Why Should You Outsource Your Independent Contractor Management?

Have you ever taken an Uber or Lyft ride? If so, you have received a service from an Independent Contractor (IC). Of course, rideshare drivers are just one example of workers that are considered ICs – ICs are all around us, and organizations across all industries engage ICs to perform work for them. 

An IC is a self-employed individual engaged to perform a specific function, service, or project for a company.  ICs are free to perform their work as they see fit, are not subject to oversight or supervision, and are held accountable only to the end result of the service or project they are engaged to deliver on. Aside from setting their own work schedules, ICs are also set apart from employees due to their responsibility to pay their own taxes, insurance, and benefits.  

ICs are a great asset for many organizations, but hiring and managing this population presents several unique challenges. Properly distinguishing between ICs and other types of workers is essential for legal and financial risk mitigation. Companies must adhere to all federal and state compliance guidelines pertaining to this worker population.

To ensure they remain compliant and have insight into all IC-related activities, many companies opt to outsource their IC management to an expert 3^rd party.  

What Does IC Management Entail?

I am sure you’re asking yourself, “What can an IC management team do for my company that we can’t handle ourselves?". Well, the answer is that they can navigate the challenging legal complexities for you and properly manage this worker population so that you can focus on your core business activities and avoid the potential stress of misclassification consequences.  

Here are some of the responsibilities that a 3^rd party IC management team will take care of:  

• Vetting ICs to determine if they are the right fit for your jobs/projects  
• Drafting contracts and distributing them
• Avoiding misclassification issues 
• Spearheading all communication – IC management team will be the main point of contact for all ICs. They will communicate timelines and expectations, field any questions, establish check-ins if necessary, etc.
• Tracking work hours and handling all necessary documentation and record-keeping
• Managing their payments
• Ensuring successful project completion 
• Handling the offboarding process – this can often be a forgotten step, and it leads to ICs having access to a company’s technology systems and data without the company’s knowledge after their engagement is over. 

Just think of all the time your employees will have to focus on core business activities if they do not have to handle these activities for every IC entering your organization.  

Benefits of Outsourcing Your IC Management

To further explain the importance of outsourcing your IC management, here is a list of some of the key benefits.  

1. Quality

Most companies do not have employees that are experts in the IC management department, so when they try to manage this population internally, the results are not faultless. However, you can expect IC management providers to bring best-in-class knowledge in employment practices and worker classification. 

Having a well-experienced, highly qualified firm manage your IC workers can bring peace of mind to companies with diverse groups of worker classifications, because these providers’ expertise ensures they are only producing work of the highest standard. 

2. Visibility 

Since ICs have significantly more freedom than employees, visibility into their activities often does not exist. A lack of visibility can lead to financial risks for a business, but standardization and automation can close that gap.

Standardization and automation should be a key part of working with a 3^rd party to manage your IC population because it ensures that your ICs are not getting lost in the shuffle.  Full visibly into requests, assessments, onboarding, billing, reporting, and management can give companies the insight needed for better planning on project timelines and spending.  

3. Cost

Regular rate analysis and job market benchmarking can increase a company's chance of realizing cost savings and fair market rates. ICs do not get paid the same way your employees do, and it can be difficult to determine their pay rate.

ICs are no exception to having to stay competitive in a highly competitive job market, but you still do not want to pay them more than you need to based on the current market rates – this is where a 3^rd party can step in and help execute on quality market analysis. 

 4. Efficiency

Building a partnership with an IC management provider can remove the administrative burden of vetting, engaging, and managing this worker population. 

The acquisition and management of ICs requires substantial time and attention - so outsourcing these processes to an expert 3 party will improve the experience for ICs while they are on assignment at your company. Having a single point of contact to rely on for all IC-related matters will lead to seamless, efficient processes that save your company time and money along the way. 

5. Compliance

As we mentioned above, worker misclassification is a major concern for many companies – especially when it comes to ICs. Companies must follow federal and state guidelines to avoid compliance issues and regulatory fines. Weighing the significant risk to IC misclassification is a heavy burden because these guidelines are plentiful, unyielding, and ever-changing.

If your company does not have an internal subject matter expert who understands the legal complexities of hiring ICs, then you should strongly consider outsourcing this process to the experts. Utilizing a 3^rd party will ensure all ICs entering your company are in line with the most up-to-date laws and regulations at all times for all engagements. 

Without adopting a formal approach to IC management, you are exposing your business to risk and likely falling short of your efficiency potential. A good IC management team will develop a smooth working relationship with ICs and streamline successful project completion. Although this worker population is not technically a part of your company, you should still strive to establish a positive working relationship with them, and a 3^rd party IC management team can help you get there.