5 gig economy myths busted with the right independent contractor processes

Effective managers learn to recognize special qualities in their workers. A manager's role is to delegate employees efficiently by giving them the tasks they are best at. They also recognize blind spots in their team's capabilities and perform cost-benefit analyses. 

Carving out roles that can be successful when accomplished by independent contractors (ICs) instead of your staff can dramatically enhance the productivity of your team as a whole. With additional resources, any team gains space where new ideas and synergistic collaborations can emerge. 

But some IC workforces are facing higher risks of worker misclassification than ever before, even those in the transportation and courier industries, which have been dealing with employment regulations for some time. Even so, it is becoming more commonplace for companies to utilize ICs for temporary, flexible jobs—that’s the essence of the burgeoning gig economy - which was once merely a way for people to supplement income between traditional jobs. More and more people are starting to get into the gig economy as full-time professions because they want more flexibility and fewer distractions, and the right to make choices in regard to how much and how often they work. 

As a result of this shifting workforce, certain myths have arisen about independent contracting that we’re here to put to rest—or confirm. 

Myth #1: Working with ICs is less quick and efficient. 

False. In fact, ICs are often quicker and more efficient than W2 employees. Not only do you usually not have to worry about training—as ICs often come with specialized skills and experience—but there is also no requirement to follow the wage and hour rules placed on employees. The result: Most ICs want to get a project done right the first time, and as quickly as possible so they can move on to the next money making opportunity. There is nothing ‘gained’ by stretching out an entire day or shift of work. 

Myth #2: Independent contractors allow flexibility as an additional resource. 

True. Take the COVID-19 pandemic, which has caused fluctuations in supply chain and consumer demand. By contracting with ICs, however, businesses can have the autonomy to increase or decrease workers in order to hunker down for a tough economy or scale up to meet a need. They have the freedom to make these decisions without repercussions, such as expensive employee onboarding. 

Myth #3: Gig work erodes the foundation of a traditional economy. 

False. With a more conventional workforce, full-time employees focus on a lifetime career and rarely change positions. In a gig economy, however, a vast number of people work in temporary jobs or on a part-time basis. This is the market adapting to a need. In a gig economy, services become more efficient and cheaper as workers strive to become more flexible and meet demand. 

Myth #4: Worker classification is harder in a gig economy. 

True. Companies who participate in the gig economy may struggle with how to classify workers. Should they be considered independent contractors or employees? The U.S. Department of Labor tends to define most workers as employees by default, and companies can face severe penalties and accumulate costs with a misclassification claim. 

There are several ways in which an independent contractor misclassification claim can arise. The two most popular are injuries and wage claims; either of which can lead to a claim during the injury or wage claim process. The individual could file a state or federal complaint alleging that a contractor is entitled to the benefits and rights of an employee, or a state or federal agency could investigate the classification policies of a company. 

An agency or court will use a fact-intensive test to determine if an IC has the appropriate classification. The particulars of the test depend on the authority and jurisdiction. Nevertheless, while there are many factors, the primary factor is on the degree of control the company maintains over the worker. Therefore, the more control present, the more likely the relationship gets deemed as employee-employer. 

As a result, companies who deal with ICs may find it difficult to control outcomes while preserving a business-to-business relationship. This is where a third-party administrator can help clarify boundaries and provide risk management practices. 

Myth #5: Third-party administrators are too expensive. 

False. Absolutely false when compared to the alternative. Companies using a  independent contractor workforce can implement a cloud-based platform like Openforce to manage the contracting process and onboarding of ICs into the platform, plus monitoring the compliance of industry regulations. This allows the company to focus on running their operations and let the TPA focus on managing and monitoring the risks that come along with an independent contractor model.  

Bottom line: Utilizing an IC model will increase productivity, which in turn increases profitability. A solution like Openforce lets you do that without losing sleep over whether an IC has been properly classified. 

To learn more and get your free risk assessment, reach out today.