Patrick Ow shares the challenges affecting employees as the workforce changes over time.
14. Employees Are Converted Into Contractors
Over the past two decades, the U.S. labor market has undergone a quiet transformation. Organizations are increasingly converting full-time employees into independent contractors.
Full-time employees are increasingly finding themselves as (or being forced into) independent contractors especially when their employment is transferred to an outsourcing organization. While they may be doing the same work, the method for computing their wages and income taxes will change with the loss of job security and benefits.
Some organizations like Uber have elected to reclassify (or misclassify, depending on how you see it) their employees as independent contractors. The impacts of misclassification are the underpayment of wages, the absence of benefits, and increased exposure to a variety of risks. According to a 2009 report issued by the U.S. Government Accountability Office, a significant portion of independent contracting does not pass the smell test. They actually represent the misclassification of workers.
Misclassification has spread quickly across sectors like hospitality, residential construction, and trucking and logistics.
When it comes to determining employment rights and responsibilities, the most important factor is the definition of employer and employee. An employee works in a business and is part of the business. A contractor is running their own business.
There are no similar workplace protections for independent contractors. They are considered to be their own small business, setting their own hours and responsibilities, providing their own benefits, and determining their own economic outcomes.
Hourly rates paid as wages to a full-time employee and an independent contractor will differ.
These ‘alternative work arrangements’ or the ‘contingent workforce’ are growing according to Politico. They represent roughly 16% of all U.S. workers, while the number of traditional employees declined by 400,000.