Often when a new project is in development a Project Managers (PM) must ask several questions when developing their plan. The most important being, “How do I get this project done under-time and under-budget?” Team development is a significant factor and cost associated with project work and PMs.
Many companies look at contract employees supplied through a staffing firm or independent contractors (IC), and while the difference may seem negligible, there are many factors at play when you decide how you hire, manage, and interact with this workforce option.
The main difference lies in the fact that contractors from staffing firms are usually W-2 employees who are assigned to work at various clients, while ICs are truly independent business-people who prefer to work on their own. As one can imagine, misclassifying 1099 contractors can have serious legal consequences.
Let’s look at how the employment status of your contract employees can impact your actions and liability across the employment continuum.
Recruiting and Administration
Like any employer, staffing firms assess prospective employees, process payroll and withhold taxes, and provide insurance coverage, including worker’s comp, as well as other employee benefits. Their administrative staff also oversee compliance with regulations such as the Family and Medical Leave Act (FMLA), the Affordable Care Act, and other human resources functions.
Also, every contractor is bound by the terms in your master agreement and staffing firms often have employees sign individual agreements to ensure that they are not permitted to the client’s benefits. Staffing firms also simplify administration by providing consolidated billing, standardized pricing, and most importantly, performance guarantees.
Above all, staffing firms have teams of industry-specific trained recruiters who spend extensive time sourcing candidates, monitoring performance, career development, and availability of their contractors. Staffing firms are responsible for anticipating their clients’ needs and maintaining a sufficient pipeline of talent. Their business relies on providing high-quality talent & substantial value.
Independent Contractors can increase the range of skills and the availability of talent in your short-term pool. However, you’ll have to execute your sourcing, screening, background checks, interview scheduling, and verify the IC’s insurance coverage and credentials.
It’s also wise to draft, execute, and retain a separate contract for each engagement or project. Additionally, experts recommend building an agreement based on a test created by the Internal Revenue Service (IRS) to determine if a worker is legally considered an employee or an independent contractor. Here are a few things from SHRM to keep track of what you need to know about a contractor as well.
Day-to-Day Management
According to the IRS, you may only direct or control the result – not how the work is performed, when working with an IC. Moreover, an IC can challenge his or her status if they feel their relationship has been misclassified at any point.
In fact, in 2015, judges ruled that lawsuits regarding the classification of Uber and Lyft workers can proceed, because the ridesharing companies exercise control over the manner of work, specifically as it relates to the collection of fares.
The government sustains that ICs should work offsite, set their hours, use, and maintain their tools and perform services for multiple clients.
If you prefer to direct the contractors’ activities, provide training and oversight, have him or her report to your office and interact with your team, a contractor from a staffing firm will meet your needs and help you stay on the right side of the law.
Independent Contractor vs Contract Labor
At the end of the day, the decision is often tied to the type of work being done. If the work can be completed as a side project, without much oversight required than an independent contractor could be the right fit. However, if you have an internal project such as technology implementation or integration or special accounting project, contract employees may be just the right fit.
endevis is a national talent & workforce solutions provider with offices throughout the nation. With a focus on healthcare, engineering, and IT staffing, the organization has won a handful of awards across its Professional Direct Placement, Professional Contract Staffing, and Recruitment Process Outsourcing Solutions. To learn more about this topic or any talent-related question, please email ROI@endevis.com.