New Year, New Compliance: Navigating Changes with Independent Contractors Globally in 2024

Female Independent Contractor working on a laptop besides another employee

As we step into 2024, it’s a time for renewal and reflection not only personally but also for businesses globally. With numerous legislative changes coming into effect, it’s crucial for companies to pause and ensure their policies align with the latest legal standards. 

In this blog post, we delve into some recent legislative updates across the globe, zeroing in on key changes that significantly impact the classification of self-employed workers. 

We’ll also explore how an Agency of Record (AOR) can help organizations reduce their corporate risk footprint when engaging ICs. 

Australia looks to close loopholes

Under its new Fair Work Legislation Amendment, known as the “Closing Loopholes Act,” the Australian government is prioritizing international underpayment of employee wages and benefits.  Intentional underpayment is now a criminal offense, with penalties of up to 10 years’ imprisonment for individuals and potential fines of up to AUS $7.825 Million. 

The amendment also allows workers to appeal to the Fair Work Commission for a review, ensuring they are paid at least what they would receive in equivalent public sector jobs or in the company’s enterprise agreement. 

Notably, the defense to sham contracting would also be modified, requiring employers to establish a reasonable belief that the contract was a contract for services rather than an employee position.

The first part of this legislation recently passed and the second portion of the “Closing Loopholes Act” will be debated in February of this year.

The United States rules that freelancing isn’t free

The U.S. Department of Labor (DOL) issued its ‘final rule’ on Employee or Independent Contractor Classification under the Fair Labor Standards Act (“FLSA”) on January 9, 2024, marking a significant shift in the guidelines for determining employee vs. IC status. 

This new rule reverts to a totality-of-the-circumstances analysis, considering factors such as permanency, investment and utility of skill. It’s noteworthy to mention that this marks a departure from the previous Trump-era standard, reflecting the evolving priorities in employment regulations. The shift aims to reduce employee misclassification, aligning with the Biden administration’s focus. 

Alongside this, the New York DOL has expanded New York City’s “Freelance Isn’t Free” policies to the state level, emphasizing the recognition of freelance workers’ rights and imposing new compliance obligations on businesses engaging with ICs.

The European Union fails on gig economy directive

In contrast to these developments, the European Union faced a setback in its attempt to reclassify gig workers as formal employees

The proposed directive, impacting up to 5.5 million workers, collapsed due to opposition from member states. The directive aimed to grant basic labor and social rights to self-employed workers of digital platforms by meeting specific economic indicators.

Staying ahead of legislation with an Agency of Record

In the dynamic landscape of business, engaging ICs stands out as a strategic move, offering flexibility and access to specialized skills. While this talent strategy holds immense potential, it comes with its own set of challenges in terms of regulatory compliance and corporate risk management.

Companies face several risks when engaging independent contractors, including the permanent establishment and the potential for retroactive reclassification to employee status. This misclassification, sometimes identified as “wage theft” or “sham contracting,” can lead to legal repercussions and financial settlements. An in-depth evaluation at the start of the engagement, especially when facilitated by an Agency of Record (AOR) service provider, can help mitigate these risks. 

Partnering with an AOR and cross-border HR compliance provider, such as GoGlobal IC Solutions, is crucial for ensuring proper categorization and correct payment of freelance or self-employed contractors. With more legislation surrounding ICs expected in the future, an AOR provider with international scalability becomes instrumental in facilitating a seamless engagement process worldwide – regardless of location.

Check out the details for GoGlobal IC Solutions or contact us to learn more about how our services can help you safeguard your talent strategy and onboard ICs quickly, compliantly and cost-effectively.