Adapting the talent status quo
It’s one of the least talked about subjects in the discipline of business management, but the fact is some of the more important improvements to the way an organization functions simply don’t happen because of the way departmental and portfolio managers are remunerated and targeted.
As organizations grow, organic organizational designs evolve into a departmental structure, with departments assigned managers to lead them. Soon enough, managers build up their little empires and start to see benefits packages focused on the achievement of departmental goals. The unintended consequence of this evolution is that managers care more about the objectives on their performance plan than they are on the wellbeing and success of their enterprise.
Dr Eli Goldratt’s Theory of Constraints is well known to organizational consultants. It states that the core constraint of virtually every organization is that organizations are structured, measured and managed in parts, rather than as a whole. This results in lower-than-expected performance with constraints constantly shifting from one place to another and chronic conflicts between people representing business silos.
The way organizations manage talent falls victim to the challenges of organizational siloism. In many firms today, HR leaders manage full-time contracts while procurement heads are responsible for indirect hires such as gig workers, freelancers, contractor and outsourcing companies. Meanwhile, IT is responsible for automation (another way to get a job done these days). While each department head has a long list of objectives, none of these include the creation of a holistic approach to talent management that spans across the organization (and across departments).
Remote working is the new normal for workforce management
2020 was a game-changing year for the talent industry. It re-wrote the book on knowledge worker productivity, re-writing the specific chapter that said office working was more productive than home working. It meant that organizations could suddenly consider tapping into talent from around the world. When everyone is on a Zoom call, it matters not that one person lives an hour from the office, another from the other side of the world.
Remote Working is transforming the talent industry. It means skilled workers in far off shores are now within reach to employers prepared to move to a virtual workforce or hybrid digital workforce model.
This significant moment in business history comes at a time when organizations are under pressure to increase the agility of their workforce and mitigate risks of falling foul of new tax regulations aimed at stamping out abuses of the system. These ‘external drivers’ are motivating employers to de-select roles for full-time employment contracts that can be offered to flexible workers.
Governments are clamping down on tax avoidance
In the next couple of years, employers across the world are expecting tax authorities to clamp down further on hiring self-employed and sole trader style contractor businesses on terms created to avoid paying employment taxes.
Tax regulations like the UK’s IR-35, and 1099 compliance in the US are being more rigorously policed. In the end, these regulatory frameworks look to do the same thing—i.e., going through compliance checks to make sure someone should be an independent consultant or should be a PAYE/W2 via payroll.
In August 2019, HMRC targeted contractors in the pharmaceutical sector by raiding the supply chain of GSK. HMRC went directly to GSK and obtained data on 1500 contractors working for them. HMRC targeted a big player in the pharmaceutical sector believing there to be widespread non-compliance in the industry as a whole with regards to the IR35 rules.
Two approaches are being taken to mitigate risk of non-compliance with tax regulations:
(1) Statement-of-Work (SoW) contracts—that fall outside of regulations like 1009 and IR35—and;
(2) Outsourcing to an Employer-of-Record (EoR); an organization that takes on the employment obligations and serves talent on-demand.
The evolution of the EoR model
Most Employers-of-Record started as payroll providers and have evolved their services from there. They come in many flavors with some offering on-premise program managers, others operating totally virtually.
The breadth of service offerings available from ‘new era’ Employers-of-Record providers like USTECH SOLUTIONS varies enormously, as there are no rules that limit the value-adding areas an EoR provider might cover (some EoR vendors look not too dissimilar to a ‘Master Vendor’). So what should you be looking for? Here are some service lines to look out for:
Expect providers to supply access to best-in-class talent insights platforms like Gartner’s TalentNeuron that offer rich data on pay rates by job category, territory and candidate skill-levels.
A relatively new feature of EoR services is the provisioning of legal services to support clients, recognising the increased threat profile of employment law, data loss/privacy regulations and diversity/equal opportunities around the world.
The traditional model of an Employer-of-Record was to take on candidates sourced by a company, or its existing network of staffing firms. This too is changing. Some EoR providers also offer recruitment services and technology to find the talent their clients need.
Background Checks, Onboarding and Integration
Performing background checks and onboarding new hires is a common feature of any recruitment. In the case of the Employer-of-Record (EoR) vendor role, these services are fulfilled by the provider ‘as’ the employer.
Employee Services and Payroll
The core function of any EoY is payroll. Often, these services are supported by slick online platforms. Providers will also take care of submissions to tax offices etc. like any employer would.
On Premise Program Management
Taking a leaf out of the book of Recruitment Process Outsourcing firms, some EoY providers offer on-premise program management to coordinate employer services and supplement the resources of their client.
One of the noticeable differences of modern EoY providers comes in the form of their technology platforms. In addition to support for core disciplines such as payroll and reporting, they might also offer advanced features such as Direct Sourcing, Statement-of-Work (SoW) and gig-working micro-task portals.
Performance and QBRs
Transparency and oversight over the activities of the EoY provider is important to any client organization. For this reason, EoY providers will normally offer rich self-service reporting tools. For larger contracts, expect to be offered a Quarterly Business Review (QBR).