Enterprise Workforce Evolution: Integrating Contractors into Your Ecosystem

“When we say workforce, what do we mean?“

This was the first question Elizabeth J. Altman, guest editor for the MIT Sloan Management Review Future of the Workforce Big Ideas initiative, a joint research project with Deloitte, posed to a collection of C-suite executives and senior leaders from Amazon, IBM, NASA, Nike, Walmart, Unilever, the US Army, and others.

“And to a person – big company, small company, internationally, non-profit, for-profit – people would say: oh, that is a very good question,” said Altman, an associate professor of management at the University of Massachusetts Lowell’s Manning School of Business. “And I thought, that’s interesting, I wouldn’t have thought this basic question was that complicated.”

Back when workforces consisted mostly of full and part-time employees – it wasn’t. But organizations today increasingly depend on external contributors – such as long-term contractors, freelancers, subcontractors, service providers, chatbots, and more – to meet their objectives. External contributors produce at least 30% of the work in roughly half of the organizations. In some industries, like tech, external contributors account for up to 50% of an organization’s workforce.

Managing such a complex structure, Altman and her colleagues from the research project concluded, requires thinking about workforces differently. What constitutes a workforce, they claim in a recently published book titled Workforce Ecosystems, is simply a matter of value. In other words, if you create value that benefits an organization – you are part of its workforce ecosystem.

A tour de force of workforce tech

Various technologies support and shape workforce ecosystems. MIT Sloan sorts these technologies into five categories: work tech (Microsoft 365, Adobe Photoshop), workplace tech (Zoom, Slack), technology as a participant in a workforce ecosystem (robotic process automation, chatbots), credentialization and verification tech, and workforce tech – which includes technologies that organizations use to manage workforces.

Historically, workforce tech platforms were designed to manage only internal contributors, but as the modern workforce’s makeup shifts, they have been expanding to address external contributors as well. One of these platforms is Papaya Global, the world’s leading payroll and payments platform, which offers an enterprise-grade solution for managing contractors at scale.

It starts with payments. Payroll providers typically outsource the payments part to all-purpose payment companies. Papaya Global took a different route. Relying on partnerships with tier-1 banks such as J.P. Morgan Chase and Citibank, we built the first paytech designed for cross-border workforce payments. Our unique payment capabilities allow us to charge the lowest possible price for contractor management: $2 a month per contractor.

As a regulated financial services company, Papaya holds money transfer licenses around the globe, allowing our clients to pay their contractors compliantly everywhere. In addition, we perform Know Your Customer (KYC) and Anti Money Laundering (AML) processes for each new client and worker who is being paid via our system – and run rigorous screenings for every payment, every cycle, to keep workers’ data and clients’ funds safe.

Compliantly correct

Another crucial aspect of managing contractors is compliance with employment laws, specifically worker misclassification. Defined as the illegal practice of labeling workers as independent contractors – usually to reduce labor costs – when they should be classified as employees, worker misclassification has become a global issue in recent years.

According to the European Commission, for example, up to 5.5 million EU platform workers (home-delivery riders, Uber-style app drivers, etc.) could be misclassified – out of 28 million in total. Many global enterprises are at risk of being fined or sued for misclassifying workers. Nike, for instance, faces potential tax fines of more than $530m and the possibility of class-action lawsuits over its handling of independent contractors.

Avoiding worker misclassification can be challenging, as regulations regarding contractors vary from country to country. That’s where Papaya’s platform comes in. With local labor laws in more than 160 jurisdictions baked into it, Papaya’s platform can determine the correct classification of every contractor, allowing it to assume liability for any compliance violation, effectively eliminating the risk of fines and potential litigation for employers.

If Papaya’s platform determines that a contractor has been misclassified, it can seamlessly change their employment status to payroll employee. In cases where the client has a legal entity in the relevant location, all it takes is one click. In cases where the client is not ready to set up a permanent presence in the relevant location, Papaya can leverage its global network of Designated Country Experts (DCEs) to facilitate the contractor’s transition.

Because when we say workforce, we mean an entire workforce ecosystem.