Companies make use of contingent workers to access new skills, meet seasonal demand, and remain competitive. As such, many companies rely on their internal HR departments to manage their contingent workforce strategy. Unfortunately, as HR departments are already focused on managing permanent employees, companies utilizing this approach may unintentionally be introducing risks when hiring contractors. While a properly executed contingent workforce strategy can be financially beneficial, mistakes can be extremely costly.

Use these recruitment tips to reduce the most common hiring risks when engaging independent contractors:

Rogue Hiring

From job-posting to issuing applicant acceptance emails, there are numerous things to be mindful of. Risk occurs when contingent workers are hired without undergoing the proper screening and/or assessment processes. A common occurrence associated with screening is rogue hiring, which occurs when a manager hires contractors within their existing network, often bypassing the usual channels. An easy solution is to implement a system in which interested parties apply through job portals, receive background checks, and take skill assessments.

Cybersecurity Risks

Depending on the project, you may have to share access to sensitive infrastructures with your contract workers. As contingent workers will not be receiving the same onboarding as your permanent employees, it is important to make sure that procedures are in place make sure that access levels are in line with responsibilities. Security breaches often come from the inside, and independent contractors can add another layer of complexity.

Financial Risks

Without a structured contingent workforce management program, many organizations run the risk of overpaying their independent contractors. Limited visibility and insights into your contingent workforce can result in overpaying talent compared to industry standards or even being unaware of your financial burden. In many of these cases, a Vendor Management System (VMS) can be a valuable tool to help you evaluate whether you are paying your workers the correct rates.

Reputational Risks

Think about how hiring contingent workers may affect your reputation when hiring full-time employees. The misclassification and co-employment of contingent workers can make your company vulnerable to reputational damage. Controlling how employees work, how they use company facilities, or how they engage with on-the-job training are all factors of establishing an employer-employee relationship. An easy way to mitigate reputational risk is to establish a balanced practice based on a transparent foundation. By correctly defining employees in their contracts, you can save your company time and money down the line. Allowing a managed service provider (MSP) to handle the employer aspects of the relationship can help avoid misclassification and legal culpability.

Misclassification

Misclassification occurs when the employer-employee relationship does not match the contractual definition of the worker. When a contingent worker acts like a full-time employee and assimilates into the corporate network, they need to be classified as one. Even when working with a third party, such as a staffing agency, employers still face co-employment risks if contingent workers are treated like permanent employees. Co-employment risks and misclassification and open your company to bad press, legal disputes, and government penalty.

How HCMWorks Minimizes Risk

Staying up to date on regulations and using standardized processes can go a long way to help mitigate risk. If you are looking for a more comprehensive review of your internal processes, working with an expert third party can help you streamline your approach. HCMWorks assists in contingent workforce strategy from job posting to payroll. Get in touch with HCMWorks to learn more about how to mitigate risk and lower hiring costs.