PICA's mission is to help independent consultants be successful through education, tools, services and community. Over time, advocacy will also become a part of PICA's ecosystem, as we campaign to change the norms, practices and biases that self-employed professionals face in corporate America.
It's been over 20 since Microsoft settled the landmark case about the misclassification of independent contractors as employees (Vizcaino v. Microsoft). Since then, third-party agencies like staffing firms and contingent workforce companies have fanned corporate fears of lawsuits and audits. Agency promises — “we’ll mitigate your risk” and “we’ll make it easy, just outsource everything to us” — have caused the pendulum to swing in the other direction, making it nearly impossible for an independent consultant to contract directly with a corporation. (See “Paying a Consultant as a Temp Worker Is a Costly Mistake!”)
Although the number of independent consultants continues to swell, other trends conspire against us. Like accounts payable departments stretching out payment terms to 60 days or more. Or media stories about so-called gig workers needing safety nets like unemployment insurance and worker’s compensation coverage.
In the press you rarely hear about people like us who choose to be self-employed, who are eager to be their own micro-business, and who have the smarts to take advantage of business-owner tax deductions and retirement plans.
It’s time for us to band together and create the critical mass that will push the pendulum decidedly back in our favor — or at least create a fair and equitable system.
Not all non-employee workers need to be paid through a third-party. As self-employed professionals, we are legitimate small businesses and deserve to be paid as independent contractors or on a business-to-business basis. Companies usually funnel all their consultants and contractors through a third party to mitigate their co-employment risk and to simplify their payables and tax reporting. In reality, they are overpaying to only partially mitigate their risk, and self-employed consultants like us are penalized in the process.
We are small businesses, not temp workers. Pay us on a 1099 tax basis, not a W-2!
Payment terms of net 60 days are an unrealistic hardship. Our consulting fees constitute a tiny fraction of a corporation’s annual revenue, but to us it can represent 50% or more of our monthly incomes. Like any small business, cash flow is crucial to our existence. To us a $15,000 payment can be critical, but to a corporation it’s just a drop in the bucket.
We are small businesses, not banks!
The requirement to have at least three employees in order to be paid on a 1099 tax basis is unfounded. No case law supports this requirement. A company like Accenture with 400,000 employees is no more legitimate than a sole-proprietor with a business license. Nonetheless, many corporate compliance processes require us to have three or more employees. This requirement is one thing PICA is on a mission to change: it's a hurdle that staffing firms have fabricated so they can make more money by paying us on a W-2 tax basis.
Demanding that an independent consultant carry the same levels of insurance as a global consulting firm is unnecessary and expensive. Some clients ask for up to eight types of insurance, ranging from general liability to employee dishonesty. Trying to explain that independent consultants don’t need worker’s compensation or employer’s liability insurance takes time and is often fruitless. Adding the client as an additional named insured or getting a waiver of subrogation processed by both parties is “administrivia” that eats into everyone’s productivity. Excessive insurance requirements create drag on the whole process for both parties.
Let’s bring some common sense into the contracting process!
Some companies insist that consultants have a “break in service” if they’ve worked for the company for 12 months or longer. Their thinking is that if you work for them longer than 12 months (or 18 months, or 24 – the number is arbitrary) that you are increasing their co-employment risk, that they may be found guilty of misclassifying you as an independent contractor when you should have been hired as an employee. In reality, the length of a contract has very little to do with the distinction between employee and independent contractor. (See “Common Law Guidelines for Contractor vs Employee ”.) This is another arbitrary practice, provided of course that you are indeed operating as an independent business and the client isn’t controlling how and when you work.
We’re not backfill or staff augmentation. We are professionals!