Companies that utilize independent contractors (ICs) know the benefits usually outweigh the costs. But challenges do exist, whether you’re trying to track contracts and qualifications or preparing for the threat of a misclassification claim. Sometimes, you just need help.
For Tim Cocchia, chief operating officer at Xcel Delivery Services—a final-mile delivery company servicing Arizona with offices in Tucson and Phoenix—that help comes from a few reliable sources: good legal counsel, a solid workforce model, and Openforce.
“As a delivery business, we tell our customers to focus on their business and let us handle their deliveries,” Cocchia said. “I think we had to take our own advice and allow a company like Openforce to manage our ICs. We’re not experts in independent contractors, we don’t keep up with the laws related to independent contractors, so we’d be foolish to think we could do it by ourselves.”
Xcel partnered with Openforce in 2008—long enough ago that Cocchia doesn’t know how they ever managed without a tech-based platform for IC onboarding, settlements, insurance and more. As a delivery company contracting around 70 drivers, Xcel uses Openforce to implement key best practices based on internal legal expertise, resulting in zero independent contractor challenges since Cocchia started there three years ago. But, despite these obvious advantages, a few difficulties persisted.
“We used to get complaints from ICs about the flat-rate fee for occupational accident insurance,” Cocchia said. “When a new person only does a few jobs and gets a flat fee taken out of their check, it kind of forces them to do as much work for us as possible … but, with our model, we don’t offer what most would call a full-time job because we’re not asking them to work only for us.”
Flexibility is a necessity for many ICs, but occupational accident insurance is essential as well, reducing the risk of workers’ compensation claims for injuries ICs sustain while providing services. It achieves this by offering them another avenue for relief.
To increase the flexibility of its occupational accident program, Openforce recently added Crum & Forster’s occupational accident coverage to its insurance lineup. In addition to a flat-rate offering, the new option allows premiums to be calculated as a percentage of the IC’s settlement, meaning it is always proportional to the amount of work performed. This reduces the cost for ICs who provide part-time services to multiple businesses. Premiums are also deducted directly from IC settlements to ensure coverage is always active.
“At first our ICs were leery of it, because everyone is leery of change, but it just makes sense,” Cocchia said. “It gives our drivers the flexibility to work as little or as much as they want … so that when they make more, they pay a little more, and when they make less, they pay a little less. When money’s coming in hand over fist, nobody really minds paying a few extra bucks.”
As a result, Xcel has been able to continue expanding their IC model by appealing to new groups of drivers: those looking for the flexible work previously disincentivized by a flat premium.
“Now we can go after the part-time people who might do one job or 20 jobs in a week, and there’s no more worry about the fee scaring them away,” Cocchia said. “I think it gives us a real advantage in contracting with gig economy workers.”
Xcel is dedicated to this model—encouraging workers to act as their own businesses and provide services to multiple clients—because there is growing evidence that such a model may help reduce the risk of misclassification. By allowing Xcel to court these new workers, percentage-based occupational accident coverage gives them a leg up in the current contracting climate, making their recruiting efforts faster and more efficient.
But what about Xcel’s existing contracted drivers—the ones who felt leery about change? Openforce helped with that too, providing clear communication with ICs and making sure the transition itself was seamless. Now that the change has been made, Cocchia says they’re happier than ever.
“Once it got rolled out, Openforce took care of everything, and I was never contacted after the fact by an IC with concerns. If anything, I heard from a few ICs that, with COVID-19 going on, they appreciated that they were having to pay a little less because they were making a little less. It ebbs and flows with the economy and makes everything much, much simpler.”