New economic realities are causing the employment models of both large and small companies to evolve. As the need for business agility has grown, a higher percentage of contractors and consultants are being integrated with a leaner permanent workforce. According to the Bureau of Labor Statistics, nearly 70 percent of hiring in the last year was contract-based.

The rise of contract employment is a key to future productivity and growth, but companies must fully understand the labor and tax laws that apply to contract workers. In an effort to increase tax revenue, the IRS and many state governments are now cracking down on how businesses classify their workers. The Internal Revenue Service plans to randomly examine 6,000 companies over the next three years for employee misclassifications, and the federal government expects to raise an extra $7 billion through tighter enforcement of worker classification laws.

For many businesses, it makes more sense to use a reputable staffing firm to hire and manage its temporary workforce. Staffing companies allow their clients to hire contract employees for as long as they need them without having to worry about worker misclassification issues and other regulatory requirements. Staffing firms are responsible for employment taxes, unemployment insurance, other types of insurance and employee benefits alleviating the administrative and legal burdens associated with hiring contractors. And because they specialize in contract employment, you can rely on them to stay informed about any new regulations that may affect your business. 

Sources: "Going Solo: How to Succeed in the Project Economy", By Gene Zaino, IDG Connect, June 26, 2011, www.idgconnect.com "Auditors crack down on independent contractors", By Nancy Mann Jackson, CNN Money, http://cnn.com