Compliance Risks on the Rise as More Businesses Turn to Contract Workers

3 min read
WorkMarket Editorial Team
WorkMarket Editorial Team
December 14, 2016
Compliance Risks on the Rise as More Businesses Turn to Contract Workers

NEW YORK (December 14, 2016) –The 2016 Workforce Compliance Report revealed that one in two business leaders (48%) believe that contract workers leave their company exposed to significant compliance risk. As more and more business leaders turn to specialized, on-demand contractors to scale their businesses efficiently, the potential for compliance complications only increases.

WorkMarket, the leading on-demand workforce management platform, commissioned the report through KRC Research to evaluate the views of CFOs and line-of-business managers about workforce utilization. The report found that business leaders often do not have a clear line of sight into their company’s workforce data. Surprisingly, one in four business leaders (23%) don’t even know how many contract workers they have.

“If a business doesn’t know how many workers it has or why they are classified one way versus another, it is highly unlikely that the business can comply with federal and state labor regulation and prevent penalties for compliance violations,” said Jeff Wald, President and co-founder, WorkMarket. “Many businesses do employ enterprise software systems to help manage their full-time workforces, but the vast majority of these systems are not designed to account for the highly nuance and complexity of contract work.”

Business Leaders Are Not Closely Monitoring Contract Workers

While a majority (96%) of business leaders do know that their company engages contract workers, one in five business leaders (20%) do not have easy access to contractor data including pay and time and attendance, which is information that is critical to preventing compliance gaps. Beyond a lack of workforce transparency, almost one out of every four (24%) business leaders manages contractors manually or through an excel spreadsheet—opening the door for errors and worker misclassification.

When asked their biggest concerns related to contract workers, business leaders reported: hours worked (60%), violating the Fair Labor Standards Act (40%), worker misclassification (39%) and running afoul of the Affordable Care Act (28%).

Why Employers Are Turning to Contract Workers

Nearly three in four (71%) business leaders believe that contractors are specialized workers that can be more skilled than their full-time employees. Similarly, half also noted that the cost-effective nature of contractors often makes them more valuable than full-time employees.

“Our research also shows that business leaders clearly value the drive, motivation, speed and efficiency of contract workers,” said Wald. “As more and more employers use contract workers, it’s all the more critical that they’re tracked efficiently and effectively to avoid exposure to compliance penalties, which can have a material impact upon a business of any size.”

Overall findings from the 2016 Workforce Compliance Report underscore the fact that while business leaders recognize the value of contract workers, they lack the tools and resources to accurately track their multi-dimensional workforce.

About the 2016 Workforce Compliance Report

The 2016 Workforce Compliance Report surveyed business leaders on topics ranging from workforce productivity to business impact, effective workforce management practices, the use of contract labor and compliance. Fielded in September 2016, the online survey polled 100 CFOs and 100 line managers across a broad range of industries and company sizes. Participants were selected as a representative sample of the U.S. economy. The margin of error is ± 3.5%.

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