AB5 and the Future of Managing Talent

Talent management in the digital age is shifting rapidly. These shifts lead to changes in hiring and working that can be daunting to keep up with, and such is the case with AB5. But actually, as we look to the future, it is easier for companies to determine best practices because there is now a precedent set by AB5.

We’ll begin by identifying what AB5 is and who it affects. California’s Assembly Bill 5, or AB5 for short, is a recent bill signed into law by Governor Gavin Newsom that went into effect on January 1st, 2020. Popularly known as the “gig worker” bill, this new law clearly defines the lines between independent contractor (IC) and a full-time employee (FTE). As it stands, many companies around the world contract with freelancers who may actually meet the legal definition of a full-time employee. 

Companies like Uber, Doordash, and many talent marketplaces are all going to be put through additional scrutiny as time moves forward, but every employer in California that uses contract or freelance workers has to comply with the new law.

This particular law is certainly only applicable in California, but every state has independent-contractor laws, and a lot of businesses are violating them without knowing it. This has been going on for a long time. Way back in 1999, Microsoft paid out about $100 million to a group of “independent contractors” who the court said were actually employees. Twenty years ago, not in California.

When it comes to the future of managing talent, candidates’ needs for flexibility are growing. One of biggest fears that freelancers have about AB5 is that they can’t work flexibly anymore, and it’s just not true. You can still work many short gigs or a few longer gigs. You can work for one company or many companies. You can work as few or as many hours as you and your employer agree. 

In fact, employment can be very lightweight (meaning easy to start and end), making it practical for even short assignments. The easiest way is to use an “employer of record” service — Here at GreenLight, this is one of the services we provide.  An Employer of Record (EoR) is an intermediary that employs contractors on behalf of companies for short-term or longer-term assignments. GreenLight can get a freelancer signed up as a “portable employee” in about 10 minutes, automate her invoicing and receivables, and get her paid within a few days, all while protecting the employer from legal risk.

In the future, this kind of automation is another aspect of workforce solutions we will see increase. An EoR service isn’t the only way though. Companies can also streamline their own employment processes to make it easier to employ for short duration, and some do. Most of the time, using an EoR can actually mimic an FTE experience by making it easy to offer your contractors benefits, expected and on-time payments, and to feel good going through the process.

In today’s Gig & Talent Economy, the world’s top talent is setting the terms on their work. If you’re a world-class engineer or any skiller worker, you know that you’re so in demand that you can work your own hours, at a rate that you set, and on your own terms. Companies that remain agile and compliant in this labor market will continue to win because as we know, the best people build the best companies.

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