The independent workforce trend creates opportunity for all
In Len April‘s article Tuesday, he looked at the lackluster September jobs report, the more worrisome decline in the labor force participation rate (LFPR). Instead of signaling the end of employment as we know it, these conditions have sown the seeds for a more elastic, liberated, productive and lucrative independent workforce that can drive the success of the sharing economy.
Consider the Boomer generation. Some will retire. Some, as we explored in our previous post, will choose to remain in their positions as long as possible, which can hinder the career development of Millennials. Yet many more seem to be choosing interim work over retirement or ongoing tenure. As DCR Workforce explains, interpreting recent data from Gallup, “Those between ages 62 to 66 — the years in which workers are eligible to begin collecting Social Security — are most likely to take on a part-time or temporary position.” Contingent work continues to play an instrumental role in the sharing economy. Between 2011 and 2013 alone, staffing and recruiting sales surged by $12 billion, according to the American Staffing Association (ASA).
Yet within the contingent talent force, we’re witnessing changes as a powerful niche comes into its own. The population of independent, freelance, self-employed and entrepreneurial talent is experiencing explosive growth. Not only that, these workers are happier, have achieved greater work-life balance and are profiting on their own. That’s welcome news for employers and workers looking to improve their opportunities. However, there are some in the staffing industry that find these changes distressing. Will there remain a need and a place for staffing professionals? The resounding answer is yes. Perhaps more than ever. As we’ve discussed before, the dynamics of the economy are redefining the nature of the workforce — and that’s driving staffing providers to evolve. Their importance as curators in the process of sourcing and connecting talent to employers, in a compliant manner, can only increase.
In this article, we’re going to look at the independent talent boom and how staffing curators can help sustain and motivate it.
The independent talent boom
As recovery efforts began in the aftermath of the Great Recession, employers worried that the skilled independents they’d relied on to restore their businesses would dwindle — the assumption being that this talent would return to full-time work. That fear seems unfounded today. As MBO Partners CEO Gene Zaino explains: “The primary reason independent workers give for their choice is that working for themselves means they are not under the control of a single employer or boss.”
- According to MBO Partners’ research, 43 percent of full-time independents say they’re more secure working independently, up from 33 percent in 2011.
- The average independent has four or more clients to diversify financial risk.
- The average full-time independent typically earns more than the average traditional employee.
- Close to 80 percent of independent workers admit being happier.
- One in seven traditional employees, age 21 and over, are considering a switch to independent work.
- Independents are important and positive contributors to the economy — their revenues reached $1.15 trillion in 2015, about seven percent of U.S. GDP. “If the independent workforce were a country,” Zaino posits, “its ‘Gross Independent Product’ would be almost equal to the GDP of Mexico.”
A new relationship between independent contractors and staffing curators
As Taryn Barnes observes in Workforce Magazine, “Led by the likes of Airbnb Inc., Instacart and Uber Technologies Inc., the sharing economy — also known as the gig, on-demand and 1099 economy — is providing independent contractors the ability to scale their businesses in a simpler and more feasible manner.”
The aggressive and rapid development of the sharing economy isn’t just fueling independent opportunities and company profits, it’s redefining the relationship between staffing providers and independents. Of course, independent contractors poses greater challenges. Unlike full-time employees or a staffing company’s talent, who are W2 employees of the agencies for which they work, independent contractors are essentially their own business entities — vendors themselves. The visible and troubling misclassification lawsuits plaguing gig pioneers like Uber make organizations more reluctant to engage them.
That said, staffing curators can capitalize on their compliance knowledge to “help bridge the gap for employers looking to engage independent contractors,” as Barnes writes.
Steve Berchem, the ASA’s chief operating officer, agrees: “Staffing firms help businesses minimize the risk of misclassifying legitimate workers as independent contractors.” Beyond that, more independents are discovering compliant ways of engaging staffing curators to help connect with them clients.
The role of staffing curation in the world of independent contracting
As Barnes points out in her article, “Staffing firms can eliminate the risk of freelancers getting stiffed by clients while independent contractors are able to source work without having to trade solely on their name and reputation.”
Most MSPs and a growing number of staffing firms already have 1099 compliance protocols firmly in place. Leading MSPs, for example, design and oversee the engagement processes of independent service providers, identifying any red-flags along the way. In large part, MSPs treat the relationship the same as they would with any outsourced service provider. The contractor functions as another supplier or vendor in the program.
- MSPs verify insurance, business licenses and qualify independent contractors according to evaluation criteria delineated in state ABC tests, IRS Common Law tests and FLSA Economic Realities tests, which focus on the issue of control.
- MSPs limit any perceived managerial roles with the contractor:
- Regular communication occurs between the independent providers and the MSP, only in relation to contractually bound and scheduled milestones, deliverables and Statement of Work (SOW) commitments — not employee related issues such as attendance, timekeeping, hourly productivity checks, etc.
- The MSP can act as a payment processing agent between the IC and the client, following a negotiated billing structure that adheres to financial control factors.
- The MSP restricts the inclusion of independent agents in company functions unless absolutely necessary to the performance of the work as contractually stated.
- All HR related information is directed to the independent contractor.
Many staffing agencies are now applying similar standards, as the need for independent contractors grows. Using their knowledge of employment law and compliance, they can ensure that the utilization of independent contractors occurs for specific, specialized work only, such as projects with established contract terms.
- Staffing curators assess the scope of the project, the time frame and the method of delivery. They evaluate which party controls the way the work is performed, and perform due diligence on the qualifications of the independent contractor to function legally as its own entity.
- Staffing curators, by observing the nature of the relationship, have the ability to determine if the engagement is leaning toward an employer-employee situation before problems arise.
- Staffing curators, when classification risks are detected, can offer independents a traditional contingent position, allowing them to become W2 payrolled employees of their agencies.
For independent contractors, the allure of working with staffing curators is strengthening. Professional staffing agencies have superior knowledge of the employment landscape and a robust list of clients looking for non-traditional talent. Just as staffing professionals help hiring managers and MSPs source the best candidates available, they can also become massively influential to independents as sources of potential projects.
“Independent contractors are using staffing firms to help them get connected to jobs while having the benefit of somebody else marketing on their behalf,” Barnes writes, citing Matt Rivera, the marketing and communications vice president for Yoh Services.
New tools are spreading to help staffing curators and independents
To further downplay the sense of gloom, they also tout the unchanged unemployment rate of 5.1 percent. And that would seem to indicate a generally healthy overview of the market — jobs are still being created, albeit at a slower clip, and nobody’s getting sacked. Unfortunately, data for jobless claims don’t paint the whole picture. The labor force participation rate (LFPR), which measures the number of Americans in the workforce, plummeted to its lowest level since 1977. That means an alarming chunk of the population isn’t considering a job. Yet there’s another aspect that analysts and pundits are ignoring — the rise of a voluntarily independent workforce and the power it has to reshape the outdated employment models that are withering in this new century’s economy.
Not participating is different than not employed
So what’s the difference between the unemployment rate, which we hear about regularly, and the less publicized LFPR? Unemployment statistics track the number of jobless people who’ve filed claims, are actively seeking work and haven’t found or been offered a position. The LFPR depicts the count of individuals who’ve simply dropped out of the workforce altogether. To put it another way, pretend you’re an actor on “Game of Thrones.” It’s probably fair to say that you’re the ultimate at-will employee. And odds are that your character’s virtual mortality rate isn’t good.
And she’s absolutely correct. More VMS providers are already preparing to integrate these systems into their own platforms. Others are developing their own modules within existing systems.
A new era of workforce freedom
Independent talent don’t embody a new or novel approach to business in this country. The origins of the U.S. labor movement can be traced back to the nation’s earliest settlers. The rudimentary labor movement was inspired by values that relied on the virtues of independent citizens to provide exceptional wares and services. This attitude inspired an entrepreneurial spirit where the accountability placed on each individual tradesman drove a high quality of goods.
It wasn’t until 1938 that America truly witnessed the shift to what we now consider the traditional employment arrangement. Yet in this century, ideals of independence and entrepreneurialism represent a departure from bygone eras and present a fresh perspective — one that ensures the prosperity of talent, commerce and economic growth together, as data and analysis suggest.
“The future of work is already here, and the innovation and entrepreneurship it will unleash are unprecedented,” Gene Zaino of MBO Partners asserts. “Will the trend towards independence continue? All signs point to ‘yes.’”
(Image Source: Dallas Morning News)