"Independent Agents/Contractors" An Ongoing Employment Trend
The following article was written by alumna Toby Nathan (UI ‘81).
The Palmer Forecast™ predicted that the demand for temporary workers in the United States was expected to increase by 20.9% for the 2010 Fourth Quarter. This percentage was close to accurate at 19.2%. In these recession recovery times companies hiring independent contractors seem to be an ongoing trend. Independent contractors (also referred to as temporary and freelance workers) enables companies to manage increased work levels - typically with short-term assignments without investing in regular employees. Since employers do not provide health care and don’t have to pay Social Security and Medicare taxes, vacation and sick leave, and unemployment insurance taxes for independent contractors, these companies realize some significant cost advantages – as much as 30% of their labor costs. In addition, companies are protected from potential legal troubles since independent contractors aren't protected by Title VII of the Civil Rights Act which prohibits discrimination.
The biggest advantage for companies is that they can adjust the size of their workforce according to their demands and requirements. Today, more individuals are working as “independent agents” or through an agency for different companies on projects versus a full time position. Many companies have been more reluctant to bring on permanent employees too quickly, especially if they have gone through a major downsizing.
Independent contractors can be self-employed and hired directly by the employer, or they can work through a contract employment agency. These agencies receive compensation from the companies that hire them to find qualified workers for completing short-term assignments. Independent contractors derive certain advantages from working with an agency. They can benefit from the variety and number of potential work opportunities that agencies have with companies across industries. In addition, agencies often manage payment arrangements and may even offer some benefits. True “independent contractors” pay ordinary income taxes, Federal Unemployment Tax Act (FUTA) taxes, and Social Security taxes in the form of the self-employment "Federal Insurance Contributions Act" (FICA) tax, which is about 2 to 3 percent less than the FICA tax a company employer would have to pay for an employee.
To decide whether to work as an “independent contractor,” consider a few of the most common pros and cons:
• Increased flexibility regarding which temporary job assignments to take and may have control over specific work arrangements
• Exposure to a variety of industries and experiences
• Opportunities to develop new skills
• Expanded networking prospects
• Potential for a full-time position as company gets to know your work
• Unpredictable and fluctuating income
• Gaps between work assignments
• Lack of company provided benefits, worker’s compensation and unemployment insurance
• A perception that you are not part of the team, resulting in possible exclusion from certain company privileges and information
About Our Writer
Toby Nathan is a seasoned talent acquisition consultant and entrepreneur who has worked with clients in a variety of industries and functional areas. She has more than 14 years of retained executive search experience working for such organizations as Whitney Group, A.T. Kearney Executive Search and Kensington International. Prior to executive search, Toby spent 14 years in the healthcare industry where she served as a senior human resources manager with a special emphasis on recruitment, compensation and benefits. Contact Nathan at toby@RecruitaStar.com, follow her on Twitter or visit her web site – www.recruitastar.com.
The Palmer Forecast can be found at http://www.gpalmerandassociates.com/User_Area/pdf/Palmer%20Q1%2011.pdf.