Contractor Compliance Management: How to Ensure Your Business is Safe

Contractor compliance management: this is the process of making sure your contingent workforce is legally observing all regulatory, statutory and financial requirements, according to state and federal legislation. It’s a crucial component of operating with a successful contingent workforce in your business.

Ignoring contractor compliance and your business risks major penalties; penalties that have, in the past, sent many businesses under.

The key objectives of a quality contractor compliance management strategy include:

  • The ability to reduce or eliminate risks associated with incorrect or inadequate contractor insurances
  • The ability to reduce or eliminate safety risks in the workplace
  • Ensure legal risks are removed, by classifying contractors correctly
  • Ensure statutory risks are removed by complying with visa requirements of any overseas workers
  • Ensure the contract workers are aware of their responsibilities in the compliance equation

Today, we’re going to cover the many facets of contractor compliance management. If your business can create a situation where a robust compliance framework is the baseline of your contingent workforce, your business will enjoy:

  • Reduced operating costs
  • A boost to productivity
  • A quality reputation with your contractor workforce and therefore…
  • Improved contractor retention.

Let’s dive in.

Contractor Compliance Management: A Centralised System

The purpose of contractor compliance management is to minimise the risk exposure to your organisation by improving – and centralising – your processes for managing contingent workers. The criterion for compliance needs to be thorough, covering all statutory and industry standards.

In addition, the undertaking of contractor compliance management must involve all relevant stakeholders inside and external to your business. These include HR, procurement, legal, finance, and IR. And despite these multiple stakeholder groups, the best, most effective approach to contractor compliance management, is a centrally managed system.

Importantly, contractors must fully agree to and understand all compliance obligations before they start working in your organisation.

The Various Compliance Hot Spots

If your organisation engages large numbers of contractors, a robust contractor compliance management process is a must.

It’s a complex and challenging proposition to engage and manage large numbers of contractors. So, conformity with all legal and regulatory obligations is crucial.

At a minimum, your business must establish a compliant contractor environment, which ensures your workers have the following (some of which are industry-dependent):

Industry licenses

Correct insurances

Correct worker classifications

 Completed and approved background checking

The relevant industry certifications

Compliant right-to-work checks

Adequate safety protocols and procedures

Without these basic compliance checks, your organisation could be exposed to financial and statutory liabilities.

A recent Deloitte report showed the five key priorities for contingent workforce management. And compliance was a big concern. See below:

contractor compliance management

Contractor Compliance Management: The Key Risks

We’ve previously identified the main risks of taking on contractors into your business. Today, these risks hold true. In summary they are:

Intellectual Property Risk:

Contractor compliance management, means establishing a set program to engage, manage, onboard and offboard contingent workers. In the absence of a robust program, the risk of losing IP, trade secrets, competitive data and more is very real.

Placing restrictions on workers taking competitive contracts, ensuring they sign NDAs and establishing security protocols are all critical for securing sensitive and vital company information.

Security Risks:

Security risks come in many guises. These include:

  • Allowing contingent workers to use cloud-based apps like Dropbox or Google Docs, without your IT department’s approval
  • Extraneous provision of admin privileges in your company IT system
  • Access to corporate data after completing a contract
  • Poor monitoring of cloud app usage, especially when access to mission-critical documents is apparent.

Financial Risks

There are a number of avoidable financial risks. These include:

  • Poor visibility of long-standing contractors in your business. If they’re not monitored or managed, they can sit in your business for way too long
  • Poor transparency, no centralisation, and inconsistencies from agency suppliers, and the margins they’re charging you
  • Poor regulation of rates for contractors under like classifications. Non-standardised rates can result from rogue hiring, misclassification of workers, and poor management of your contractors.

Contractor Compliance Tracking

One of the biggest challenges when it comes to contractor compliance management, is keeping track of your contractor’s activities. This includes:

  • tracking and managing their performance
  • overseeing the timely management of contract renewals
  • being across contract expiry dates
  • monitoring compliance activity in real-time
  • future scoping any potential gaps or issues to mitigate potential problems for your workplace.

The implications of poor contractor compliance management across any of these areas could be devasting for your organisation. This is particularly so if any of your contractors are already working in a non-compliant framework.

In Summary: Contractor Compliance Management

There are many areas to contractor compliance management that your business needs visibility of. These include:

  • Insurances: do your contract workers maintain the right insurance cover for the nature of work they are undertaking?
  • Evidence of relevant training for the job type and industry, especially when mandatory training is required for maintaining industry compliance
  • Systems in place: what systems are in place for managing workplace safety, IR compliance, including risk management, and a safe and healthy culture
  • Regulatory activity: have there been any breaches incidents where non-compliance of contractors is evident?

Also, please do contact us if you have any feedback or comments.

As one of the world’s leading providers of contingent worker management solutionsCXC is well-positioned to optimise all elements of your contingent workforce strategy.

With operations in more than 50 countries across five continents and decades of experience, we can assist with every aspect of your program.

If you are interested in discussing contractor compliance management, please don’t hesitate to contact us.