The composition of the American workforce has been changing and will continue to evolve. While regular employment used to be almost the only classification of workers, now more and more in today’s gig economy people are hired as temporary employees or independent contractors.
According to the latest job report from the Bureau of Labor Statistics, almost 157 million employees are participating in the workforce. This includes 27 million part-time employees (those who work fewer than 35 hours per week), 4.7 million of which are “involuntary part-time” workers—those who would like to work full time but cannot find open positions. Unemployment rose slightly in this report to 3.9 percent with about six million people actively looking for employment while there were 6.9 million job openings nationwide.
Shifting job trends, employment costs and employee availability have required companies to look for alternative ways to fill open positions and meet work demands. Two of the more popular options are hiring temporary employees and using independent contractors. Both have pros and cons to consider.
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Temporary Employees (“Temps”):
Temporary employees fill a need in the workforce that regular employees cannot. Companies use temporary employees for several reasons including:
- to fill a short-term need (i.e., sudden or occasional increased client demands)
- to assist regular employees who are under work stress
- to complete a specific project (i.e., to scan hard-copy records into electronic storage)
- to “try out” a person before hiring full time
- to meet seasonal demands (i.e., salespeople just for the Christmas shopping season)
- to cover a regular employee who is out on extended leave (i.e., medical or maternity leave)
- to reduce employment commitments in an uncertain economy
- to avoid the costs associated with regular employees (i.e., benefits, insurance)
Employers who hire temps should be alert to two issues:
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Independent Contractors
Companies may choose to hire independent contractors for several of the same reasons they would a temp: staffing flexibility, reduced employment costs or to meet a temporary need. Independent contractors can also fill a specific, more regular role that the company may not need full time, such as marketing, IT support, HR or bookkeeping.
The CPA Practice Advisor explains that small businesses hire independent contractors more often than regular employees. Since small companies must be more streamlined in their operations and are more impacted by client demand and budget fluctuations, independent contractors give them a way to fill part-time or occasional workforce needs without the expense of hiring a regular employee.
Many people are choosing to leave the regular workforce and work for themselves as an independent contractor. The trend of self-employment is increasing with expectations of 42 million people working as self-employed independent contractors by 2020 as compared to 126 million regularly-employed workers by that year. That means that one-third of the workforce will be classified as independent contractors in the next year or two.
Two cautions apply to independent contractors:
- Does the person control his /her work hours, methods, tools, etc.?
- Can the person work independently without oversight or supervision from company management?
- Can the person work for other companies or clients doing similar work?
- Is the person given expectations they can meet however they wish or does the company dictate every procedure?
- Is the person expected to follow company policies such as attendance and progressive discipline?
- Can the person gain a profit or suffer a loss from the work arrangement?
Regardless of the makeup of your workforce, it is important to remember there are regulations to follow for all types of workers, and the penalties for employee misclassification or failing to follow those regulations can be costly.
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States Rule
The new year brings with it six state-related employment changes to watch for in 2019.
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Paige McAllister, SPHR, is a contributor for Affinity HR Group, Inc., PPAI’s affiliated human resources partner. Affinity HR Group specializes in providing human resources assistance to associations such as PPAI and their member companies. www.affinityHRgroup.com