As the contingent workforce grows, employers are recognizing the different risks and processes necessary to access and manage these critical resources, which include independent contractors (IC) and payrolled labor. At the same time, significant intellectual drains are occurring as the baby boomer generation moves into retirement years. However, most organizations realize the continued value of maintaining a direct employee population, and the risks associated with losing valuable internal knowledge. These employers are finding ways to re-engage permanent labor resources and meet their growing needs, such as flexible options that utilize their skill-sets.

Similarly, recent generations are looking for opportunities that allow them the flexibility to control how they deliver results in a more independent way. Companies with forward thinking strategies have quickly realized the motivators and value of these contingent workforce resources, but are often challenged by the unique risks and processes involved in the sourcing and management of this type of labor.

Turning to traditional staffing companies for the management of contingent workforce populations is most common. However, these organizations are dedicated to recruiting services, and lack the creative pricing models and expertise that a committed payroll and IC compliance company has to offer.

WORKFORCE MANAGEMENTIN THE ERA OF FREE AGENCY

While the war for talent continues, the workforce is increasingly mobile and attracted to flexibility and independence. The greater majority of the hiring today is done through social media channels, as well as personal referrals and tapping into the retiree population.

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Why is it important?Today’s use of ICs has led to increased scrutiny by federal, state and regulatory authorities. The misclassification of ICs can lead to costly lawsuits, penalties, taxes and co-employment exposure. The

use of ICs to provide various types of services continues to grow in most industries, which increases the need for IC engagement and compliance programs.

Why is it important?Over the last decade, many organizations have begun to examine the opportunity to consolidate their contingent labor and “consultants-rich” internal buying activities under a consistent and controlled business model. Along with the deployment of Managed Service Programs and Vendor Management Systems, Payrolling

Services have grown to become a key engagement model for companies to achieve tangible cost savings and avoid risk. Companies also use this solution as a way to drive diversity spend initiatives as the payroll population of contingent workforce program is estimated to be around 10 to 25 percent.

What are independent contractor (IC) compliance services?

What are professional payroll services?

Definition—Independent contractors are independent businesses or self-employed individuals that are engaged for a specific area of expertise for a discreetly defined project. They are also referred to as freelancers, consultants, 1099s, contractors and ICs. They are generally engaged under a contract for services, rather than as a full-time direct employee.

Definition—Payroll workers are client-identified resources originating from the company’s internal recruiting effort of identifying ideal candidates that match their needs. They are then “payrolled” with a third-party provider which acts as “the employer of record.”

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Take Control of IC ComplianceThe burden to properly classify workers is on you and it’s all about control: financial, behavioral and the relationship of the parties. So, what are your responsibilities? A worker is generally considered your employee if you have the right to control the means and manner of the work.

Many companies are not sure how to properly classify workers—and the federal government doesn’t make it easy. The courtroom is crowded with more wage and hour disputes that are pinned on wrongful employee classifications. Meanwhile, state and federal agencies are stepping up their enforcement activities and cracking down with hefty penalties.

The reality is many organizations misclassify their workers. In a survey by the Staffing Industry Analysts of companies in various industries with 1,000 or more employees, fewer than 1 in 5 respondents said they are sure that their ICs are properly classified.

IC Compliance that Acts Like Firewall ProtectionCorporate United, with the help of Brightfield Strategies, a management consulting firm specializing in global contingent workforce strategies, carefully evaluated specialty payroll and IC compliance vendors, and Corporate United ultimately selected Populus Group, a certified minority-owned business, as its partner. Essentially, Populus Group acts as a firewall, providing IC compliance specialists and ongoing compliance recommendations and support.

How confident are you about the status of IC compliance and the reliability and cost of your payrolling?

IC Compliance Highlights include:• Experienced team of IC compliance experts

• Ability to unbundle IC compliance and payrolling solutions that meet the unique needs of member companies

• Experience with both MSP and VMS Solutions

• Full suite of IC compliance technology

• Warranties and indemnifications for IC evaluation services

• Ongoing training and support to members on ways to properly engage ICs

• Ability to satisfy each member’s unique contracting requirements, industry and locations

• Review each IC engagement to help determine whether the 1099 ICs and other small suppliers are truly independent in the eyes of tax authorities and provide risk assessments

• Maintain defense files if an IRS audit does occur to set the minimum documentation and contracting requirements

1 in 5 survey respondents are sure that their ICs are properly classified. —Staffing Industry Analysts

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Internal Revenue Services (IRS) penalties can hit a company hard, especially with the three-year look-back period for misclassified workers.

IRS Penalties for Unintentional Misclassification:

of FICA employee should have paid

of all wages paid to the misclassified worker

of FICA employer should have paid

of FUTA that should have been paid

All federal income taxes that were not withheld

100%

40% 1.5%

100%

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Also through Populus Group, Corporate United and Brightfield Strategies have designed an innovative payroll pricing model called Statutory Plus Pricing, which accounts for all statutory costs, including non-terminating and terminating costs. And it figures in cost reductions after meeting statutory thresholds—no money is left on the table. This pricing model is all about transparency, accountability and reducing cost.

For example, as the tax cap is reached for an individual worker, the federal or state government no longer requires those payroll tax dollars to be withheld. Many third-party payroll providers pocket the fees from a client even though the government no longer requires it to be paid. Corporate United’s progressive Statutory Plus Pricing model delivers that savings back to members with reduced spend.

Innovative Payroll Pricing

Want to know how much you can save? We’ll analyze the data and show you how Corporate United’s Statutory Plus pricing delivers reduced spend.

Don’t I Get All This Service Now?Probably not with your current recruiting company, staffing firm and managed service provider.Many recruiting companies or MSPs offer payrolling services. But it’s not their core business, and it almost always costs more than it should.

The traditional mark-up model of pricing for third-party payroll services is simple—but it means you’re leaving money on the table. That model does not account for varying federal and state payroll tax rates and caps.

There are staffing companies that handle IC compliance, as well. They will collect documentation and make recommendations, but that’s not enough. Companies need a provider that will stand behind recommendations on IC compliance and indemnify their findings.

Your payrolling and ICC solutions should enable you to:

• Reduce costs and risk • Leverage your recruiting brand to attract and retain talent • Meet diversity goals • Stay compliant with employment laws and regulations • Achieve operational efficiencies

Payroll Pricing Highlights include:• Lowest cost pricing model for payroll services

• Diversity status

• Act as Employer of record for both professional and non-professional skill categories

• Financial security

• Quality of worker benefits

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$160

SUTA ~3.4%

FUTA 0.8%

FICA 6.2%

STAT

UTO

RY

CO

STS

Statutory Plus Pricing: How It Works

1 2 3 4 5 6 7 8 9 10 11 12

WORKERS COMP ~0.9%

DISABILITY INSURANCE

~0.9%

Corporate United’s Statutory Plus pricing model steps down the cost to Members once the taxable wage base is met for select taxes.

This example equates to a 10.4% reduction for SUTA, FUTA & FICA.

Some statutory costs are non-terminating (i.e., insurance)

MA

RK

-UP

FEE

(%)

HOURLY PAY RATE ($/hr)

$200%

5%

10%

15%

20%

25%

$40 $60 $80 $100 $120 $140

Compare Statutory Plus with Traditional Pricing

Average Annualized Effective Mark-Up: Cost + Method

Average Annualized Mark-Up: National % Method

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So, what kind of standards are we talking about? Corporate United and Brightfield Strategies engaged in a comprehensive vetting process to find the right solution and provider.

First, know that we seek supplier relationships with companies that specialize in a solution. We also look for cost and other value-added services that our members couldn’t achieve on their own so our members can achieve their procurement goals now and throughout the life of the agreement. Then, we introduce

innovative solutions or novel models, such as our payrolling price model. Finally, we ensure there is executive-level support and understanding of the GPO model.

We conducted a thorough market and supplier landscape analysis, and we married that with stringent criteria and a competitive request for proposal (RFP) process.

The resultMembers can reduce spend on payrolling and IC compliance with a unique pricing structure, while feeling confident they have a market leading program with best in class terms and conditions.

Smart Sourcing

Corporate United is your partner in achieving a valuable payroll and independent contractor program. We’ll help you assess your current work environment and design a tailored solution that suits your business environment. Most of all, you can start saving

immediately with our turn-key contract with a specialty provider that has a track record for success in payrolling and IC evaluation and compliance.

Make the Payrolling and IC Compliance Decision

Take stock. Is she an independent contractor or employee? Many companies don’t know the answer to this question—or they get it wrong. Our partners at Populus Group can help.

Create tailored solutions. Access advice on what payroll and IC compliance solutions will work best for you through partner Populus Group.

Achieve more value. By leveraging the buying power of 200-plus members and partnering with Populus Group, a certified minority owned business, we can provide members with an IC evaluation, as well as compliance services at the lowest possible price.

We help our members...

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Call your Corporate United member development representative or email cws@corporateunited.com.

GET STARTED

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Populus Group is a nationally certified minority-owned business, specializing in payrolling and independent contractor compliance solutions. Populus Group has been successful at helping clients meet their diversity spend initiatives, while offering guidance and expertise in the mitigation of risks that accompany the usage of contingent labor. populusgroup.com

Brightfield Strategies is a management consulting firm specializ-ing in contingent workforce strategies. Independent and objective, Brightfield’s team of contingent workforce experts bring industry best practices and benchmarks to its global Fortune 50 clients. brightfieldstrategies.com

Corporate United enables close to 300 member companies to expertly manage their indirect spend categories. By providing category lifecycle management for more than 40 leveraged agreements, Corporate United offers an enhanced approach to ongoing contract and supplier management. We are committed to providing members and suppliers with a collaborative community to help them achieve more.

Corporate United Headquarters24651 Center Ridge Road, Suite 527Cleveland, Ohio 44145440.895.0938

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