Independent Contractor Compliance Blog

The other day I was asking a client about a consultant and she told me she wasn’t sure how long he had been working there. I asked if she had a way to find out and she said, “Maybe, I think he’s been here awhile, on several different projects…I’ll have to check with Procurement and HR, but there’s really no central place to look. I could ask him…”

We’re now setting up a tracking system for them so they will always be able to: 

• Track the deliverables’ progress specified in each contract
• Know the number and names of all contingent workers, consultants or IC’s working there at anytime.
• Know how much each contract is really costing the company
• Know if a project is going over budget in either time or dollars
• Know if Status Drift has set in and the project, and consultant, has changed from a legitimate IC status into an employee.

Consultants who overstay their initial contract are a risk.

Consultants who stay for a long period, especially past the completion of the initial project are exposing your company to risks of civil lawsuits, tax audits, workman’s comp claims and other problems.

No body wants a permanent house guest-the relative who came to visit for a weekend and is still living with you a year later.

The consultant most likely has been doing a good job and has the potential for more good work. That’s why he/she is still there. Occasionally, an attempt is made to maintain the IC relationship by creating a series of contracts that tag onto each other-one-after-another-year-after-year.

The problem is when something goes wrong and the relationship is viewed from outside the company, it simply looks like a continuous long term engagement-just like an employee. The consultant has lost his/her independence and has become financially dependent on your company. That’s why you need a system to be checking on your contingent workers and IC’s regularly to insure you have not allowed their status to drift towards employment.

When the project is approaching the total dollar amount budgeted it is time to ask:

• Is the job complete?
• Is the consultant doing other jobs not part of the original contract?
• Has the project gotten out of control?
• Should we reevaluate the contract terms?
• Has this person become our misclassified employee?

A good system will help you answer those questions.

Is there a person responsible to track IC projects in your company?

Oftentimes, tracking these details falls to someone in the company with 25 other duties and responsibilities they believe are more important, and since the squeaky wheel always gets greased first, the other wheels are ignored. The problem is by the time the IC compliance wheel squeaks it’s too late. That wheel usually doesn’t make a sound until it falls off.