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Contract Employee

Tips to hire contract employee

Contractors and temporary employees are increasingly being used to supplement existing workforces, respond to expanding talent demands, staff big strategic initiatives, bring new skills and experience to teams, and drive growth. Contract labour is becoming more popular across the world. According to an Oxford Economics poll, 61 percent of CEOs said they were using contract workers more to accomplish corporate goals. Furthermore, according to meensat’s Annual Jobs Forecast, 47% of companies want to hire part-time or contract employees. Not only are businesses entering the contractor industry; an increasing number of experts are choosing to operate as "free agents". According to a survey from the Bureau of Labor Statistics, 79 percent of independent contract workers prefer their arrangement over regular employment. While there are many different sorts of freelance, SOW, consultant, temporary, and contingent employees in a variety of contexts, we'll focus on how to properly classify and manage independent contractors in this article.

Risks and Consequences of Using Independent Contractors in a Co-Employment Situation

Using independent contractors' expertise can have a number of advantages, including no income tax withholdings, no employment taxes, less employee responsibilities, and improved workforce agility. Co-employment and compliance difficulties might arise as a result of poor
management and classification of independent contractors.

What is co-employment?

Co-employment occurs when a contract employee has two employers, each of whom has possible legal duties for them. Because both the vendor and its client might claim an employer- employee connection with the contractor, co-employment scenarios are prevalent when
independent contractors are employed through a staffing vendor. In most situations, the staffing company is referred to as the primary or record employer. When the client, or "secondary" employer, oversteps the contractor-secondary employer relationship, co-employment hazards arise. To put it another way, the customer has greater influence over the contract employee than the rules and regulations allow.


Organizations that venture over their bounds risk becoming the employer of record, as assessed by the IRS's 20 Factor test. If a company is designated as the employer of record, they are accountable for all duties performed by their staffing vendor.

For example, litigation involving co-employment may require an employer to reimburse missed earnings, overtime, or perks. In these situations, corporations may also be liable for any related court expenses, which, given the length of many of these cases, may add up quickly. The Vizcaino v. Microsoft Corp case is a well-known example of co-employment lawsuit involving contract workers. Microsoft was deemed to have failed to correctly identify the duties of temporary workers by the court, resulting in fines of over $100 million.

Having a single point of contact for staffing vendor management is one method to prevent the danger of co-employment. This single point of contact might be a Managed Service Provider (MSP). MSPs can reduce co-employment risks by assuring 1099 worker compliance and correct classification. MSPs help reduce worker risk by performing drug testing, background screening, and competency evaluations, as well as evaluating worker eligibility. Pre-screening and onboarding best practises are included in comprehensive MSP programmes, as well as drug testing, worker eligibility, skills evaluations, salary rate, bill rate, and performance ratings, all of which are meant to encourage compliance and reduce co- employment risk. MSP customers may use enterprise-wide independent contractor (1099) risk assessments to better understand their exposure and develop plans for replacing independent contractors or transitioning to W-2 status if necessary. This can help with the compliance issues that come with hiring contract workers.

The contract employee workforce is becoming a larger component of the labour mix as more professionals choose to make their income as contract employees. Developing a best-practice management plan is critical for attracting and keeping top talent, as well as maximising
organisational growth. Contract employees are getting more input in the job they do, and companies are linking them with coworkers and rewarding them for their efforts. In other words, they're putting themselves in a position to become contractor's preferred employer.

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