Freelancers, temp workers, contractors, subcontractors – the labor market is seeing a surge in alternative work arrangements. According to a recent Gallup report, 36% of U.S. workers participate in the gig economy through either their primary or secondary jobs. Service listing apps and websites make it easy to connect. It’s no wonder your chapters are turning to contractors for help, but are they prepared to navigate the pitfalls?
With the evolution of the gig economy, working with contractors isn’t just for chapters with houses anymore. Chapters are outsourcing website design, IT, administrative tasks and even meeting facilitation. In our Chapter Rescue series, we’ve covered several potential crisis scenarios that chapters could engage third parties to help resolve:
Chapter Outsourcing and Hiring Issues
Chapter leaders have likely never signed a hiring agreement or contract before. Pile on the legal complexities and you have a meltdown just waiting to happen. There are several factors to keep in mind before taking the plunge:
Due diligence on vendors
Chapters need to exercise care before entering into a contract with a third party. Vetting contracts or vendors provides peace of mind that they are trustworthy and operating legally.
Employees vs. contractors
With new labor laws, the definition of employee vs. contractor has been a hot topic. Chapters who hire employees or contractors must understand the difference between the two.
Job applicants have legal rights before they are even employed by a chapter. Chapters can find themselves in legal trouble if they aren’t abiding by anti-discrimination laws during interview questions and the hiring process.
Dealing with Hiring and Outsourcing Nightmares
If the chapter failed to do the necessary vetting of their vendors or contractors, they likely have a mess on their hands. It can easily turn into a case of conflicting stories. Run through a list of questions with the chapter to get a handle on the situation:
Was a contract signed? Were the contracted services completed? Did the chapter complete their end of the agreement? Can the issue be resolved amicably? Is the company local? What’s the lawyer’s number again?
If the chapter fell into the trap of classifying someone as a contractor who should’ve been an employee, it’s time to pull in legal and financial advice. The chapter could be on the hook for federal and state back taxes, penalties, and interest.
If the chapter has committed a hiring violation, there is no sugar coating the ramifications. You must get legal counsel involved, quickly.
Preventing Hiring and Outsourcing Nightmares
Arming chapters with knowledge is the easiest way to prevent hiring and outsourcing nightmares. Incorporate important information into easy to follow resources, so chapters can easily reference them before making decisions:
Every chapter leader should receive a toolkit that includes best practices for outsourcing, contracting, and hiring employees. Incorporate questions for vendor due diligence, checklists for hiring vendors, and guidance for vendor reference requests.
HR or Management Assistance
Provide a factsheet that makes the difference between an employee and a contractor easily identifiable. The IRS website explains the nuances, but be aware of specific state laws as well. Find out which chapters are using contractors (1099 instead of W20) so you can confirm they are classified correctly.
Outsourcing experts can be an invaluable tool for overburdened chapter leaders. By using caution they can prevent their hiring and outsourcing decisions from coming back to bite them. In the next post in our Chapter Rescue series, we dive into another area of extreme caution – chapter legal issues.