The contingent workforce is continuing to grow as more workers prioritize flexibility. Businesses also increasingly rely on this workforce segment to remain nimble in the face of unpredictable labor market and economic conditions, especially considering its specialized skill sets across industries. And despite some businesses requesting their workers return to the office, remote work will continue to make up a significant portion of the landscape with 32.6 million Americans, or 22% of the workforce, predicted to work fully remote by 2025.
As the labor market continues to evolve, so do the worker misclassification and co-employment laws that organizations must navigate. As the workplace becomes more data and tech-driven, regulations and risks associated with areas such as employee data privacy, diversity and inclusion, work-from-home protocols and more continue to rise. This is also leading to increasing complexity in remaining compliant both locally and internationally.
Thus, while it’s not the preferred subject matter for executives, ensuring that the company is mitigating risk is critical—and not just from a tactical perspective. More than 80% of executives recognize that anticipating and considering external risk factors to inform workforce-related decisions is critical to an organization’s success.
Let’s take a look at why the C-suite should make workforce compliance and risk management a key priority in this landscape or potentially face serious risks to the business.
Incurring Major Costs And Reputational Damage
The most critical consequence for companies that fail to meet compliance regulations and abide by employment laws is costs incurred by fees and lawsuits. (Get key takeaways on the latest changes in workforce legislation when you download our regulatory newsletter.)
Additionally, organizations could lose current clients, potential new business, strategic partnerships and even see a decline in company stock value. Needless to say, failing to meet compliance regulations can be a massive and expensive risk to organizations of all sizes. And the consequences trickle down to other essential parts of the business.
As the news of lawsuits becomes public, this can have a major negative impact on the perception of an organization. This also affects the health of the employer brand, which can be detrimental to the company and take years to recover from.
Loss Of Talent
Reputational damage doesn’t just stop there though—it snowballs to all aspects of the business, including getting talent in the door. Such public lawsuits can make it more challenging to attract top talent because the company is perceived as a risk. This can also push current workers out of the organization to seek out other opportunities with more stability, and can even drive them to competitors.
But considering what can go wrong in neglecting workforce compliance, on the flipside, companies have a lot to gain by investing in staying ahead of it.
Key Benefits Of Compliance
Compliance is important to all companies, but especially mid-size to larger businesses. And it is essential across industries as well, but especially healthcare, finance, tech and other high-growth verticals (energy, life sciences, semiconductor, etc.) that heavily rely on contingent workers.
Companies that prioritize compliance can see several benefits, including:
- Reducing risk, costly penalties and lawsuits
- Improved business outcomes
- Stability across the organization
- Positive company reputation and healthy employer brand
- Advantage in the war for talent
However, there are many complexities in managing joint liability and meeting compliance regulations with the extended workforce, especially as businesses may utilize a combination of independent contractors and temp workers, work with staffing agencies and more. (Get proven practices for managing contingent worker liability in our ebook.)
The good news is companies can take various approaches in how they manage their unique compliance needs. Let’s take a look at how the C-suite can elevate it successfully.
How Can The C-Suite Effectively Manage Risk And Compliance?
Make Compliance A Priority From The Top Down
Compliance shouldn’t be an afterthought, but an ongoing endeavor. In my experience as SVP of operations at Magnit, the companies I’ve seen stand out in this regard are those that have leadership proactively involved in making it a priority. This could be anything from being involved in the company’s compliance program, to helping select managed service provider (MSP) and employer of record (EOR) partners, and communicating across the organization on the priority of compliance in the businesses they partner with. The importance of remaining compliant ultimately needs to come from the top of the organization and spread to everyone else, so they feel a sense of responsibility and ownership in making it happen.
In an increasingly technology-driven and remote-work world, the complexities in staying on top of the latest compliance shifts can be difficult. And considering the current macroeconomic challenges around talent supply issues and skills shortages, companies need to prioritize removing fragmentation and friction from the talent supply chain more than ever, which includes worker classification and compliance issues. However, companies that make it an organization-wide priority and invest in the right partnerships to guide them through this evolving landscape stand to reap tremendous reward and avoid critical business risk.
Invest In Compliance Resources
Companies can build their own compliance program, which will be responsible for ensuring that the right combination of resources, budget, staff and technology are allocated to support contingent workforce compliance efforts. This approach may involve a combination of investing in compliance software, hiring legal and compliance experts and funding training programs.
Partner With A Managed Service Provider
Businesses that need additional guidance in managing their contingent workforce’s compliance should look to partner with an MSP organization. To help guarantee they effectively meet regulations, they should seek an experienced, external and global MSP with a specialty in compliance to ensure they have historical knowledge and expertise in this area.
Seek An Employer of Record Partner
Contingent EOR companies help businesses manage their payroll, benefits and risk for workers on the company’s behalf. They not only assume responsibility for ensuring compliance with employment laws but also keep up with the latest changes in regulations. Paired with their ongoing guidance on best practices, this strategic partnership is especially critical for organizations with workforces in different locations and countries to help them reduce risk in jurisdictions they may be unfamiliar with. Learn more about EORs in our comprehensive guide.
Learn more about Magnit Employer of Record services.
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