Blog Post

HR cluing in to dealing with independent workers

MBO Partners' Gene Zaino at Net:Work 2011Just a few weeks ago here on WebWorkerDaily, we rounded up a number of blog posts and articles complaining that the good folks in HR just haven’t gotten their heads around the growth in virtual teams and are still scrambling to devise policies surrounding remote work. Commentators on the post were pretty uniform in their negative assessments of HR, but not everyone has bad things to say about how quickly big companies are adapting to the rapidly changing way we work.

Recently, WebWorkerDaily phoned up Gene Zaino, a Net:Work 2011 speaker and CEO of MBO Partners which offers a package of back office services to independent workers they dub a “passport to independent work” — they’ll sort out your taxes, benefits, insurance and the like if you hand over a small percentage of billings — for a wide-ranging conversation about his predictions for independent work in the year ahead. (Check out his full predictions in infographic form here.) In his role at MBO, Zaino deals closely with a number of corporate HR and procurement departments, and his view of how quickly companies are coming to terms with the changing landscape of work varied significantly from the opinions of those who paint corporations as slow to adapt. For one, he defended HR against its critics, at least when it comes to taking advantage of independent talent:

HR organizations are very focused on the full-time employee segment of their business because that’s what they do, and they typically don’t deal with non-employees. Non-employees are paid through accounts payable or through procurement, so they tend to not be part of their system.

Now the more forward-thinking companies have decided to partner HR and procurement to figure out how to [handle independent workers], because HR gets upset when you hire an independent contractor who’s sitting next to or working alongside one of the full-time employees and they start talking. There’s a culture issue there, and I think the smarter companies have assembled teams or new positions, which have representation from HR, from procurement and from legal, and they put together a strategy and make [independent work] one other component of how they get work done.

And outside the boundaries of HR, Zaino insists, in the last few years, companies are really starting to grasp the benefits of hiring independent workers, as well as how to maximize their value while minimizing the compliance risks of nimble hiring.

I’ve seen tremendous change. Today most Fortune 500 companies have an actual position – sometimes it resides in HR, sometimes it resides in their procurement department, sometimes it’s a new department. It always has someone from legal involved because it’s generally a compliance issue. But they generally have someone that manages their non-employee labor and in more and more companies there’s much more publicity, much more education, much more awareness.

Most recently in 2011, for the first time, I’ve even seen public companies in their annual reports start talking about how many independent workers they have as compared to employees. Caterpillar is one where they actually boasted because they consider that a strategic advantage to be able to be nimble in terms of their cost structure. So there has absolutely been a dramatic increase in education on the corporate side that has taken about ten years to happen, but it’s prominent today.

As Zaino points out, ruthless economic realities are pushing companies to be equally ruthless about cutting costs and maintaining flexibility, but he also explains that a vigorous compliance drive by tax officials partly explains why companies are getting more savvy about managing their independent workers.

“There’s a huge enforcement effort to reclassify people as employees that companies are paying as contractors,” he says. “Today there are 14 new bills pending that will increase penalties for companies that try to engage independent workers who would otherwise be classified as employees, and the test for being an employee versus an independent contractor is extremely gray. It’s about behavior. It’s about control. It’s really easy for the state tax, the IRS, the Department of Homeland Security or the Department of Labor to come in and say: ‘You look and walk and talk like an employee, so we’re going to call you an employee and we’re going to give a big fine to the place where you’re working because that’s the easier way for us to go collect a lot of money.’”

Motivated by both the carrot of a more agile workforce and the stick of stiff government fines, it seems even the slowest moving organizational behemoths are learning to manage the exploding number of independent workers. (Zaino predicted independent workers will be a majority of workforce by 2020 at Net:Work.)

In your experience, are big companies dragging their heels or quickly coming to terms with the realities of the changing workforce?

One Response to “HR cluing in to dealing with independent workers”

  1. Twisted Wrist

    Generally, HR departments have waaaay too much power in corporations. You can tell when a corporation has been “poisoned” by HR when the only way to get hired (or work as a 1099) is to go through HR first. Another indication is when there’s a VP or Director of HR. HR needs only a few managers/supervisors to oversee the HR rank-and-file.

    Sadly, most corporations do not understand that the motivation for HR is to actually *encourage employees to leave*. Why? Because HR is the “gateway” for new employees, so the more new employees, the more work HR has to do, resulting in more clout.