Implementation Methodology and Best Practices

Authors: Steve Kusnit and Liz King
Edited by: Mark Zisholtz 


Typically, implementation is the key first step following the close of a deal where the selling organization has the opportunity to demonstrate its competence and make the buyer feel confident in their vendor decision. Hence, the Implementation Team is in prime position to set the working tone of the relationship with a new client before the Operations Team digs in and runs the day-to-day.

However, before we implement a solution, we first look to understand the current state of our client’s contingent workforce management program. The process begins with an in-depth discovery and evaluation in which we review existing workflows to uncover opportunities for process improvements and efficiencies. After the discovery phase is complete, we move into the design and implementation of the solution.

Our implementation experts define our client’s ideal program, future-proofing it to ensure optimal efficiency, automation and program support across the entire contingent labor continuum—from procurement to payment. Then, we map the current state to that future state, develop a roadmap to bring it to life, and begin your business transformation.

Among many other benefits, our approach ensures:

  • Discovery of hard and soft cost savings from process streamlining and re-engineering
  • Reallocation of resources devoted to managing contingent labor, including IT, contracts, buyers, accounts payable, and resource management
  • Implementation of compliance and risk mitigation best practices (note: we design the program to provide auditable data for SOX compliance)
  • Process automation via e-procurement services, enabling hiring managers to spend less time placing orders, approving time and managing spend

Below is a list of Implementation Best Practices that our Implementation Team drafted. These Best Practices are universally applicable to payrolling, IC compliance, MSP, RPO, and other contingent workforce programs.

  • Experienced project team members dedicated to building and maintaining excellent client relationships
  • Disciplined project management based on Project Management Institute (PMI®) principles, which allows for flexibility to fully support client-specific needs
  • Identify key stakeholders and project team members (in the absence of input from the correct resources, projects may slow down, stall or parts of it repeated)
    • Make sure to include everyone that will be critical to the success of the project, which may include:
      • Steering Committees and Stakeholders
      • Program or Project sponsors
      • Hiring Managers (or Business Unit leaders) who will utilize the system
  • Identify pertinent information ahead of time
    • What is making the client switch solutions? What are the drivers?
    • What are things the client would like to have that they did not previously have?
    • Determine the pros and cons of a solution based on amount of labor spend
    • Are there any other client initiatives that may conflict with the timing of this implementation and require shared resources (hence, the timeline and expectations need to be adjusted accordingly)?
  • Plan the project in advance
    • Initially, develop a high level project plan that can be revised and tweaked as more information becomes available
    • Identify potential resources and how best to utilize their skills for project
    • Review lessons learned from previous implementations and implement them, as appropriate
  • Review KPIs and SLAs with the client. Set expectations and engage Operations to deliver!
  • A thorough, multi-channel change management and communications process based on a high-touch, hands-on approach that includes all client stakeholders and program audience members
    • This is key for a successful implementation. Among other reasons, effective change management builds confidence and demonstrates that a proper vendor choice has been made.
    • Ensure that resources are made available to answer user questions
  • Actively listen to the client’s needs, propose solutions, and tell the client when better solutions are available
    • Interview the client and listen attentively to their needs, wants, and desires
    • Pick the client’s brain and ask engaging questions. (Most people are not tech-savvy and have a hard time conveying what they want in a solution)
    • Interject ideas of your own that produce cost savings, enhanced quality, and/or a quicker rollout
  • Perform extensive testing on all systems
    • A GAP analysis should be done on the Legacy system.
    • Testing should include: Smoke, QA, Internal, User Acceptance, Regression, and End-to-End
    • The above testing should be performed on any new, integrated, 3rd party, or downstream applications that will be impacted
  • Get clients and their teams that will be impacted on your side
    • Spread the word, motivate them, show them that the solution will make their lives easier as most people oppose technology changes; Client buy-in on the new program throughout the organization
  • Try to eliminate as many manual processes as possible
    • If the purpose is to become automated; this is a necessary evil
    • Manual processes leave room for a lot of human error
    • It will make reporting and auditing much cleaner
  • Deliver efficient training
    • Develop presentation decks
    • Quick reference guides and FAQs
    • Recorded Trainings
    • Interactive Training
    • Make training FUN. Seriously. Training is far too often boring. Engage the audience. Set the tone!

About the Authors:
Steve Kusnit
is a PMI-Trained, Six-Sigma-Certified Services and Solutions professional with 13 years of experience Implementing and Managing MSP/VMS Programs across multiple industries, including: telecom, energy, transportation, government, healthcare, food and agriculture, pharmaceutical, and retail. Over the past 3 years, he has focused his professional energies in leading many successful Payrolling and IC Validation Program Implementations for HireGenics throughout the US and Canada.

Liz King is an IT Project Manager with more than 15 years of experience implementing MSP, VMS, and ERP solutions. She has a background in project management, business analysis, system testing, and training. In her spare time, she enjoys reading, traveling, salsa dancing, and karaoke.

Independent Contractor Compliance: Why Is It So Complicated?

By: Brandon Pavley
Edited by: Mark Zisholtz


The Problem

By statute or rule, all workers default to the classification of “employee.” If you want to be an independent contractor (“IC”) , that means you face an uphill climb. Taxing agencies earn more revenue from employees (as opposed to independent contractors); the Department of Labor and its rules (e.g., overtime rules) generally apply to employees, not independent contractors; independent contractors are not covered by the National Labor Relations Act, thus employers can, at least according to the AFL-CIO, “thwart union organizing or dilute bargaining units by misclassifying workers [as independent contractors].” The list of reasons governmental agencies, judges, employee interest groups/unions, and investigators want a worker to be classified as an “employee” are seemingly endless.

It is not surprising the definitions of an “employee” enacted by law makers are very broad. Probably the most notorious (and circular!) definition of an “employee” is applied to statutes like Title VII of the Civil Rights Act of 1964, which is an anti-discrimination statute commonly invoked by plaintiffs in the employment setting. Title VII defines an “employee” as “an individual employed by an employer.” That definition is very broad and, to put it nicely, essentially useless. In other words, if an individual is technically “employed by an employer” – whatever that means… — then the anti-discrimination protections of Title VII apply to protect that individual.

In response to worker and business complaints about the lack of clarity, various Federal and State governmental agencies promulgated rules, and governors signed into law, statutes attempting to more clearly define an independent contractor. Unfortunately, none of those statutes or rules contain bright line tests, but instead contain a list of factors, ranging anywhere from 3 to 20 factors with countless interpretations of those factors and countless additional sub factors. For example, the Department of Labor issued a 6 factor “Economic Realities” test to determine whether a worker is a bona fide independent contractor for purposes of the Fair Labor Standards Act. The 6th factor – “The nature and degree of control by the employer” – described by the DOL as “a complex factor,” can include 50 or more different sub factors, depending on the circumstances, e.g., who sets pay amounts and work hours?, who determines how the work is performed?, who determines the sequence of the work?, is the worker free to work for others and hire helpers? These are just some of the sub factors. The point is that independent contractor compliance seems more daunting now than it has ever before, and neither legislators nor regulators have helped clarify the issues.

It is also worth mentioning that due to the existence of numerous laws utilizing multiple tests with varying factors and sub factors, it is possible for an individual or entity to qualify as an IC under one test but not qualify as an IC under another test all the while assessing the same details surrounding the worker. This is especially important because the Internal Revenue Service (“IRS”) and the Department of Labor (“DOL”) entered into a Memorandum of Understanding (“MOU”) establishing enhanced information sharing and other collaborative activities (e.g., if the IRS receives information that an audit should commence within a business, the IRS will inform the DOL of the potential misclassification and allow for the DOL to commence its own audit). Thus, if a business passes an IRS audit, they are not in the clear until they also pass a different set of factors under a DOL audit. Additionally, all courts specifically denote that no set of established factors is determinative in and of itself and courts have left every test open-ended to allow for new factors on a case-by-case basis. Therefore, workers and businesses looking to get clarity on worker classification in the United States are left with hundreds of factor application scenarios and a large question mark floating over their head as it relates to qualification as a bona fide IC.

State Differentiators
Each state has its own employment laws and varying definitions of “employee” are enacted within those state laws. Two of the primary reasons an IC misclassification suit are filed are: (1) the worker files for unemployment insurance benefits at the end of their project, and (2) the worker files for workers’ compensation benefits if they are injured while on the job. Unfortunately, unemployment insurance and workers’ compensation benefits are reserved for “employees” only. Thus, when an independent contractor makes a claim for either benefit, this raises a red flag potentially triggering an audit. Mirroring the Federal chaos model, state courts and other state governing authorities followed suit and opted to use a variety of worker classification tests as opposed to a single set of standardized factors. Consequently, there are more than twelve classification tests in use by the states and more than one test is used for classification purposes in at least 43 of the 50 states. Therefore, a worker not only has to qualify as an IC under the Federal laws, but must also qualify under numerous state laws.

Why Is This So Important?

First, you need to understand that judges and regulators apply independent contractor compliance tests to multiple statutes. For example, let’s say a worker is not deemed compliant with the Federal common law independent contractor compliance test, (i.e., is not a bona fide independent contractor under the Federal Common law test). Potentially, that means that the worker will be protected by every statute which relies on the Federal common law test (in contrast, the same worker would not get any protection if he/she were a bona fide independent contractor). The following is a chart which illustrates the point:

Sampling of Federal Statutes that Have Been Applied by Judges to Various Federal Independent Contractor Compliance Tests
Common Law Agency Test (or an expanded version/ variation of the common law agency test)

 

§ Affordable Care Act

§ Federal Insurance Contributions Act

§ Federal Unemployment Tax Act

§ Income Tax Withholding

§ Employment Retirement and Income Security Act

§ National Labor Relations Act

§ Immigration Reform and Control Act

§ Copyright Act (and other intellectual property laws)

§ Title VII (& other federal anti-discrimination statutes) (“Title VII”)

§ Age Discrimination in Employment Act (“ADEA”)

§ Americans with Disabili­ties Act (“ADA”)

Department of Labor “Economic Realities” Test

 

§ Fair Labor Standards Act

§ ADA

§ Family and Medical Leave Act

§ Worker Adjustment and Retraining Notification Act

§ Title VII

§ ADEA

§ Social Security Act

“Hybrid” Test, i.e., a hybrid of multiple tests used by some judges

 

§ Title VII

§ ADEA

§ ADA

Second, you need to understand the repercussions for misclassifying an individual as an independent contractor (when, at least according to the judge or regulator, that individual should have been classified as an employee). The following is a list of factors to consider:

  • Unpaid Federal, state, and local income tax withholdings
  • Unpaid Social Security and Medicare contributions
  • Unpaid workers’ compensation and unemployment insurance premiums
  • Unpaid overtime compensation (including liquidated damages pursuant to a statutory double penalty provision)
  • Debarment from state contracts
  • Unpaid work-related expenses
  • Brand tarnishment/negative press
  • Liability for failure to provide coverage under employee benefit plans
  • Class action targets
  • Attorney’s fees and costs, including compulsory payment of plaintiff’s attorneys fees and costs

Third, you need to understand that governmental entities are entering into information sharing agreements. Thus, if the IRS finds you misclassified, it may share that information with the DOL, and vice versa. Further, nearly 2/3 of states have joined into the collaborative effort and signed MOUs in order to combat worker misclassification. In some cases, these agreements include the cooperation of the Employee Benefits Security Administration, Occupational Safety and Health Administration, Office of Federal Contract Compliance Programs, and the Office of the Solicitor.

Your Options to Solve the Problem

At a high level, you have 3 basic options:

#1: No IC policy, i.e., flat-out prohibition against using ICs
#2 Internally managed independent contractor program
#3: Externally managed independent contractor program

With Option #1, you have no IC misclassification risk. However, you lose access to a significant talent pool and flexibility in your contingent workforce strategy. Additionally, don’t forget that if you use payrollees or staffing, you still have joint employment compliance risk!

With Option #2, you have IC misclassification risk. This misclassification risk can be mitigated by a good compliance process, support from a well-informed legal team, and an increased cost structure (which can become cost neutral or even cost positive through a supplier funded program), while maintaining access to a significant talent pool and enhance the flexibility of your contingent workforce strategy.

With Option #3, the analysis is the same as #2 except you can mitigate (or even eliminate) your compliance risk through an indemnification clause and use of best practices.

With Options #2 and #3, you need to be wary of incremental increase in pay rates if you utilize a supplier funded model, (i.e., the IC may inflate their pay rate in order to cover the anticipated added cost of the markup from the external management company). However, you can control these increases through various methods, such as the use of a rate card or a strong negotiation process with a solid understanding of prevailing local market rates.

California Environmental Protection Agency’s Classification Requirements Require an Investment in Your Business

By: Mark Zisholtz
Edited by: Brandon Pavley


This commentary is in reference to content found on the California Environmental Protection Agency’s website. Please visit their site for more information.

Unfortunately, we commonly see misclassified independent contractors who fail to make an investment in their business, such as buying equipment or investing in software. Further, many companies want to engage independent contractors on a personal services contract. While prohibiting an IC from hiring workers to perform the services set forth in a contract does not automatically mean the IC is misclassified and is in fact a common practice, it is also true that the chances of misclassification drop rather significantly if the independent contractor is permitted to hire workers.

Such is the case with the California Environmental Protection Agency, which explicitly requires all independent contractors who want to be on the agency’s “approval list” to have the “proper equipment” (i.e., the IC must invest in its own business) and “qualified personnel to conduct the tests” (i.e., no prohibition against the IC from hiring workers to perform services under the contract).

Oregon Independent Contractor Classification Law Reminds Us What is Important

By: Mark Zisholtz
Edited by: Brandon Pavley


This commentary is in reference to content found on the State of Oregon’s website. Please visit their site for more information.

It is not uncommon to hear procurement or HR personnel claim their independent contractors are compliant because they are a business entity and signed documentation indicating they are an independent contractor. However, nothing could be further from the truth. Take, for example, the State of Oregon, which explicitly states that “[t]he creation or use of a business entity, such as a corporation or a limited liability company, by an individual for the purpose of providing services does not, by itself, establish that the individual provides services as an independent contractor.”

Further, currently sitting in a congressional committee in the U.S. House of Representatives is the Payroll Fraud Prevention Act of 2015 which defines “non-employees” as those who provide services through a corporation or LLC if they are required to create or maintain such entities as a “condition for the provision of such labor or services.” In other words, if the Payroll Fraud Prevention Act ever were to become law in its current form, then an independent contractor would automatically, by operation of law, be deemed misclassified if you required that contractor to form an entity as a condition of providing services!

Moral of the story: look to the substance of the relationship, not the form.

Indirect Labor Acquisition: A Contractual Checklist

by Jason D’Cruz, Partner at Morris, Manning & Martin, LLP and

Tali Hershkovitz, Associate at Morris Manning & Martin, LLP


Carefully drafted contracts help limit a company’s legal exposure when using contingent workers.  The following checklist includes various types of provisions for end customers (also known as service recipients) to consider including in agreements with staffing companies, payroll providers, IC compliance management companies, and other contingent labor service providers (each a “Provider”):

(1) Legal Compliance

  • Include a broad obligation that the Provider will comply with all applicable laws and regulations;
  • Include general non-discrimination provisions, as well as the obligation that the Provider will comply with any affirmative-action and OFCCP obligations;
  • Include an obligation that the Provider will properly classify workers as exempt or non-exempt under the Fair Labor Standards Act and applicable state law;
  • Include an obligation that the Provider will withhold and remit all required payroll and other taxes from workers’ paychecks;
  • Include an obligation that the Provider will appropriately classify, and treat as such, workers who are employees and workers who are independent contractors of the Provider; and
  • Include an obligation that the Provider will ensure that necessary documentation is secured and maintained demonstrating that workers are authorized to work in the U.S.

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