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Home based virtual staff seems to be the wave of the future for small business owners who want to sidestep the headaches and the expense of a traditional brick and mortar office.

Given the current economic downturn, employers everywhere are taking necessary steps to reduce costs, often starting with staff cuts forcing them to seek out temporary workers or independent contractors to help fill the void. Today's employers are entertaining all options that offer cost  savings including those that address costs associated with a fulltime workforce. A highly successful offering with Canadian employers Virtual Pro is a huge hit in the U.S market since it was launched by StaffPro America in February. Employers who are looking for alternatives to the traditional staffing model have been very receptive to this new idea because of all the front end pluses. The model allows employers to gain access to a transient talent pool, work can be project based with no long term commitments and virtually no employer responsibilities that go along with traditional employment. It seems employers have embraced this concept and this could be a leg up on the competition for StaffPro. 

Although StaffPro acknowledges the solution is still very much a traditional staffing firm model it is unique in that neither party bears the responsibility of the employer given the workers are "independent contractors" and "self employed". These individuals are responsible for adhering to the riggers associated with operating a business paying their own taxes, obtaining other clients, writing handling the contract and when the project is done neither the employer nor the staffing company has unemployment costs to worry about. Given this alternative worker model has been so successful in Canada StaffPro is optimistic they can repeat it in the U.S. A huge advantage for StaffPro it has no local competitors and it expects to boost its revenue by 19 percent this year if this endeavor is a hit. 

A possible success factor for the Canadian operation maybe in the past revenue seeking agencies in Canada has not been as aggressive in its employer auditing efforts as the IRS in the U.S. However in the last 5 years numerous worker misclassification cases against employers have been tried and won and employer compliance continues to be a focus in Canada. In the U.S. employer workforce compliance has endured heavy scrutiny given it is at the forefront of political campaigns, on the lips of workers and numerous notable cases make the headlines on a daily basis. Now more than ever employers must ensure the programs and solutions they adopt are carefully scrutinized for potential risks to avoid the missteps of companies like FedEx and others. Working on a project basis from your home does not make an independent contractor.  In any employee-independent contractor review, all information that provides evidence of the degree of control and the degree of independence will be scrutinized. Meeting the requirements set by both the state and federal government to be deemed self employed is no easy task. Specific worker types requiring heavy supervision, little or no specialized education or training and hourly payments is typically viewed as indicative of an employer/employee relationship. If the auditing agency feels the employer company has the right to control the relationship (whether they ever exercise the right or not) the mere fact that it exists is enough to reclassify a worker. Should the agency render a reclassification determination an employer must be named for payment of back taxes, fines and penalties assessed for this error in judgment. 

The costs of worker misclassification can be financially devastating to small client companies possibly resulting in financial ruin. Employers looking to avoid the added costs associated with traditional staffing models must look at all aspects of the staffing model beyond the costs and real employer obligations. Take a peek under the hood and kick the tires before signing on that dotted line.  Remember, just because you call them independent contractors doesn't make it so.

Homeland Security has more contractors than government employees who are so deeply ingrained in governmental functions potentially influencing decisions well outside the duties of a hired gun. A Senate Committee looking into the matter uncovered the justification for this hiring practice. The long standing practice of hiring contractors to fill open positions earmarked for W-2 employees has created a situation that is not easily rectified. The committee determined the department lacks in-house expertise and institutional knowledge and must rely on contractors to fill the needs of the department and issued a "strong urging" to DHS to change its hiring practices. The problem is so pervasive an overnight change is not possible. Robert Burton, Deputy Administrator of the Office of Federal Procurement Policy said "the question is, what rules will govern that relationship.

What?? Ask any private employer and they can quote the rules for hiring contractors and the pitfalls of improper worker classification. Compared to the hammers and large boons lowered on non-government employers who utilize the exact same hiring practices it seems very little has been done to influence change in governmental hiring practices. Company's in the private sector have endured years of harsh financial penalties, been threatened with 3rd degree felony charges, paid fines and penalties in the billion dollar range for misclassifying workers.  Compared to a "strong urging" to fix the problem and a check for $39 million in procurement dollars to hire regular employees the punishment pales in comparison.

This milk toast approach towards DHS and other government entities from those who push employers to do the right thing by its own workers seems less than adequate. The message to ALL employers should be equal playing field for all.  To fix the age old contract worker misclassification problem we must lead by example and not from the platform of do I say not as I do. Otherwise, how can we expect employers to take the pitfalls of worker classification seriously if those who do the policing are not adhering to the law?

For some Pennsylvania employers it may be time to pack up the old kit bag but minus the smile.

The Construction Industry Independent Contractor Act passed Monday by a landslide in a vote of 122-76.  This could mean severe punishment of those employers who misclassify workers to avoid paying their share of employer taxes.

Pennsylvania House of Representatives ignored lawmakers who lobbied heavily against imposing such severe penalties citing this extreme form of punishment would only worsen the ailing state's economy.  Should the bill become law, some governmental officials predict it may drive jobs to employer friendly states like North Carolina, Tennessee and Virginia. 

With union groups backing the measure and the state scrambling to fill empty tax coiffeurs, a passage of the bill into law is not unfathomable. The construction industry is not alone on the list of targeted industries.

The courier industry with the ever popular FedEx case rolling along at lightening speed, the infamous carnage of the software industry and other high-tech entities, I think we will see copy cat bills cropping up all over the country.  Heavy users of independent contractors waiting in line for their number to be up may find themselves at the front of the line.

Now I've seen it all! 

This article tells of an employer who falsely reported payments to independent contractors who never even worked for them!  It seems everyday we read or hear about how the government treats employers unjustly and how when they make a mistake and misclassify a worker as an IC, they are made to look like the bad guy.  Although most employers who make bad judgment calls when classifying workers rely solely on their best interpretation of the rules, this company clearly is not one of those mistaken employers.

Falsely reporting unpaid wages in any circumstance only leads to bigger issues with the government.  If this company is engaging in these types of practices, the audit door ordinarily closed is now flung wide open. It will become a free for all. Even if the contractor can't prove the client company falsely reported wages for him they are now on the radar as a possible revenue stream for the state and federal government.  In the end it won't be a matter of if they are audited but when!

Another update unfolds in the FedEx driver misclassification saga as shareholders take matters into their own hands and file suit against the FedEx board of directors. The plaintiff, Plumbers and Pipefitters Local 51 Pension Fund, alleges FedEx Ground unnecessarily exposed the company to damages through their questionable hiring practices.

The company was initially fined $319 million by the IRS for the 2002 tax year en lieu of classifying their delivery drivers as Independent Contractors while treating them as they were traditional W2 employees. However, after all is said and done, the company potentially may face liability and backtaxes totaling upwards of $2 billion dollars.

A spokesman for the company dismissed the union's lawsuit, calling it frivolous and without merit.  Yet, FedEx is currently fighting lawsuits in 30+ states as the result of this dangerous business model. FedEx still refuses to change how it engages these workers and continues to fight sinking more money into the tax dollar battle that has not enjoyed much success.

To date, stocks continue to sink as FedEx continues the battle and the IRS digs their heels in.

California just may be sitting on a newfound gold mine.  State audits and investigations of employers who use independent contractors are up 54% in the last 3 years and the dollars are adding up. Dollars from the states mining efforts in 2007 was $163.6 million although up 30.4% from fiscal 2005 still not the mother load. The dollars hitting the empty coiffeurs although fairly sizeable may not be quite enough to make employers sit up and take notice.

Misclassified workers, uninsured workers, unpaid tax dollars and state and federal deficits are reasons enough for auditing agencies to take a second or third look at the worker population in your organization. Presidential hopeful Barack Obama's campaign gains momentum as he picks up support from large pro-worker organizations, including the teamsters union. This candidate may impact the current reform in employee classification issues. If so, the nation can expect to see the number of audits jump up significantly. The sound produced by those cash registers as the dollars come in will be heard round the country.