Among the main risks in hiring independent contractors (PJs) is the reclassification of the contract to recognize an employment relationship between the client and the contractor.
This engagement model has grown significantly among companies; therefore, it is essential to stay alert and mitigate the risks involved. Despite its advantages and cost-reduction flexibility, facing a contract reclassification that triggers full liability on compensation may expose the company to civil and criminal liability for potential fraud.
In other words, the voiding of multiple service agreements entered into through legal entities can lead the contracting company into bankruptcy.
Risk Analysis in Independent Contractor (PJ) Hiring
Risk analysis in independent contractor (PJ) hiring is dedicated to mitigating tax and labor risks concerning agreements established with third-party service providers.
In this way, all documents from the service provider are reviewed on a monthly basis to prevent joint and several liability for the company.
Risks
Believe it: if your company does not perform risk assessments, it faces significant risks. It is essential to conduct it proactively and correctly to rule out prominent hiring risks.
Accordingly, Level developed a Risk Analysis process for Independent Contractor (PJ) Hiring. Learn about the stages:
- STAGE 1: SUPPLIER EVALUATION
Level conducts a study of each of the company's service providers, evaluating the legal entity classification, headquarters location, place of service delivery, etc.
- STAGE 2: RISK MATRIX CREATION
After gathering all the information, we build a risk matrix and identify the documentation that will be requested monthly from each supplier.
- STAGE 3: REVIEWS & ANALYSES
Every month, Level evaluates the submitted documents and then delivers a report to the company detailing the potential risks associated with each supplier.
Step-by-step details:
- Survey of data from all of the company's service providers;
- Creation of an analysis map for each supplier, outlining potential risks to the company;
- Subsequently, Level requests a checklist of documents from each supplier that must be submitted on a monthly basis.
- We conduct reviews based on the documents provided by each supplier, measuring the risks identified across procedures.
- Monthly, Level delivers a report outlining potential risks and guides the company on the corrective actions and measures needed to mitigate them.
To learn more or ask questions about Risk Analysis in Hiring Legal Entities (PJs), visit our website.
