As a way to get work done when payroll budgets are tight, two in five employers are using more independent contractors. According to ManpowerGroup, 41 percent of recently surveyed employers report that they have used a greater number of independent contractors over the past two years. 

Does your company use independent contractors? Proposed regulations would bring additional record keeping

As a way to get work done when payroll budgets are tight, two in five employers are using more independent contractors. According to ManpowerGroup, 41 percent of recently surveyed employers report that they have used a greater number of independent contractors over the past two years.

"Certainly, independent contractors can fill a need in today's environment," says Jennifer Menke, senior vice president of Quality and Service Operations for Ceridian. "When volume levels are uncertain or you experience cyclical peaks, this type of resource can provide flexibility and an ability to meet a temporary need. Additionally, you may experience a short-term need for a unique skill set, and a contractor can help you bridge that gap. In these types of situations, contractors may be viable options as you look to balance cost pressures with delivering an outstanding customer experience."

New record keeping regulations proposed

The United States Department of Labor (DOL) is considering regulations to change the record keeping requirements for large categories of employees -- including independent contractors. A proposed DOL rule, called the Right to Know Under the Fair Labor Standards Act, would require employers to notify workers of their rights under the Fair Labor Standards Act (FSLA) and to provide information about hours worked and wage computation.

As described by the DOL, the proposed record keeping regulation specifies the scope and manner of records covered that employers must keep in order to demonstrate compliance with minimum wage, overtime and child labor requirements under the FLSA. The proposed regulation also specifies the records that employers must keep to confirm particular exemptions from some of the act's requirements. This proposal intends to update the record keeping requirements to foster more openness and transparency in demonstrating employers' compliance with applicable requirements to their workers in order to better ensure compliance by regulated entities and to assist in enforcement.

How to prepare for changing rules

"If the proposed regulations are implemented, employers need to be prepared," says Ann Shaw, senior vice president of Legal for Ceridian. "I would recommend that HR professionals begin to look at the way they classify independent contractors so that they can confirm that they're complying with current law. Then document your findings. It's a good way to start preparing for the record keeping and distribution requirements you may face if the new regulations are implemented."

The determination of whether a worker is an independent contractor or an employee varies under FLSA, Internal Revenue Service and state law, but the basic concept is the same. "Generally, the determination centers around control," says Shaw. "If the employer can control when, how and where a person performs work, then it is likely that the worker would well be classified as an employee in most states. Seek legal counsel if you're unsure."

Take action to manage the paperwork and business risks that come with changing regulations

Ceridian HR Compliance solutions a range of assistance, including cost-effective options for smaller businesses.