What risks lurk in your contingent workforce program?

I recently joined Brightfield Strategies, the premier consultancy in contingent workforce strategy. Colleagues are asking WHAT IS IT YOU ARE DOING TRACEY?   So I thought I would share a part of what we do at  the firm, because learning the different perspectives that the team offered, had an impact on my thinking.

I have enjoyed my work on the design of our audit practice. I work with Frank Lyons, a practicing attorney in the contingent workforce space, and Erika Halverson, a consultant with experience in contingent workforce management.  Combined, the industry experience on this team enables us to analyze an issue from multiple perspectives and create a set of solutions that can bring a sharp perspective to the details that can make or break a contingent workforce management program.

Today we asked ourselves WHY companies reach out to Brightfield.  We honed in on uncovering the risks that lurk inside your contingent workforce program.

As a team we decided to share a few elements in the management of your contingent workforce program where you may find goblins lurking:

  • Staffing and MSP Contracts
  • 1099 (IC Compliance)
  • Policies and practices
  • Temporary worker assignment longevity
  • Contingent labor documentation (Non-employment, IP and  Confidentiality agreements)
  • On-Boarding and Off-boarding
  • Insurance
  • Utilization of Retirees

Two risks I will discuss in greater detail are seemingly simple items, but according to Frank Lyons can expose a company to significant risk.

DOCUMENTATION

With any audit, we look at documents, processes and policies that protect the client.  In addition to any specific items identified by the client, our Audit team makes sure that each individual temporary worker has in place:

1. Non-employment acknowledgement

2. IP assignment document

3. Confidentiality agreement

The non-employment acknowledgement requires a temporary worker to state in clear, unambiguous language that s/he is NOT a client employee.   This provides extra protection around benefit taxation risk as discussed in the Staffing Industry article at:  http://www.staffingindustry.com/me2/dirmod.asp?sid=9B6FFC446FF7486981EA3C0C3CCE4943&nm=&type=MultiPublishing&mod=PublishingTitles&mid=6EECC0FE471F4CA995CE2A3E9A8E4207&tier=4&id=C7B7BB72B90F44EBBF240022EDAD72ED

IP assignment protects a company from losing intellectual property when a temporary worker walks out the door at the end of an assignment.

Finally, the confidentiality agreement offers a client some assurance that proprietary information disclosed to a temporary worker will be protected both during and after the temporary worker’s assignment has ended.

This documentation should be kept on each worker and should be available through your MSP or the Contingent Workforce Program.  The loss associated with not having these documents accessible is typically unknown until an issue gets escalated, and by then it’s usually too late to look for other relief.  The reality is, why take the chance?

RETIREE UTILIZATION

Scenario: An employee retires or takes a package from the company, than returns to the company as an independent contractor.  If the retiree is not properly classified as a valid Independent Contractor, your benefits director would be more comfortable sitting directly on top of Eyjafjallajökull. (By the way, our attorney spent two-and-a-half years in Iceland and is one of the few people in North America who actually knows how to pronounce the name of the volcano that shut down half of Europe’s air space.  An added Brightfield benefit!)

Properly deployed, retirees are a true source of talent.  Many in the MSP world are building out retiree portals leveraging the VMS system. How these retirees are paid as contractors can sometimes be obscure. Especially if it is not carefully controlled by contract, and if random audits are not conducted regularly, a company can find itself unknowingly exposed to enormous potential liability.  A retiree contracted through an agency to his or her old employer, where the agency allows the worker to be a 1099, exposes the former employer to unimaginable risk. The risk is greatest if the retiree is receiving retirement benefits from the organization and is NOT a valid 1099.  If you think you may have this exposure, Brightfield suggests you consult with qualified benefits and tax experts immediately.  In the opinion of our counsel no amount of risk is acceptable.

The fact is there is risk in everything we do.  Contingent labor is projected to be 25% of the workforce in 2010, so managing the special risks associated with this workforce segment is an essential element of running an effective program.   Our audit leaders recommend first understanding the exposure and risk in your program and then determining the best strategy to managing the risk.

To learn more about contingent labor risk, Staffing Industry Analysts is hosting the Contingent Workforce Risk Forum in May. See their website www.staffingindustry.com or send me an email tfriend@brightfieldstrategies.com.

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