How to prevail when technology fails - Flipbook - Page 34
34 | How to prevail when technology fails
53% vs
40%
53% of businesses plan to hire
technology expertise in the
next two years. Only 40% did
Employee misclassification
can lead to litigation
When recruiting, you must be mindful of
misclassification risk. If contingent workers (such
as freelancers, independent contractors and
consultants) are deemed by tax authorities and
regulators to be employees, you can be forced to
pay employment related taxes owed in addition
to penalties.
so in the past two years.
There is also a risk that contingent workers will
independently or collectively seek rights and
benefits if they believe they should be classified as
employees. This is not just a risk to “new economy”
companies, but also to traditional businesses that
replace full-time employees with contractors or
who seek to maximize flexibility through building a
workforce model based on contingent workers.
Our survey data reveals that businesses plan to
increase recruitment of individuals with technology
skills: 53% intend to hire technology expertise into
the business in the next two years – up from 40%
that did so in the past two years.
It is a risk that is particularly complex for companies
operating in multiple countries, because the law
varies across jurisdictions. Indeed, Californians
voted in November 2020 that freelance workers
could continue to be classed as independent
contractors rather than employees. But regulators in
other jurisdictions may apply different rules.
“Any time you hire consultants or independent contractors to replace
employees, you have significant risk of misclassification, the costs of
which outweigh the savings of hiring these people as consultants rather
than employees. The direction of travel is that employers will have less
freedom to treat contingent workers differently, which is not just a risk
for ‘new economy’ businesses – we’re also seeing traditional automotive
companies, for example, experiencing this.”
Kerstin Neighbour | Partner, Hogan Lovells