Misclassification – a growing risk

It’s not hard to spot a contingent worker if you’re looking for one—the new developer in your employer’s IT department working on a short-term engagement; the offshore website developer you engaged to build your kids’ primary school website; or, the ‘host’ at your Airbnb holiday beach house (the ‘contingent renter’). What might not be so apparent is how these temporary, freelance, or contingent workers are impacting the global workforce. A recent projection estimated that by 2020, around 40% of the workforce will be contingent contractors. The next time you hop in an Uber, keep in mind that workers just like your driver might make up nearly half of the active workforce in only four years. Except that might not be the case—not entirely.

While Uber drivers and Airbnb renters are grouped as independent contractors, these low-skilled, temporary workers make up only a small percentage of the global contingent workforce. The majority of independent or freelance contractors are highly skilled, specialised individuals working white-collar, short-term positions. Despite being a valuable and cost-effective resource, these workers are not always part of the global conversation on the gig economy.

The low visibility of these white-collar contractors may not be entirely their fault: the workers in gig-economy companies, such as Uber, make bigger headlines. Uber has had to deal with a number of lawsuits that accuse the ride-sharing platform of worker misclassification: Uber contends that its drivers, who make their own schedules and use their own cars, are independent contractors, while many government bodies across the globe insist that these drivers—13,000 of which are currently taking fares in 15 Australian cities—should be legally classified as employees. If independent contractors are set to make up half of the global workforce in just a few years, ensuring that these workers are hired properly will become an essential responsibility for any business seeking to engage with the contingent workforce.

According to the Contingent Workforce Index’s Global Analysis for 2016, Australia ranks 16th of the top 25 global markets for contingent workforce engagement. With a market already recognised for its active engagement with contingent workers, an unambiguous plan for hiring and classifying workers will become a near necessity for Australian companies. For organisations working with freelancers, it is difficult to know exactly when a worker should be hired as an independent contractor, and when it is required that he or she be hired as an employee or engaged through a third-party employer. The risk is great: unknowingly committing worker misclassifications can result in costly fines and legal action.

However, this tricky territory should not discourage organisations from tapping into the growing number of highly skilled, specialised independent contractors finding comfort in Australia’s workforce. Much of the recent hoopla surrounding worker misclassification shouldn’t cloud an organisation’s judgement, as many contingent workers can legitimately be hired as independent contractors. But parsing out how each and every newly hired worker should be classified can be a costly endeavor that many companies don’t have experience in. Luckily, these companies have contingent workforce solutions providers to help them navigate this tricky terrain.

Organisations can team up with a contingent workforce solutions provider, like CXC Global, who specialises in managing the client-contractor relationship from the sourcing, hiring, and management, right through to offboarding. Engaging with a contingent workforce solutions provider such as CXC Global is an efficient way to get the best of both worlds: minimise the risks and pitfalls associated with hiring contingent workers while still maintaining a highly efficient and flexible workforce.

To make sure you don’t miss out on more awesome content about the Contingent Workforce click here