Keeping up with the changing world requires constant innovation — and this includes hiring. Evolving technology, the shifting generational makeup of the workforce, and a candidate-centric market[...]
February 18, 2020Read More
Structural changes are occurring in the way newer workers want to be, or expect to be, recruited, specially for on demand staffing. As we’ve detailed in past articles, online staffing platforms are poised to become one of the most influential forces in the future of talent. The reason for that? Online staffing solutions allow freelancers, niched staffing agencies and self-employed service providers to sell their services directly to businesses or consumers without investing in a business development team, in a system that encourages open dialog, community and collaboration and, most important, accountability and transparency for both sides.
Since 2006, according to Staffing Industry Analysts’ 2014 landscape report, the number of online staffing platforms began to escalate steadily, with “16 new starts per year from 2006 through 2013; a trend that seems to be continuing.” SIA also showed that, only in 2017, the B2B segment of the human cloud grew 19%, reaching $6.4 billion. A simple search at SIA for online staffing platforms will show a series of acquisitions and funding rounds happening in 2018.
A brief history
Although the advent of online work arrangement intermediation platforms, as they’re formally known, came in the late 1990s, around the same time the first VMS systems entered the market, they’ve only recently picked up steam in the industry. Today, with over 145 development companies supporting these virtual talent marketplaces, they represent the next iteration of staffing technologies.
The model began simply enough. Software developers sought to create a basic technology vehicle that could unite freelance talent and prospective buyers of their services, with functionality that facilitated billing and payments. However, as market demand grew, the platforms evolved and incorporated an expanding array of features that now include efficient methods for crowdsourcing, aggregating, vetting and provisioning more diverse groups of talent.
Unlike traditional staffing technologies, these human cloud platforms deliver online engagement and self-service options. Contract work and assignments can be measured at more granular levels, such as hourly instead of daily, weekly or monthly. In short, as SIA points out, they have pioneered a new form of “variable/fractional labor services.”
The evolution of human cloud platforms
What makes online staffing truly unique, no matter the number of sources on the market, is the niche nature of these talent collectives. They target all buyers of indirect labor, blurring the distinction between small businesses and individual consumers. They also support that gamut of services needed to enable the performance of superior work. Because they capture a robust array of extensive datasets about workers, projects, job performance, skills, qualifications and revenues, they create rich business intelligence systems from which big data can be culled.
In many respects, online work platforms are beginning to behave like typical staffing businesses: they have transformed into third-party intermediaries that facilitate contingent work arrangements and the payment processes between the indirect talent and clients.
This has caused some concern among staffing providers and even developers. Many of the technology providers expressed no desire to enter the business as staffing agencies, although that’s what they’ve unintentionally become. Staffing firms worry that online work platforms could potentially automate them into obscurity. Our contention has been that the prevalence of human cloud platforms will actually elevate the role of staffing professionals into curators. And one of the reasons comes from the biggest question most people are asking: how do these systems ensure compliance?
Unlike staffing providers, online work platforms are not the employers of record for the contingent talent who use the software as a freelance marketplace. A staffing provider mitigates a client’s exposure to labor-related risks and legal responsibilities. In this arrangement, a client has some assurance of compliance with mandated laws and regulations, such as health and safety, workers comp, EEOC, citizenship and work permissions, statutory withholdings, and some degree of indemnity. In the open labor marketplace model, however, the platform can’t assign or assume any labor-related compliance responsibilities.
With online work platforms, contingent talent and buyers establish a marketplace and enable a process of bidding and interaction through services that offer identity and profile management, skills searching, resume matching, ratings and references, payment terms or negotiations, and more. The principal legal arrangement, however, is a contractual agreement executed between the freelancer and the buyer. In this scenario, issues of worker classification, government income reporting, and applicable tax withholdings are essentially left for the parties involved to figure out. And that’s more risk than any staffing firm would allow or be comfortable with.
At best, according to SIA’s research, some platforms provide rudimentary compliance help features:
• Various suggestions or notifications generated by the software
• Issuance of forms for tax reporting
• Verifying legally required licenses
• Automated validation of legal work status by country
A few platforms may offer indemnification for these compliance assistance services, yet nothing beyond them. The challenges only increase globally. In the United Kingdom, for example, platform based intermediaries, under certain conditions, can be held liable for VAT, worker misclassification, payroll tax issues, and data privacy violations of Safe Harbor laws. Online work platforms functioning in the United Kingdom could face significant penalties or financial impacts under these unique legal requirements.
Staffing curators will remain vital to the process
With the growing reliance on freelancers and the online marketplaces they use, staffing professionals will be needed to curate the process, ensuring compliance and connecting businesses to exceptional contingent talent. Online staffing platforms do not act as employers of record nor do they provide true compliance services.
SIA also notes that “the now numerous Crowdsourcing and a fewer number of ‘Online Service’ platform businesses tend to act like outsourcers or general contractors and effectively manage ‘their own’ workers (typically as independent contractors).”
For the vast majority of online work platform users, however, expert staffing professionals can be engaged to lend consultative guidance to issues of workforce regulations, employment classification, labor laws, tax reporting, and a variety of screening processes. Where issues are identified, staffing curators can step in to represent the talent for buyers, taking workers on as employees and ensuring a compliant placement process with limited exposure to risks.