As with many business terms, the word “compliance” can mean many things, especially in different contexts.
For simplicity, and the purposes of this blog, compliance means meeting established specifications. More specifically, we are talking about meeting the guidelines that are established by our Customers in their service network contracts for those they will engage to deliver their products and services.
These requirements answer the question “what requirements does a contractor have to meet to be considered eligible for such work from the Customer?”
In this blog, we discuss what independent contractor compliance means to us as your partner in managing the risks associated with working with contractors and vendor networks.
When organizations engage contractor networks, they are typically leveraging individuals working as contractors who are not their direct employees. Since the organization’s brand, reputation, and ultimately, business, lies in the hands of this contractor network, the organization needs to mitigate any potential risks.
This risk mitigation is most often done by establishing contracts with the servicing companies that outline the required expectations that must be met to work together. Components that may be outlined could include background checks, TIN matching, license verification, and COI management, to name a few. The servicing companies must then meet all these guidelines established by the organization, to be considered “compliant” and eligible to receive work.
Independent contractor compliance may be determined at the servicing company level for such things as Tax Identification Number (TIN) Matching, COI Management, and Licensing or the individual level in the case of background screening and badging. PlusOne Solutions will report on the compliance rate(s) for the Customer in a manner that is documented, actionable and transparent. Data and compliance programs are not useful if they are not understood or available to the organization.
Each customer will set their requirements related to various products. For example, with Certificate of Insurance (COI) Management, the Customer will specify the types of policies they require – auto, G&L, umbrella – the limits – $1,000,000 – and any special language, endorsements, or other requirements. PlusOne Solutions will then work with all the servicing companies in their network to ensure they meet the established requirements. If they do not, we coordinate with the insurance agent and servicing company to bring them into compliance. When successful, this is what positively increases, and raises, a Customer’s compliance rate for COI Management.
TIN Matching is a useful process to ensure the servicing company is legitimate and to reduce the risk that future claims and payments may be denied. Compliance is defined by verifying the name and TIN information with the Internal Revenue Service (IRS) database that matches the information provided when they join the Customer’s network. The higher the number of verified (matched) companies are, the better the compliance rate will be. We will also work with them through the process to ensure they understand what is required and that the process is completed and done accurately. Reducing the likelihood of IRS fines is important to every organization and every 1099 form issued by a Customer carries this risk. Most common issues occur when the recipient and payee names do not match, either in error or by accident, and taking the time to check this through something like our TIN Matching service is efficient and timely.
Another area of risk – operationally, reputationally, financially, and legally – is to use unlicensed contractors to deliver your service or product. License verification and monitoring ensure that whenever there is a license required to perform work, run a business, or complete certain tasks, the Customer can confirm this licensing is active and meets requirements. Performing unlicensed work increases the risks noted above and opens Customers up to claims and damages that could otherwise be avoided. Reporting licensing compliance rates provides protection against such situations and yields a clearer picture of the quality and capability of a Customer’s service network.
For background screening, a similar process exists. The Customer will determine the scope of the background check they require – criminal, driving, drug testing – and PlusOne Solutions will work with the individuals working for the servicing companies to ensure they complete the required background screenings. We work with them not only at the initial onboarding but also every two years when they are required to rescreen. This ensures that independent contractor compliance is not only achieved but maintained. It is important to note that while a background check being completed will track compliance for a Customer, it does not always mean the background check resulted in an eligible decision. A technician may fail the background check process for a criminal issue, but the Customer still has a strong compliance rate because the process was completed.
Although instituting even one program will provide a measure of risk mitigation that is helpful to protect the organization, a complete and cohesive compliance program that includes multiple products to cover the various areas of the business will yield the best results. For example, doing background checks is better than doing nothing, but doing background checks and COI Management will deliver a more robust program and a greater level of protection.
PlusOne Solutions has created a complete workforce compliance program that addresses many of the common challenges of utilizing networks and these programs are what defines compliance for us. From ensuring you are dealing with a legal, verified entity, to ensuring professionalism and expertise through licensing tracking, to confirming the actual individuals doing the work are not a risk to homeowners right to verification of appropriate insurance coverage in case something does go wrong and a claim is filed. Organizations have a wealth of options available to protect themselves, their customers, business, and reputations. Service companies that meet all these requirements are deemed compliant and eligible.
Two of the single biggest factors that impact independent contractor compliance rates are the importance and commitment the Customer puts on their program and the penalties in place for non-compliance. PlusOne Solutions will not be able to support strong compliance rates in cases where Customers treat the program as optional or continue to provide work and pay claims for non-compliant servicing companies. In these cases, there is no incentive for the servicing company to comply and more importantly, there is limited risk mitigation realized by the Customer. Having a compliance program is not beneficial if the program is not adhered to and Customers and PlusOne Solutions work together to increase compliance rates.
Through regular reminders and communications, call campaigns, joint programs, and other package and financial incentives, a Customer can positively impact their compliance rates and reduce their potential exposure. Some Customers may do short-term incentive programs to increase compliance, by offering compliant servicing companies additional or varied contract opportunities or payment schedules and otherwise encourage participation in their programs.
Any requirements and expectations of the service network should be documented and regularly reviewed and updated, in their service contract with the Customer. PlusOne Solutions will use this as their barometer to determine compliance needs and it will also guide the company on how to ensure they comply. If you are interested in the compliance services we have to offer, contact us today to learn more about how we can help your organization.
Contents are provided for information purposes only and should not be construed as legal advice. Users are reminded to seek legal counsel with respect to their obligations and use of PlusOne Solutions services.
PlusOne Solutions has been an industry leader in the risk management field by specializing in compliance programs that meet the complex challenges of geographically dispersed contractors, vendors, and employee networks. PlusOne Solutions protects companies from possible financial, legal, and reputational risks associated with contractor and vendor relationships while creating safer work environments. To learn more, visit our website.
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