Workforce compliance in the gig economy

Today, companies of all types and sizes are using contingent workers at a greater scale than ever before. Beyond the traditional “outside contractor” who might perform a discrete time-boxed task, the contingent workforce, as often as not, now operate within an organization just as if it is part of the employee base. Professional services might be supplied under a statement-of-work agreement, a freelancer with unique skills might be retained through an online labor marketplace, or traditional temporary workers might be hired through a staffing agency. Entire departments or projects might be run by contingent workers.

References to the “gig economy” abound, with articles about how this task-based approach to work enables greater flexibility for both the workers and the company engaging them. Economists note the globalization of the contingent workforce and predict an even more rapid pace of growth in this sector.

As a result, we see growth in offerings of technology systems to help companies manage independent contractors. This ensures compliance with tax, wage and hour, and other employment-related rules. But is that enough? Is the company adequately protected by addressing the regulations around use of contingent workforce? What about the compliance risks that the contingent workers and their tasks create?

Using contingent workers has its benefits, to be sure. But if that workforce is not managed properly, the costs to your company will far outweigh the benefits. As in every aspect of your operations, balancing the risks and rewards is essential and having an effective management system in place is critical.

Using contingent workers can save money, offer flexibility, and bring unique skills to your organization. But beyond the non-compliance from misclassifying contingent employees, the full range of risk problems that can occur during operation of the tasks assigned to these employees must be considered.

Regulatory Compliance

If they are engaged in any activities that are subject to regulatory compliance requirements or company policies or procedures, they need to have communication and training.

Operational Risk

If they are engaged in critical tasks that can affect business continuity, quality control, and operational schedules, they present operational risk that must be adequately managed.

Information Risk

If they handle confidential data, they present an information security risk and controls must be put in place.

CONTINGENT WORKERS ON THE RISE


In 2015, the U.S. Department of Labor found that 65 percent of employers anticipate an increase in the use of flexible staffing arrangements to meet their future talent needs.

In Deloitte Consulting’s Global Human Capital Trends 2015 whitepaper, more than half of respondents said their need for contingent workers will keep growing over the next three to five years.

A recent survey conducted by research firm Ardent Partners found that about 30 percent of company workforces are now made up of non-full-time employees, growing to 50 percent by 2020.
Quoted source: peoplefluent.com/bloghttp://peoplefluent.com/blog

Even if the contingent workers are provided by a third-party supplier, in today’s world of fast-paced information, there is a huge reputational risk associated with any significant data breaches or instances of regulatory non-compliance. Penalties and costs of remediation may also fall at your door.

It should be obvious that the contingent workforce must be managed appropriately to ensure they receive communications and training needed to address your risks and compliance requirements overall. They must be integrated into the company culture and understand the established policies and guidance around risk tolerances and limits. Their roles and tasks must be clearly defined so that they receive the same consideration as employees engaged in such roles and tasks. A clear record indicating ownership of the relationship with each contingent worker, defined roles and tasks, communications, policy distribution, attestations of understanding, and risk-based training must be created and maintained.

Using contingent workers has its benefits, to be sure. But if that workforce is not managed properly, the costs to your company will far outweigh the benefits. As in every aspect of your operations, balancing the risks and rewards is essential and having an effective management system in place is critical.

Modernizing workforce compliance: an OCEG roundtable

Switzer: We’re talking today about ways to improve the management of workforce compliance, so let’s start by asking what are the key aspects of workforce compliance that must be addressed in any organization? 

Sanders: At Mungenast we are focused on four main aspects of workforce compliance—onboarding, training, policy communication, and procedure changes. Onboarding starts with online applications and continues through a blizzard of forms, policies and procedures. Initial training is extensive and takes up a full day.  Our digital component assesses both policy acknowledgement and subject matter comprehension. Continuing training and communication cover all of our updated policies, as well as reminders which we push out 30 to 40 times a year. We also communicate new policies and changes in existing policies and benefits to ensure all employees un­derstand those changes in a timely manner.  We often communicate changes live, and then issue a policy or procedure change with interactive Q&A follow-up to document policy dissemination and ensure team member understanding. 

Warmack: It’s important to remember that compliance doesn’t live just in the compliance or human resources department. It lives throughout the company and should be ingrained in the culture and reflected in how a company conducts its business. To build a true culture of compliance, your policies, training, assessment, and reporting needs to be available to everyone, communicated across every department, and frequently reinforced. These activities should be consolidated and delivered through one consistent platform across the organization.

Switzer: You’ve mentioned a digital or automated component to workforce compliance. Why is that helpful?

Warmack: Here’s the challenge: When I look at most companies’ compliance programs as they relate to workforce interaction, they are run like an old-fashioned switchboard  where the compliance team has to manually connect activities with people, one by one. They don’t have a systematic way to assign these compliance activities to their employees, to define their inherent business processes, or to monitor and report program progress. This brings a host of headaches for the compliance team. It becomes almost impossible to track which policies and activities go to which people, and which people reviewed which version, which impacts the ability to send reminders to employees and managers to complete activities. They are shuffling through reams of paperwork and e-mails to keep tabs on compliance status, then manually assembling reports and audit evidence from their hodge-podge of sources. So back to the switchboard analogy: a dropped call, a missed connection ... this is what exposes businesses to risk. This is why organizations look to automation to gain efficiency and better protect their businesses.

ROUNDTABLE PANELISTS

Carole SwitzerPresident,OCEGModerator
 
Patrick SandersGeneral CounselMugenast Automotive Family
 
Rob WarmackCEOCompli




,

Sanders: I believe there are at least two reasons why forward-thinking organizations should automate workforce compliance.  The first is confirmed communication.  We need the ability to ensure prompt and synchronized distribution of a new or changed policy and confirmation that any training on that policy has been completed.  For example, we recently changed a benefit policy and by using a compliance management platform, we could timely distribute precise information instantaneously. Once we pushed information out to our team, we could track who didn’t review or respond.  With this data, we quickly identified areas where personal follow-up was indicated.

The second reason is what we call personnel compliance. We need to timely track when someone was given, let’s say, an oral warning on tardiness. When we can track these activities, HR is able to flag specific issues for follow-up. With an automated solution, we ensure the appropriate documentations are sent and we identify actionable items of risk. Effective communication is an operation linchpin. To be effective, communication must be understandable, contain examples, and be timely, complete, and verifiable. Without these traits, we can’t communicate effectively with our 560-plus team members. If our communications do not accomplish this, we are not effectively communicating with all 565+ of our team members.

Switzer: Many organizations use automated learning management systems to deliver training. What else can be automated or what should we do differently?

Warmack: If you’re unfamiliar with an automated workforce compliance system, it’s broader, deeper, and more comprehensive than training modules delivered through a learning management system or LMS for short. The knee-jerk reaction is to use LMS tools that are already in place, hoping it will save some money. The thinking is, “we’re using it to train people to use Excel, or how to improve their technical skills, etc. Why not use it for compliance, too?” But workforce compliance is a combination of learning based and non-learning based activities. An LMS simply can’t support the breadth of a typical compliance program.

The main thing that concerns me when I hear of organizations that are leaning on an LMS for their compliance program is the lack of definition and visibility of program success. Sure, you may get “check the box” data around how many people completed the training out of the LMS. But you can’t monitor and measure what happened relative to what was supposed to happen, collect information from the workforce through online forms such as conflict of interest disclosures, or easily demonstrate who signed off on what policy and when. Without this level of information and automation, you’re only adding to the amount of time your team spends managing the mundane side of compliance. But with a true workforce compliance system, time and money is saved, hassle for employees and compliance teams is reduced, and the business is better protected.

Sanders: We ask the question ... what should we be doing differently ... first. So, when it comes to automated systems, what is critical to us is ease of use and flexibility. In my experience, I have found many people learn differently.  In many industries, including manufacturing, warehousing, automotive, construction, etc. straight screen-based e-learning doesn’t work effectively for upwards of 20 percent of the workforce. Many of these educated, very bright, and innovative individuals learn by doing or by example or a combination of multiple learning exposures. You should be asking ... does the tool work for your organization, accommodating different learning styles and preferences?  Unfortunately for some, completion of training for defensive purposes ends the analysis.  We don’t stop with completion; we must know ... How effective were we in communicating the training material to each team member? 

Switzer: When should an organization consider automating workforce compliance?

Warmack: We see four traits in companies that are well suited for automation. First, they have broad compliance needs, ranging from industry-specific laws and regulations to human resource policies to topics like health and safety. Second, their workforce itself is dynamic. This can be in organizations that experience high turnover or ones that are growing rapidly. Third, they’re tackling compliance manually today. Their tool is staff -- people to assign, people to remind, people to report. Fourth, there’s a consequence when something fails ... consequences like fines, damage to your reputation, or hits to your bottom line.

Sanders: For me it’s not a matter of if an organization should add enhanced digital workforce compliance, it’s a matter of when and the sooner the better. However, it is critical to understand that not one size fits all. Among many issues, consider the generational make-up of your workforce and how quickly technology has evolved. We have four, going on five, functional generations working together in the same workplace, each with a different level of technological dependence and capabilities.  My Millennial children view a phone call as an invasion of their privacy, firmly believe voicemails from me or my wife are a form of parental punishment, and may not read or answer e-mails because if it was really important you would have sent me a text. 

So, you need to develop a flexible system that effectively communicates with all generations, and provides each of them the training and policy content in ways that each is functionally able to consume and understand. Companies are going to stub their toes when they wade into this somewhat opaque water, but that’s ok.  The key is your employees want the communication and your company needs a robust digital platform to keep your team members up-to- date on information they need to function in your workplace in an ethical and legally compliant fashion. 

Finally, come to the understanding this is a journey, not a destination.  If you view the establishment of more robust digital communication and compliance management platforms as a destination, you are missing the point. Hang up your phone, resolve not to send your children voicemail or e-mail, text in your next take-out food order from your smart device—trust me, you have a 50 percent better chance of actually receiving what you ordered, if you do—and prompt your enhanced digital workforce compliance system to remind you to review your overall management of compliance issues.

Every day you focus on meeting compliance obligations and making sure nothing falls through the cracks. But it’s a tough job if you have no central source for data, inefficient reporting from disconnected systems and departments, and a workforce that may not understand the importance of workforce compliance initiatives.