Worker classification has become one of the more complex challenges facing organizations that rely on independent contractors, freelancers, and other forms of contingent talent. Shifting regulations, varying state requirements, and high-profile misclassification cases have created an environment where companies can be tempted to take the safest-looking path: classify more workers as employees or use an Employer of Record (EOR) model whenever there is uncertainty. However, during a recent Future of Work Exchange (FOWX) Podcast, Cristin Monnich, Head of Services for Worksuite, explained that excessive caution can create its own costs and talent risks.
Compliance Requires More Than Choosing the Safest Option
The fundamental challenge is determining how a worker should actually be classified. An independent contractor operating as an independent business is fundamentally different from an individual who functions as part of a company’s internal workforce. Treating those two situations the same can create problems for both the organization and the worker. Monnich argues that organizations need to become more intentional about understanding the distinction between an EOR and an Agent of Record (AOR) model. An AOR can be appropriate when an individual is legitimately operating as an independent business, while an EOR is designed for situations where a worker is functioning more like an employee. Forcing an independent worker into an employee structure can create additional costs and potentially cause the organization to lose valuable talent.
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