Employers are busy working out their policies around labor laws and fair pay as the economy changes. In turn, worker classification challenges and employer missteps seem to be finding their way to the headlines more often. As we know, wherever money is on the line and laws are unclear, you’ll find controversy right behind. If you’re looking to engage an Employer of Record (EOR) or a partner for your compliance issues and freelancer management, watch out for these warning signs.
3 Red Flags That Should Send You Running
Promising to Find Legal Loopholes
This article points to a California politician who has called for an investigation into an employer of record company and accused it of “advising its clients on how to misclassify workers and avoid taxes.” Whether the allegations prove true or not, we know it’s common practice. Let’s just get this straight right away: trying to get around the law does you no favors in the long run. Even when those laws are a real pain.
It might be tempting to look for a way around the rules, but paying employees fairly and classifying them correctly needs to be an absolute baseline for doing business with an Employer of Record. What you should be looking for is a team that keeps up with ever-changing contractor / freelancer payment and compliance issues on your behalf.
The most effective partners will adjust to changes on both the state and federal level and will be proactive about ensuring compliance. With the right partner, you won’t have to think about the frequent changes in policy around freelancer payment and compliance regulations because they’ll be thinking about it for you. Find a partner that you can be confident is in position to mitigate compliance risk and educate you on practices that could compromise you legally.
Lax or Nonexistent Payment Processes
You know how people care about their paychecks? You should, too. If your partner doesn’t have a standard, well-established set of processes to make sure employees are paid accurately and in a timely manner, run. Just get the heck out of there.
If they have their act together, your payroll company will offer online management for employees to log hours and supervisors to approve them, fast/accurate payments, and automated overtime tracking. They’ll also provide you with consultation for overtime and benefits policies that will keep you in good standing. Their automated systems will track changes in minimum wage and sick leave policies. Don’t settle for anything less. You’re worth it.
They’re a Mile Wide And an Inch Deep
You know those restaurants with Encyclopedia-length menus? They’re not usually known for good food. They’re known for being barely adequate in every way. Contrast that with the restaurants who do a few things well enough to develop a fandom of loyal consumers who will go out of their way for that crave-worthy item.
If you’re looking for a prospective partner for your freelancer management, it serves you well to find one that can do the important aspects really well. You need experts. Like those mediocre restaurants, if they’re trying to fill every need, they likely won’t be great at any of them. Their classification processes will be thinly justified or they’ll have a one-size-fits all approach. They won’t have the resources or practices in place to audit business entities or certificates of insurance.
If they’re not able to dedicate the resources to doing the important aspects well, they’re also not in position to take on many of the risks associated with freelancer management, which means they’ll offer weak or nonexistent indemnification. If a company’s offerings look too good to be true, dig a little deeper. Otherwise, you risk finding out they’ve cut corners only after there’s a problem.
Bottom Line
It should give you major pause if your prospective partner is looking for ways around the rules, has lax payroll processes, or is spread too thin to do things well. It’s worth doing your due diligence if you’re engaging an employer of record. Let us know if you have questions about your freelancer management! This is our jam!
