How a Misstep with Your Independent Contractors Could Cost You Millions

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Relying on independent contractor professionals to carry out your marketing? Proceed with caution, you might be a step away from a huge lawsuit.

The talent pool of nonconventional staff has long been leveraged by the marketing industry, even more so than most others. Though the national workforce is only now approaching a 20% rate of temporary workers, contractors and freelancers have been a staple resource of marketing development and execution capacity for decades.

Businesses have increasingly turned to flexible staffing solutions as a way to handle the uncertainty of marketing…

It’s no surprise that our field relies so heavily on alternative sources of talent. After all, much of marketing itself is constantly shifting. Business needs come and go, clients appear and vanish, trends skyrocket in popularity then fade into obscurity.

Businesses have increasingly turned to flexible staffing solutions as a way to handle the uncertainty of marketing, and that trend has only accelerated with the rise of digital technology.

To be sure, there are plenty of potential benefits to effectively leveraging independent consultants and staff, freelance labor and the like:

  • Few long-term employment obligations
  • Potential cost savings in payment and benefits
  • Better flexibility to handle marketing work on a project-by-project basis

But they also come with substantial, immediate legal risks, especially if your organization doesn’t have a robust structure to deal with them.

The $100 Million Danger of Freelance and Independent Marketers

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Businesses in many industries, especially marketing, frequently fall into a common legal problem by working with an individual as independent staff when they are, by legal definitions, an actual employees. Though this is rarely an issue for one-off services or work on short-term projects, it sometimes occurs when an organization brings in independent marketing staff for long-term work.

And of course, companies have many more obligations when it comes to an employee than an independent worker in terms of support, compensation, and labor regulations. That’s part of the reason they find freelancers and contractors attractive.

But if you treat an independent worker like an employee and/or pay them like an employee then they’re likely to be considered as your employee in the eyes of the government. And that could even supercede any agreement or contract you have with that individual that says otherwise.

If that happens to you, you’ll be liable not only to begin treating your freelancers as employees: you’ll also be expected to retroactively compensate them (and the IRS) for any missed payment and benefits during the time they worked with you (which has ballooned recently with the Affordable Care Act). And that’s not to mention the costs associated with going to court and the potential damage it could do to your brand.

Just how much could this cost you? Well, Microsoft once was directed to distribute nearly $100 million to 12,000 contractors that it was using in employee roles. Though a lawsuit of that magnitude will probably never occur again for this kind of mistake, mis-classification of labor and expertise remains an expensive danger for businesses of all sizes and across all industries.

Other Risks

The hazards of independent contractors don’t end at employment liability. Though the rest of those risks aren’t usually as immediately expensive, they can still lead to lost opportunities and wasted resources.

In general, the quality of work from freelancers and independent marketers is less consistent than what you’d expect from a full-time employee or agency contractor. They may be harder to hold accountable to deadlines and more difficult to track down if their output isn’t what you expected.

Then there’s the difficulty of verifying their legitimacy. Ensuring your independent contractors have the proper certifications, business licenses, insurance, etc. is difficult at the best of times.

All these problems can be mitigated with careful vetting and and management of independent worker resources. But at a certain point, especially for your most critical marketing efforts, it becomes more effective to avoid the uncertainty altogether and turn to an alternative source of talent.

The Marketing Staffing Agency: A Safer Solution

So how can you avoid the practical and financial problems associated with independent contractors and freelancers while retaining the flexibility and cost-effectiveness?

The simplest answer is to bring that talent on through a reputable marketing staffing agency. In this arrangement, the contractors work as actual employees of the staffing firm.

The agency maintains a degree of separation between you and the marketers, so there’s little risk of you taking on employer status. You work with the agency to explain your needs and arrange payment. The agency then hires a contractor to fulfill those needs, while handling their payment, benefits and tax responsibilities.

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