In 2023, the gig economy continues to undergo more and more legal scrutiny. It’s becoming increasingly important for talent marketplaces, platforms, and companies to understand the ever-changing government regulations. In recent years, there has been an influx of proposals and rulings at both the state and federal level that impact how freelancers are classified by employers. Litigations have also sprouted up across numerous states as a result of these updates – leaving some HR and legal teams struggling to stay ahead of this rapidly changing landscape.
Overview of the Gig Economy and Regulations
The gig economy has revolutionized the way we work with its emergence, thanks in many ways to innovative technology. Platforms are at the helm of this transformation – they create a bridge between employers and workers while making it easier for individuals to find gigs that match their skill set and availability. The projected gross volume of the gig economy in 2023 is 455.2 billion USD – up 53.8 billion USD from the projected gross volume of 2022 and nearly double the projection for 2019, according to Statista.
While this freedom can provide advantages for workers, it also places them outside of many traditional regulations and protections provided by employers, such as healthcare or access to retirement benefits. Government regulations have been evolving quickly to keep up with the consequences of this changing landscape. This makes ensuring compliance more important than ever, especially with the Department of Labor’s proposed ruling on worker classification and people leaning toward the ABC Test to become the standard. The passage of California’s AB5 has also added an extra layer of complexity for companies operating there, not to mention the increased risk of litigation that comes with non-adherence.
What Platforms Need to Know About Worker Classification in 2023
To accurately classify workers in 2023 and beyond, it is essential to stay current on the legal definitions of worker classifications. Last year’s slew of misclassification lawsuits should serve as a stark warning for any company – there can be no room for mistake when determining how to properly categorize workers.
What Are Worker Classifications?
Worker classification is an important area in today’s employment landscape that can determine the rights, duties, and obligations of individuals who are employed by businesses. They’re tax-related designations that define an individual’s relationship with their employer, such as sole proprietor, partner, or employee. Such regulations are in place to dictate how workers are classified based on various aspects like wages and benefits eligibility for overtime exemptions amongst other critical factors. The two main categories workers can be classified into are employees (who are classified as exempt or nonexempt under FLSA) and independent contractors.
The Opportunity of AI-Driven Worker Classification
Despite the complexity of worker classification, advancements in technology offer some exciting opportunities for businesses. As a global EOR with the world’s first AI-driven classification engine, we empower companies to get any worker they want from almost anywhere in the world without having to worry about government agencies. We examine multiple variables, including the role of the worker, whether the individual can demonstrate that he or she operates independently and free from the company’s control, and how the individual receives payment from the company. Our AI determines the correct worker classification and your workers either become employees of GreenLight or we hire them as an approved contractor. With our solution being AI-driven, we stay current with any changing regulations season after season so that businesses never have to worry about the compliance part of their payroll again.
What Employers Should Do When Hiring Workers in an Ever-Changing Landscape
With the evolution of the gig economy and regulations surrounding classification of workers, the responsibility of employers has become increasingly challenging. Using a payroll platform with an AI-driven classification engine and on-hand HR support can be invaluable for platforms and companies in 2023. Not only will it keep you compliant with the latest regulations as they arise, but having access to comprehensive guidance and advice is also essential for managing workers and staying up to date on such complexities.
Employers looking to ensure compliance amidst the current uncertainty in the gig economy and worker classification landscape may feel overwhelmed. Thankfully, there are steps that can be taken to mitigate risk and get ahead of any potential changes or litigation. Adopting new technologies can streamline processes and help you achieve cost savings while complying with laws and regulations. GreenLight leverages artificial intelligence-driven worker classification to deliver optimal solutions related to labor compliance with precision while freeing up resources and time otherwise consumed in managing manual paperwork. Schedule a demo today if you want to stay agile amid all of the changes the gig economy brings while still utilizing evermore sophisticated methods to remain compliant with evolving laws.