Businesses face employment compliance risks with the rise of gig workers

In recent years, an increasing number of workers have been pursuing "side gigs" as part of their portfolio careers. This trend has been fueled by the rising cost of living and a desire among workers to engage in monetised activities they enjoy, a phenomenon that has been further amplified by the Covid-19 outbreak.

However, this trend has presented challenges for employers. In addition to workers being unable to give their full attention to their primary jobs, which can limit their ability to achieve their full potential, employers have also fallen victim to scams perpetrated by temporary workers. These schemes may include difficulty in complying with employment regulations, which can have far-reaching consequences for those looking to pursue side businesses in the future.

Let's dive into the various schemes these individuals use, including difficulty obeying employment compliance, and how it will affect others who want to venture into the side business later on.

According to Sterling, a global background screening and identity service firm, the increase in freelance work and side gigs is putting companies at risk of increasingly sophisticated recruitment fraud. But what exactly are side hustles and gigs?

Side hustles or gigs refer to work that is done outside of one's primary employment. Often run as a side business or freelance work, they are not to be confused with a second job. Examples of side hustles include selling homemade products like cakes or chocolates, purchasing and reselling furniture or clothing, driving for Uber, content writing or working as an influencer. With people having more time during the pandemic to turn their interests into businesses and the rising cost of living, there has been a noticeable uptick in side businesses.

However, Sterling has warned that companies face a more complex employment compliance landscape. According to Talent.com, workers are increasingly likely to start a side business (18%), take on multiple jobs (8%), or freelance (4%) to combat the growing cost of living. As a result, companies must be vigilant against the threat of recruitment fraud which is becoming more prevalent and sophisticated.

While the ability to work from anywhere and at any time has given workers a wonderful sense of liberty, it has also made compliance more difficult for companies, Steve Smith, Sterling's President of International, has said. He added that concerns about tracking when workers have a side business that they may not have disclosed to their current employer are one of the exciting developments they are witnessing lately. This could have impacts on both productivity and their employment contract.

The rising cost of living has forced employers to run the danger of unintentionally outsourcing work in a non-compliant manner, in which case Smith noted that recruiting fraud has become more sophisticated. As an illustration, he noted that it is now a common practice to engage contract workers remotely, especially in sectors like tech, but it can be challenging to confirm that the individual who has been hired and vetted is the one who completes the work.

While it's difficult to track these individuals to monitor if they are doing the work and not outsourcing it to others, Smith disclosed that more employers are falling victim to schemes where a single contractor exploits their credentials to win employment but subsequently delegates the execution to a third party. For organisations, this may imply that workers complete tasks before being thoroughly screened following corporate requirements.

With the ongoing trend of remote work, the risks for employers associated with hiring freelancers or independent contractors have increased. According to the President of International at Sterling, to mitigate these risks, employers need to have a robust system in place that enables them to monitor their relationship with freelancers from the hiring stage to project completion. This system should also help identify red flags and potential compliance risks.

Even though employers are still adapting to the new work environment, it is crucial to acknowledge these compliance risks. Before hiring a freelancer or independent contractor, it is important to consider the regulations governing temporary workers. In other words, taking the time to assess the working relationship and understanding its legal implications can help prevent potential risks and non-compliance issues down the line.