It’s a controversial business issue making front page news in countries across the western world. It has the potential to seriously damage your business. Even destroy it. And it’s heading for Asia right now. Worker classification has always been a complex and even dangerous issue. Now it’s become a life or death matter in the eyes of many.
Independent Worker Classification and the AB5
The spotlight on independent worker classification began intensifying in early 2020 when California’s AB-5 law went into effect. AB5 stands for Assembly Bill 5 (AB5) and with it lawmakers there sought to extend employee classification status to some gig workers.
Previously, app-based rideshare companies such as Uber, Lyft, and DoorDash were being sued by the state for non-compliance and misclassifying their workers as independent contractors, which resulted in the company-funded Prop. 22 ballot initiative in the November 2020 election. Ultimately, California voters determined those workers should in fact remain independent contractors, but the cat was well and truly out of the bag. All over the USA there is now a renewed focus on worker classifications.
In Australia, emotions ran high recently when a number of app-share delivery riders – nearly all students from Asian countries – were killed in road accidents whilst ‘on the job’. As they’d been classified as independent contractors there was no insurance pay out and no compensation for grieving widows and families. Nor even an acknowledgement of service from the big name international companies involved, all of whom suffered severe reputational damage. As a result change is on the way down under. Worker classification and protections there – like in the USA – are well and truly in-frame, as are the miserable hourly wage rates being paid to many independent contractors across a range of industry sectors.
Importance of Worker Classification in Asia
All this, and more, is coming to an Asian country near you! And that country may be much closer than you think!
Worker classification has always been a closely monitored topic in Asia, where contingent workers are common and companies often maintain an eclectic workforce mix.
In 2021 Governments there will no doubt be casting a fresh eye over the whole issue, and if you’re an Asian region employer then not knowing the legislations around correctly classifying employees could cost you dearly. The bad publicity and serious financial penalties involved could impact your brand, business performance and long term organisational objectives.
So could turning a blind eye. It’s a fact that many business owners will classify a person as an independent contractor when they should really be an employee simply because independent contractors are easier administratively and generally cost less.
Whilst this may be OK in the short-term or for specific project based assignments, this laissez-faire approach may lead to misclassifications in the long-term if not assessed appropriately initially and reviewed regularly. Again, the costs and penalties involved could be significant, and long term.
That’s why it is vital that organizations understand the differences in classifications and ensure the use of contingent workers is rigorously consistent with the country or state legislations they are working within.
Consult CXC for help on Worker Classification
So how does a company know whether to classify one of their workers as an independent contractor or employee? Especially in a region where there are multiple jurisdictions and legislations vary considerably from state to state and from country to country.
Don’t hesitate to contact our workforce classification specialists today if you need a worker classification check up.