January 6, 2012
In the United States, we hear a lot about job creation. Perhaps we should stop thinking in terms of jobs for 2012 and start thinking about independence—as in independent contractors.
If your small business is like most, you probably already use independent contractors to staff up or down depending on your need for help. You do that instead of investing in full-time employees, avoiding the added costs of benefits and training. Or, maybe you’re an independent contractor yourself, running a virtual business by enlisting other contractors when you need them to manage big projects.
According to the MBO Partners Independent Workforce Index, this move to independents will only accelerate this year. In 2011, MBO Partners’ survey showed that there were 16 million independent career workers in the country. They predict that by 2020, 70 million Americans will be independents. That’s more than half of the private-sector workforce.
Here are some of the trends Gene Zaino, the CEO of MBO Partners, sees for independent workers in 2012. Let’s look at how will they affect your business.
Entrepreneurial mindset
As more workers become independent contractors, they will adopt a “solopreneur” mindset, behaving like businesses rather than like employees. Zaino says this attitude will spread to employees, who will increasingly see themselves as independent brands, even within their workplace.
Demand for experts
Of the 16 million independent workers today, Zaino says 70 percent are experts whose work requires specialized training, skills or education. Forty percent are professionals over 55 (obviously there’s some overlap). Both trends will accelerate in 2012.
Many older workers need or want to continue working. MBO Partners’ survey found that workers who are 65 and older are the most likely to be highly satisfied as independents.
We often assume that companies hire independent contractors to save money. But the study found that the primary reason was to gain access to specialists with unique, hard-to-find skills.
Social communities, collaborative technology
Collaborative cloud-computing tools and social networks have made it easier to build communities based on industries and skills. They’ve also simplified the process of finding and hiring independents. It’s now possible to use independent contractors in any part of the world.
Cloud computing, collaborative tools and social networking are increasingly integrated into the work world. So, businesses that haven’t yet tried working with independents will find it easier to do so. More employees will take the leap out of the salaried job into the world of contracting.
Greater regulation
If you have ever outsourced work, you know that one of the big risks is misclassifying someone as an independent contractor. In many cases, the work the contractor is doing fits the definition of “employee.” This can get you in hot water with the IRS, and Zaino says in recent months there has been an uptick in class-action lawsuits and government action on this issue.
In 2011, seven misclassification laws were passed in six states, and 14 bills could pass early this year. So it’s more important than ever for you to be sure you’re on the right side of the law when you’re dealing with independent contractors.
Passport to independence
If you’re an independent contractor, you know that one of the big downsides is not receiving such benefits as health insurance from any of the companies you work for. Unfortunately, the need for insurance keeps many would-be independents tied to the traditional workforce.
Zaino predicts that in 2012, some type of “passport for independence” will be developed. The details are still a bit vague. Zaino describes it as “a platform that [would] enable independent workers to build a custom infrastructure that could include retirement and health care programs. [It would] install the necessary protection to insulate ... clients from misclassification risks.”
I think something like a passport system is much needed. In an election year, though, I’m not very optimistic about it coming to pass.
Do you use independent contractors in your business, or are you one? What do you think about these projections?
Photo credit: Photos.com
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ICsimplify 14 days ago
While we are seeing more movement to IC from employees, you do want to make sure that you are putting your small business at risk by utilizing ICs in a way that could bring great risk to your business. While it is easy to engage and IC it is cumbersome to do it right. Besides the classification risks you mention above there are others. Such as not having your business protected with a contract and making sure that all required filings are made. 16 States require new hire reporting, usually within 30 days of engaging. If you are looking for a tool to help you with these risks, be sure to check out http://www.icsimplify.com which will give you a free recommendation on how a contractor should be classified..employee or independent contractor.