With remote work battle-tested, businesses have opportunities to seize — but leaders must know new legislation
While the Covid pandemic created countless problems for companies and contingent workers, it has also provided an opportunity to reshape the long-held beliefs about engaging, managing and retaining those workers.
Work-from-home options have become more flexible, so organizations are thinking differently now about where work is performed and about the composition of their workforces. The successes of remote work also have provided talent with evidence that they can now expect more, and sometimes even total location flexibility.
Opportunities and risks associated with these changes are being influenced by an evolving legislative landscape that is trying to balance employee protections with entrepreneurial growth.
Post-Covid, the future of work now is borderless, making talent accessible from almost anywhere. Companies have learned how to better manage remote work so they can meet the best workers where they are, hiring them directly or indirectly from locations previously considered untenable. Not only does this expand the available talent pool, but it also extends markets, bringing companies closer to customers, clients, suppliers and the communities where their workers live.
No matter how workers are identified and classified — contingent, independent contractors (IC), freelancers, gig workers, providers under an SOW, temps — they are all seeking flexible, agile work that provides benefits similar to those provided to permanent employees. They are also more focused on maximizing their rates and business tax deductions while looking to gain access to benefits usually reserved for permanent employees.
“There are definitely more opportunities for companies and workers, but federal, state and local governments have noticed the changes too,” said Geoff Dubiski, Chief Solutions Officer at Workforce Logiq, a technology provider for workforce management. “They are changing existing laws and creating new legislation and regulations to address today’s more fluid, mobile extended workforce. Now companies need to be ready to rapidly address the changes, with modern technology and expert partners, so their workers and their brands are protected from risk.”
The legislative landscape
Dubiski believes the pace of legislative and regulatory changes around contingent workers will be slow and reactionary — instead of insightful and influenced by commercial markets — presenting major challenges for organizations.
“I think it’s going to be a constant flux over the next months and even years,” he said. “With every new administration at the state and federal levels or macro events like the Affordable Care Act or the pandemic, we see changes in things like worker classification and tax laws. Sometimes those changes are dramatic. These are risks that organizations need to stay on top of or risk being out of compliance and potentially subjected to fines.”
Worker classification has been a concern for years, but now with so many more people shifting to contingent roles, correctly classifying every worker is even more important. Dubiski said at Workforce Logiq alone, they regularly uncover about 34% of ICs who fail the IRS economic realities test across thousands of annual audits. Additional audits reveal no break in service between previous permanent employment and contract opportunities in about 25% of situations.
There are as many as five federal agencies and governing bodies weighing in on who qualifies as an IC: the IRS, U.S Department of Justice (DOJ), U.S. Department of Labor (DOL), National Labor Relations Board, Occupational Health and Safety Administration, and Wage and Hour Division of DOL. The lack of continuity among these agencies creates problems, especially when their regulations conflict with state and local laws and regulations.
So with that kind of complex regulatory landscape, companies will face overarching questions like:
- What category do my workers fall into, and what rules do I need to follow for these decisions?
- What are the governing legislative rules I need to follow to keep my company and workers safe?
- How do I ensure consistency and accuracy across all talent channels?
Beyond these questions, Dubiski said companies need to remain aware of how to define the needs of contingent workers and create an environment that serves both groups, while still heeding the particulars of running their businesses.
Companies may not realize the potential impact of changes to tax codes to their internal business operations and the individual problems faced by their entire workforce, including contingent workers and newly remote employees.
“There are a couple of examples that come to mind,” Dubiski said. “We’ve seen a significant number of people leave New York City to work from places like Connecticut and New Jersey. They are no longer paying a Manhattan tax, but how will all of the states involved tax those workers? In a recent lawsuit rejected by the U.S. Supreme Court, New Hampshire sued Massachusetts over personal income taxes collected from fully-remote workers. Massachusetts continued to collect state taxes from now out-of-state fully-remote workers, but New Hampshire claimed its residents should be released from that tax since they were no longer working within the state boundaries. These are the kinds of issues that will likely be part of upcoming state and federal legislative agendas.”
One way to ensure success when facing the constant ebb and flow of legislative and regulatory changes, Dubiski said, is to have a core internal business system that allows for consistent auditing across the entire organization. That technology can become the guiding force behind the effective management of an extended workforce.
“I’m not sure most companies understand how much these new rules coming forward are going to change the economics of and risk to their extended workforces,” he said. “We’re already finding that, at least with the current administration, the IRS, the DOJ, and Wage and Hour Division of the DOL are going to be very involved, especially when it comes to agency workers. Companies are going to need to be ready, so seeking out technology and services partners with expertise can only be beneficial.”
Technology, data and expertise
Once companies realize their need to address all of the fast-moving changes, their internal business systems become pivotal components in managing their entire workforces. Using the data available from an integrated technology system, companies are able to establish a predictable and auditable process that can change dynamically. But, he said, such a technology system usually requires a nimble technology provider that can implement system changes quickly to meet external and internal demands.
According to Dubiski, adopting the right technology system bolsters an organization’s ability to act tactically and strategically, addressing issues like:
- Engaging wider and more diverse talent pools
- Seeking out on-demand talent, which meets workforce planning needs around downturns and increases in production and can reduce layoffs
- Using geographic parameters to move workers closer to constituents, consumers, buyers and service
- Extending products and services into new markets by using a strategically placed remote workforce
There is so much rich data available today within and outside organizations that technology can enable them to stop guessing and reacting. Now, they can start predicting and anticipating to gain an edge when it comes to engaging the right labor at the right time, in the right place and at the right cost.
Having a system that flexes with changing business needs and enterprise protocols can help an organization be agile and mitigate risk. A dynamic, easy-to-update system gives businesses the ability to remain current with changing rules and regulations, including correctly classifying workers or suppliers; engaging workers through contractual arrangements; managing payroll and invoicing; and maintaining approvals processes.
Ease of use and automation are also essential if companies are to truly take advantage of the risk mitigation benefits that grow from adopting technology systems.
“The user experience has to be simple and intuitive,” Dubiski said, “because users, who are often busy managers, need quick and reliable answers — or they will stop relying on the tool.”
And when processes are automated, human error rates go down and consistency goes up. Automation leads to better on-time delivery of services and products, maximizes profit, minimizes loss and results in fewer problems meeting legal and regulatory requirements.
Regardless of the technology chosen, one factor that cannot be ignored is the ever-present need for subject matter experts. There are many tools available, but none can be optimized without people who know the client, the extended workforce arena, the legislative environment and understand how to navigate all of those components most effectively for an individual organization.
“It’s a delicate balance of technology and data with humans at the center,” Dubiski said. “There are many tools available, but no matter what a company chooses, there is still a need for the contextualization of strong subject matter experts. Without them, even the most advanced technology available right now cannot have a conversation around organization-specific or worker-specific problems and solutions.”
This Brand Studio post was written with Workforce Logiq.