Acquiring Stakeholder Support for Your Compliance Program – The Vital Element of Program Success
By Sabrina Clay, Vice President Strategic Alliances, Synergy Services
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We all recognize the value Independent Contractors (ICs) bring to an organization. We also recognize that using these critical resources comes with the responsibility to make sure there is a process in place to ensure they are properly classified. Development of a compliance program is not a one or two step initiative, and securing stakeholder sponsorship prior to implementing any type of compliance program is critical. Since stakeholder sponsorship is usually considered the first step in developing a compliance program, it’s important that each element of the process be well thought out and executed carefully to ensure program success from the start.
The level of sponsorship depends on the degree to which a company uses ICs. Companies with a large contingent workforce program or expansive use of ICs including freelancers should have a very high level of sponsorship due to the potential risk of exposure to the business and the need to drive strict controls.
The key elements to ensuring stakeholder sponsorship include:
Doing your research. Internal research will help you to understand how and when your company utilizes ICs. Understand the risks of misclassification and some of the key questions associated with it. Some of the most critical questions are:
Is there specific direction and control in managing your ICs?
Are your ICs doing the same type of work as full time employees?
Does an IC have a W-2 and a 1099 for the same year with your company?
Getting key answers from your internal experts. We know there are issues, but what are the ramifications? Your stakeholders need to be educated on both the “why’s” and “what’s” involved with misclassifying workers. Often times the best internal department, team or person who understands the consequences of employee misclassification is your company’s legal team. There is a mountain of information available to companies regarding federal, state and local efforts to eliminate misclassification practices and legal experts should be fully aware of the damage an audit can cause. This information is always changing, and knowing that they should be able to help substantiate the importance and need of a compliance program. They can even help drive the process of properly implementing a comprehensive compliance program within your company and serve as a valuable resource throughout the process.
Building your business case. As with any new initiative, the support you gain is based only the information you provide. Show your sponsors you’ve done your homework. Outline the risks, IRS “red flags” and the impact it may have on your organization. Highlight where your current process is and provide recommendations on what you can do to minimize risk and optimize your company’s use of ICs. Share your information on what you are currently doing to manage ICs and what needs to be done going forward to ensure proper IC compliance. Start with a realistic, manageable solution - if you have a large IC population, don’t expect to tackle every contractor from the start and be mindful of the fact that contractors are not all managed the same… different processes will need to be implemented for different contactor types.
Presenting your findings to an influencer and/or decision maker. Once you get all your research, program information and legal support together, it’s time to share your conclusions and suggestions with someone who can help escalate the program to an executive level to keep the process moving forward. Be direct in your communication about the consequences of having misclassified workers and offer a clear, proven solution to show how a compliance program will mitigate your company’s risk while saving time, resources and money.