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Cut legal risks in contingent workforce management

CWS 3.0 - Contingent Workforce Strategies

Cut legal risks in contingent workforce management

Matt Norton
| January 21, 2025
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A game of Jenga with each block representing a different phase of data carefully balanced and always at risk of being

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Hiring contingent workers may seem straightforward, but behind the surface lies a complex array of regulations and requirements that can easily catch organizations off guard. As business models change and the numbers of freelancers, contractors, consultants, temporary agency help and gig workers grow, strains on the traditional employer-employee model can sometimes be played out in litigation and regulatory change.

With the landscape of contingent workforce management constantly evolving, staying ahead of legal and regulatory changes is crucial for both businesses and contingent workforce professionals. All organizations globally using contingent workers need to be aware of these new developments as the risks arising from misclassifying non-permanent workers, particularly the self-employed, are evolving.

That said, the compelling benefits to both companies and workers of mutually acceptable flexibility means that these developments are likely to deepen rather than diminish over time.

Similarly, the unprecedented number of elections last year — with elections taking place in the US, the UK, India, Mexico, South Africa, and the European Union — means that the legislative landscape is likely to continue changing as new governments implement their agendas. Governments continue to adapt to modern workforce models, which companies are increasingly engaging with to help “future-proof” their businesses.

To help CW program managers stay abreast of evolving legal regulations, SIA’s new interactive Contingent Workforce Compliance Database: Americas provides contingent workforce buyers with essential data on the legal requirements and restrictions for supplying and using temporary agency workers, fixed term contract staff, independent contractors, outsourced personnel and MSP services. The report is available for three regions: Americas (covering eight countries in the region), EMEA (covering 14 countries) and Asia Pacific (covering 13 countries). Program managers can use these interactive tools to identify the requirements of local laws and regulations when hiring contingent labor and to audit their staffing suppliers and other vendors.

The tool provides information related to the following:

Temp Worker Restrictions

  • Agency temporary worker restrictions
  • Tenure limits for agency or contract labor
  • Tenure limits for fixed-term contract employees
  • Employing workers as a foreign entity

Licensing to Supply Contingent Workers

  • Need for a license/registration to supply temporary workers to work for, and under the supervision and control of, an employer
  • Need to set up a local entity to supply staff in a particular country
  • Requirement to provide a financial guarantee or bond to pay workers in the event of liquidation or have a minimum share capital
  • Specifications on use of premises
  • Staff nationality or qualification requirements
  • Risk of penalties for operating without a license, e.g., fines, revocation or nonrenewal of a license

Restrictions on the Use of Intermediaries/Outsourcing

  • Legal restrictions on the use of intermediaries or outsourcing, e.g., MSPs
  • Commonly used MSP models
  • Independent contractor models
  • Independent contractor status determination

Statutory Costs of Employing/Using Contingent Workers

  • National minimum wage
  • Total percentage of statutory costs
  • Information on social security contributions
  • Equal pay regulations for temporary workers

The databases help managers identify contingent workforce-related risks. They also help to assess risk exposure, frequency and severity in your program and to understand how to control and manage those risks. The databases will be updated as new laws come into force. In late January, SIA will also publish legal calendars which will identify the legal changes and developments expected to impact the contingent workforce environment in 2025 in different regions.

As SIA research highlights, the proportion of the workforce that is contingent is projected to grow in the next ten years. The compelling advantages to businesses (and in many cases workers) of contingent working arrangements mean that the contingent workforce is here to stay. Provided businesses carefully review why they are using contingent workers and stay abreast of all legal developments to mitigate risk, the contingent workforce will offer organizations much-needed flexibility and agility.