didn’t lose a single trainer due to the transition.
Time and Cost Savings
IES’s outsourced W-2 payrolling solution alleviated the university’s burden dramatically, saving its staff over 40 hours of admin time each week.
Improved Insights
The IES team configured the university’s program so that it could quickly and easily review usage and payment metrics on this fluctuating, hard-to-track workforce.
IES’s important contributions didn’t end there. The university now uses IES in other departments, as well as for engaging and paying out-of-state and out-of-country workers.
As such, since engaging with IES, the university has successfully avoided misclassification penalties, minimized its administrative burdens, and stayed ahead of emerging labor law risks – regardless of whom it engages or where they work.
The university also praises IES’s customer service and their day-to-day interactions with the IES team. “I love IES’s customer service and the speed with which they help. The whole team is amazing and is always so attentive to our needs.”
