In today’s workforce, successful organizations are composed of a variety of different types of workers. Teams are often made up of cross-functional members and individuals with diverse experience and backgrounds, as well as project-based freelancers and/or independent contractors (ICs).
Ideally, organizations would embrace all their workers as valued team members, regardless of how they’re classified on paper. While full-time employees receive benefits like health insurance and workers’ compensation, the independent contractor status of 1099 employees doesn’t make them any less a part of the team.
For People professionals working to build satisfied and highly engaged workforces within a culture of belonging, including independent contractors in their People Program Models (PPMs) comes with a unique set of considerations. Below, we’ll take a closer look at what a PPM is, why it’s important to include your independent contractors in it, and how to do this effectively.
What Is a PPM?
PPMs are the sum of the ways companies exchange and collect information from their workforce, which enables their employees to do their best work. PPMs are comprised of three major components: goal alignment, input on the worker experience, and performance management.
But PPMs are not a static exercise that organizations can simply check a box to complete. Rather, they are ongoing processes that should be revisited often throughout the year and assessed for progress or any adjustments that need to be made. Here are examples of what this might look like in practice for each of the aforementioned categories.
- Goal Alignment: Quarterly goal-setting between employees and managers.
- Input on the Employee Experience: Regular engagement or satisfaction surveys that provide anonymous insight into the point of view of the workforce, and equip leadership and management with valuable self-reported data to create action plans for the organization.
- Performance Management: Review cycles that pull together performance-based feedback and workers’ achievements and prepare managers and employees for future-focused conversations, such as formal performance reviews and more casual check-ins like one-on-ones.
Intentional or not, all companies have a PPM. And your independent contractors are feeling the effects of it, whether they are deliberately included or not. But that doesn’t mean the PPM in place at your organization is necessarily working to best support your business and its people.
Independent Contractors and Their Contribution to Your Company
Independent contractors have had staggering growth in the workforce over the last 20 years — one 2019 survey from Gallup and Intuit Quickbooks estimated that there were 8.5 million more adults working as independent contractors or self-employed in 2016 than there were in 2000. From independent contractors with fixed-term, static roles in a firm, to those juggling disparate project-based work for several different organizations, independent contractors are contributing to the companies they work with, both tangibly and intangibly.
“The reality is that whoever is working at or with a company impacts the company’s culture,” said Julia Markish, Director of Advisory Services at Lattice. “And culture is nothing more than behaviors and norms getting amplified over time.”
While important IRS-related and legal distinctions exist between full-time employees and 1099 contractors, the differences tend to end there. Both employees and independent contractors contribute their time and efforts to do work that’s meaningful personally and professionally and benefits the company.
“When you’re thinking about how [to] celebrate and encourage great work and how [to] all get better together — the ethos of a PPM — then no matter who it is that’s contributing to a company’s culture, output, [and] goals should be included in that celebration and growth,” advised Markish.
Incorporating independent contractors into your organization’s PPM is the inclusive and people-centric thing to do, but it will also become a practical necessity moving forward. Contractors are expected to continue to grow as a subset of the workforce, and having separate PPMs for employees and independent contractors isn’t sustainable for a growing company.
How to Include Independent Contractors in Your PPM
Their status as self-employed, non-employees makes avoiding misclassification of independent contractors important, but that doesn’t mean People teams can’t include these individuals within the appropriate aspects of an organization’s PPM. Here are some suggestions of how to do this for each of the three main categories we’ve previously listed.
1. Goal Alignment
Goals enable workers to see how their efforts connect to your company’s mission. Many companies use goal-setting as the framework for setting expectations, giving and receiving feedback, and measuring performance. And while the formal performance review aspect of performance management is not advisable for independent contractors, setting goals is a recommended and impactful way to strengthen the connection between an organization and an individual.
“I would say it’s actually even more important to be very clear [with independent contractors] about what the company is trying to accomplish, and how and why the contractor contributes to this,” Markish said.
Markish pointed out that independent contractors are less likely to get a sense of this information — company mission, values, and overall culture — on a regular basis. They may not be attending all-hands meetings, for example, or be a part of other scenarios where discussions on these topics commonly take place. And since there are fewer touch points where organizations are communicating this information to independent contractors, ICs stand to benefit even more from goal-focused resources and conversations with their main point of contact at the company. One simple way to accomplish this is by using the Lattice platform.
“The ability to go back to the platform and see the goals and what you’re trying to accomplish can drive a lot of meaningful work,” noted Markish.
2. Input on the Worker Experience
Employee surveys are used to measure everything from reported satisfaction with company communications to engagement with one’s specific role. Including independent contractors in your organization’s satisfaction and engagement surveys is an appropriate and effective way to incorporate independent contractors into your organization’s PPM — but be mindful that doing so comes with some practical considerations.
First of all, you should label these surveys as “Engagement Survey” or “Satisfaction Survey” rather than “Employee Engagement Survey” or “Employee Satisfaction Survey.” While the difference may seem semantical, independent contractors might not see it that way. They aren’t employees, and this distinction comes with a number of employment-law-related implications. Respect all parties involved by keeping the survey title simple and all-inclusive.
Secondly, since all the responses will be aggregated regardless of worker classification, make sure you can differentiate anonymously on the backend between company employees and contractors to ensure the data collected is weighted and interpreted correctly. Doing so will provide clarity on responses to questions that could otherwise be misrepresented by contractors, like questions about satisfaction with employee benefits, for example.
3. Performance Management
Involving independent contractors in performance management is a historical no-no. Because of the legal implications of misclassifying workers, many camps take a definitive stance against including 1099 workers in performance management programs.
But this idea conflates the concepts of performance management and performance reviews. While contractors should certainly not be taking part in formal performance reviews, there are still meaningful ways to include them in the benefits of a holistic performance management program.
“We want to think about purposeful performance management, which is a much broader collection of behaviors and processes, like continuous feedback, a trusting relationship with your manager, and your individual development plan — for whatever position you’re in, contractor or not,” Markish said.
So when it comes to 1099 workers, skip annual or mid-year reviews, but opt in on other aspects of performance management, like encouraging a culture of continuous feedback through regular check-ins and sharing everyday praise.
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As the nature of work continues to change and evolve, we must find ways to support and empower all the individuals who contribute to an organization’s success, whether they’re full-time employees or not. A data-driven PPM can help businesses leverage the talents of all their workers, while providing them with the resources and support they need to do their best work.
Lattice Advisory Services helps companies identify and implement People programs that fit their unique needs. Based on industry knowledge, customer data, academic research, and market analyses, we’ve identified six People Program Models that are effective for most organizations, each featuring a unique take on performance, engagement, and goals. Learn more here or contact us to schedule a demo.
