Independent Contractor Compliance Blog - by Collabrus™

Last week I attended the 2010 Staffing Industry Analysts (SIA) Executive Forum in Las Vegas. This year’s conference (now in its 19th year) had a theme of “The Upside of the Downturn…Thriving in a Brave New Staffing World.” More than 500 senior executives from staffing, consulting, and human capital services firms gathered for three days of learning and networking.

In reviewing the state of the staffing industry, new SIA president and chief analyst Barry Asin struck a cautiously optimistic tone in his opening keynote address. His main points:

• Last year represented “the apocalypse” for the staffing industry. Total U.S. staffing revenue was down 26% in 2009, but is expected to grow 5% in 2010
• The Economic Cycle Research Institute (ECRI)’s leading index indicates growth
• Unemployment claims were down in February
• Bureau of Labor Statistics shows Temp employment heading higher

While mostly optimistic, Asin tempered his remarks in light of the ongoing challenges many companies face, including continuing pressure on margins, market consolidation, and the vagaries of an unsettled economy. Among the keys to achieving success, Asin says, are critically assessing the markets you compete in and refining your positioning (find a defensible niche).

Some other interesting data points and predictions:

• 58% of the 2009 US staffing spend is categorized as “professional”…
• The latest research indicates that in large companies the contingent workforce decision is made by HR (56%) and Procurement (60%)…
• 63% of large organizations (companies that generally have 200+ contingent workers on site at any given time) have implemented a Vendor Management System (VMS) solution…
• 49% of large staffing buyers use a Managed Services Provider (MSP)…
• The total US contingent workforce market was estimated to be $425B in 2009, of which Independent Contractors represented the largest component at $243B, followed by Temps at $93B, and “other” which includes services like PEO, Search, and Outplacement at $89B…
• Professional staffing will ultimately be 2/3 of total contingent spend…
• Only 1/3 of contingent workforce buyers believe they are compliant with worker classification and wage/hour provisions (NOTE: If your company falls into this category, Collabrus can provide expert assistance!)
• The GAO estimates worker misclassification represents $385B in uncollected tax revenue. (NOTE: This is a significant issue for federal and state regulatory agencies. As we’ve written a number of times before, IC Compliance is identified as a significant contributor to the “Tax Gap” and agencies are stepping up their audits to find misclassified workers.)
• By 2020 it is predicted that large buyers will increase their use of contingent workers from today’s 12-14% to 20% of their total workforce…

Geoff Colvin, author and senior editor of Fortune Magazine gave a fascinating keynote entitled, “The Upside of the Downturn: Ten Management Strategies to Prevail in the Recession and Thrive in the Aftermath.” As the economy recovers, the business world we’re entering won’t be anything like the pre-recession world. What is the new normal? What are your most valuable assets? Dramatic changes aren’t necessarily dangers - they’re typically opportunities for companies and leaders that respond the fastest and smartest. Among his recommendations on how to ensure that your business moves from recession to recovery:

• Upgrade your talent. Human capital is the single most important asset a company has. To start, you need to evaluate employees better. In good times it’s easy for most employees to look like stars (”a rising tide floats all boats”), so evaluations tend to be less rigorous. In tough times it’s much easier to distinguish the true stars from the third-stringers (”You don’t know who is swimming naked until the tide goes out!” - Warren Buffet).
• Confront new realities quicker than your competition, and be willing to change your plans. Example: Government is taking a larger role in the life of every business. The global economy is becoming less U.S.-centric. What are the ramifications for your business?
• Find new solutions to new problems; don’t just discount prices on current inventory. Develop a creative culture that looks for needs customers don’t know they have.
• Re-examine your business model. What is your essence? The core? What is the one thing you’d never cut? Also, what is the profile of your customer base, and has it changed with the recession? Take a look at your industry - has it changed fundamentally, or just been thrown off a bit?
• Grow yourself. Expand beyond your previous limits. Be seen early and often. Act fast. And show fearlessness; employees want their leaders to demonstrate that they’re not afraid. In business that means facing bad news head-on.

For more about how to intelligently manage the contingent workforce while mitigating the risks of independent contractor compliance and co-employment, visit www.collabrus.com or call us at 415-288-1826.