Employed or self-employed?

Entrepreneurial risk, set work times and even the extent to being bound to instructions are all factors that differentiate employees from self-employed, third-party contractors. Checking and evaluating these criteria is often difficult in real-world scenarios and makes it hard to set clear boundaries between employees and people who are only self-employed on paper.

This situation poses a major challenge for the human resource departments in many companies. In addition to focusing on internal employees, they now need to incorporate independent contractors into their long-term personnel planning.

This 360-degree view helps organizations respond to growing demands of globalization, regulatory requirements – not to mention, the employees themselves. In light of the ongoing shortage of skilled labor and professionals, it also ensures optimal human resources planning and management.  

An integrated IT solution can help reduce both costs and risks by addressing the ever-increasing scenarios for using third-party services in companies and helping to identify and evaluate individual risks and usage scenarios. This creates a complete view of all requirement cases for management while reducing the number of individual, manual checks for third-party resources. Companies can, therefore, concentrate on more efficient ways to use these services instead of constantly monitoring work regulations.  

Aside from improving compliance, an IT-driven solution can be integrated into both Governance, Risk and Compliance processes and the existing enterprise architecture. It also increases the risk awareness and understanding throughout the organization.

Although the problems with pseudo self-employment are not new, they are more current than ever. Package delivery, healthcare and construction are just a few sectors that are currently being targeted by investigations, whether from the chambers of labor and commerce or regional healthcare funds. Wenatex, a sleep system provider from Salzburg, is one recent prominent example. According to the local newspaper “Salzburger Nachrichten”, the regional healthcare fund assessed a pseudo self-employment status for more than 100 retail partners. This means 12.9 million euros in back social security payments and 4.1 million euros in local taxes (source: derStandard.at). For most companies, such astronomical back payments would severely endanger – if not end – their entire existence.

To prevent these types of legal conflicts before they happen, EY has developed an external workforce governance (EWG) approach, which it has launched as IT solution in cooperation with GBTEC (formerly avedos). This joint solution fulfills all requirements in the field of EWG. “Flexible solutions to cover the personnel requirements using internal employees and independent contractors will have a major effect on tomorrow’s work world,” explained Hannes Wambach, Co-CEO at GBTEC Austria. “To remain competitive, companies need to establish structures, processes and systems to efficiently and effectively manage services through third parties without losing sight of the regulatory requirements. A tailored EWG IT solution can be invaluable. Following a quick check of various factors including its own maturity level, a company can implement a customized, sustainable approach to EWG and map it in BIC GRC Solutions (formerly risk2value). This software platform integrates all relevant EWG stakeholders to ensure full transparency when working with external resources.”