DIRECTLY CONTRACTING YOUR SUPPLY CHAIN & STRATEGIC SOURCING PROFESSIONAL? YOU’RE AT GREAT RISK

August 3, 2012

Thank you Bob Pridding – a real guru when it comes to Contingent Workforce Solutions (he came from many years leading huge IT shops) and who heads up our Contract Business Development and Contract management for sharing this very important message with our customers.

We all know that over the last few years that the employment landscape is migrating to a split between permanent and high level contract Procurement & Supply Chain Management. Take a look at the IT field which is mature in its use of hundreds or even thousands of contractors. In the IT world no company would ever dream of contracting IT experts directly – it’s just unheard of. They are always, without exception, brought in through a third-party staffing company so that an arm’s length relationship is maintained. Only in this way can the worker NOT be considered an employee of the client. It’s a bit of a no-brainer which hasn’t yet percolated in the Supply Chain world. But it needs to happen sooner rather than later.

Unfortunately, it’s going to take a high profile and very expensive law suit like the Microsoft case for example before firms catch on. At Microsoft, in the US a few years ago, there was a class action brought on by Call Centre contracted workers who sued for options rights that were passed over and not given to them because they were NOT full time employees but direct hire contractors.

The Direct Hire workers won hands down proving our point that companies who hire contractors directly are indeed very vulnerable. The resulting cost for Microsoft was in the tens of millions paid out to these workers.  

This is just one of many examples that the IT industry learned early and should have taught other sectors as they continue to come online like Engineering, Change Management and Strategic Sourcing and Supply Chain. It’s a rat’s nest and an easily avoidable mess because there are some good options out there to consider. Companies MUST put an arm’s length relationship in place with their direct hire professional contractors. A loosy-goosy work arrangement through accounting to pay for a 100K professional directly on your payroll just won’t cut it. And trust us it happens all the time and all over the place. Companies are very vulnerable.

Let me give you a practical example. If your Strategic Sourcing group of 40 paid out a bonus of 13%, your company would be required to also pay out that same bonus to the 7 direct contractors in the same role. The key is that you are absolutely required to treat both direct contractors and employees the same way – they are entitled to the same rights and privileges. And right now the only form of protection is that your contractors don’t know any better. That’s rather scary. And don’t think that just because you run a small to medium size company that this problem won’t affect you – because it will. Even if you have a department of five, the same rules apply for direct hire contractors. So buyers beware.

If your company is contracting your Supply Chain, Logistics and/or Procurement Professionals directly for fixed term work projects or to augment your core teams, then you are putting your company AT RISK!! Why you ask? You can’t contract away employment rights. A worker cannot give away their employment rights, even in a contract so contractors are entitled to ALL THE LEGAL RIGHTS as if they are one of your full time employees, such as bonuses, termination pay, vacations, benefits, profit sharing and more. The fact that they don’t ask doesn’t mean they don’t have the right to come back at a later stage to get them.

Argentus has a very strong handle on the contract management piece and can work with you to manage through your direct hire challenges. Call me, Bob Pridding – Managing Director at 416-364-9919. Additionally we are also able to place our own well skilled contract staff in Supply Chain Management with your organization.

All the best

Bob 

 

 

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