Know the details of hiring contractors - Brief Article

There are an estimated eight million contract employees working in the United States today, but nearly half of them aren't acting in accordance with federal labor guidelines.

"The IRS has strict guidelines as to who can be an independent contractor and who can be an employee," says Andrew Schulz, a consultant with Pro Unlimited, a contingent worker management service. According to Schulz, independent contractors are supposed to be "truly running a business, paid by the contract, hold multiple contracts, and are paid not by the hour but by the contract."

He believes that the haphazard manner in which contractors are recruited will pose problems for employers, citing the controversial action against Internet giant Microsoft, which--in order to avoid tax problems--moved all of its contract employees to "permatemp" status. A recent court ruling requires Microsoft to pay back benefits for at least 10,000 "permatemp" employees.

Of even greater concern to Schulz is the recent dispute over contract workers between Time-Warner and the Department of Labor, which cost the media giant $5 million. This was the first such case the DOL has been involved with, but it's unlikely to be the last; the government estimates that it lost nearly $20 billion in tax revenue from undocumented or mis-documented contract employees.

"HR people need to set up proper procedures once the sourcing is done, make sure they have policies in place and that contractor issues are addressed," Schulz says. "We've never found one company that even knows how many independent contractors it has or what it's paying for them. As the contingent workforce continues to grow, the implications of this are chilling."

COPYRIGHT 2001 ACC Communications Inc.
COPYRIGHT 2001 Gale Group