Many of the major shifts in the business world over the past decade revolved around the idea that businesses needed to “do more with less.” A decade removed from an economic downturn that forced enterprises to seek alternative workforce strategies vis-a-vis massive layoffs and organizational restructuring, there is one major fact that resonates with both the business of 2009 and that of 2019: a robust reliance on non-employee talent and contingent labor. Ardent Partners research shows that 41.5% of the average enterprise’s overall workforce today is comprised of non-employee labor, a figure that is nearly 2.5-times bigger than it was ten years ago. Additionally, seventy-one percent (71%) of business leaders state that the pressure to adapt to evolving market and economic conditions is the biggest catalyst to changing how they get work done. What does this mean for businesses and more specifically those in Finance and Accounts Payable? It means the role of the contingent workforce, and more importantly, how you onboard, pay, manage, and track this part of your workforce (aka Vendors which really how they are entered into your accounting sytems) must be taken into account now and in the future.
The the realm of financial operations for contingent workforce management is an oft-overlooked aspect within AP but it definitely shouldn’t be. Most contingent workers are classified and paid as 1099 employees. And who is responsible for making sure the 1099 workforce gets paid? Accounts Payable. Freelancers and independent talent depend on regular, consistent income and this can create enormous pressure for AP departments to pay these workers on time. If AP is late or delayed in making payments to these workers in can have large implications for the business (not to mention the workers who are counting on getting paid) such as these workers deciding not to work for them on future projects and initiatives which can have significant implications on a company’s ability to get projects completed, etc.
The (mostly) good news is that sixty-five percent (65%) of businesses are dedicated to paying their freelancers and independent contractors within 30 days of project completion. Although there are still many enterprises that take longer, this is a heartening progression for freelance talent. Additionally, in recent years we have seen the passing of some major legislation across the United States that aims to curb delayed payment behavior by enterprises. For example, in 2017, New York City passed the “Freelance Isn’t Free” Act, which forces businesses to pay their independent workers on-time.
Chances are that every AP department in the USA has familiarity with 1099 and 1042-S workers and have a process for obnoarding them, validating them with background checks against required databases such as OFAC and the IRS, adding them to their Vendor Master File, and setting them up to receive payments. However, how many companies are ready for this portion of their workforce to grow significantly over the coming years? In some industries, contingent workers expect to get paid weekly or even daily in the case of Uber or Lyft drivers. Will you be able to handle the demands the contingent workforce will place on your systems and processes? The time is right for Accounts Payable to start thinking, planning, and enacting changes and transformations to handle ‘The Future of Work’.
RELATED RESEARCH:
