ADP: How Payments Power The Evolving Workforce

Contract, or 1099, workers aren’t a new workforce phenomenon by any stretch of the imagination. But in the era of on-demand services — and a seemingly ever-proliferating number of platforms that match employees to short-term labor contracts — the last decade has seen the emergence of the golden era of the gig economy worker.

Initially, the rise of the gig economy was adaptive: The U.S. economy was in dire shape, companies were skittish about investing in employees and the labor force rapidly found itself largely underemployed and looking for innovative ways to add to their household income.

Doug Politi, president of Compliance Services at ADP, told Karen Webster in a recent conversation, that those conditions are very different in 2018. The economy, by most reasonable measures, is going strong, and unemployment is at record lows. But the gig economy is still growing — faster than ever.

“Everyone wants more flexibility these days,” Politi said. “That is true of both employers and employees.”

That ever-increasing desire for flexibility, he said, meant that it was time for ADP — a firm currently managing payroll for one out of every six American employees and 13 million additional workers worldwide — to evolve along with the employers and workforce their business was built to service.

Which, Politi told Webster, is how ADP came to acquire WorkMarket, a cloud-based workforce management solution provider that enables companies to efficiently build and manage an integrated workforce across W-2 employees, 1099 contractors, vendors and other types of workers.

Addressing an Emerging Economy

Though the acquisition has just been announced, ADP has been investigating this expansion for the last several years. Until now, the firm’s capabilities around 1099 workers were limited — as Politi said, they “for all intents and purposes had the ability to print the forms.”

Given the strong market growth, 90 percent of today’s ADP clients are leveraging 1099 employees to some extent, which compelled ADP to build a solution to help their clients — the employers — to more efficiently manage their entire labor base.

WorkMarket emerged as a natural partner. Active in the market for the past eight years, the company specializes in helping employers manage an on-demand freelance labor pool, which has also become an increasingly essential piece of the entire labor economy. Their client list includes some very big players — The New York Times, Pitney Bowes, Walgreens and Warby Parker, to name a few — a broad group of firms that use their software to hire and manage this more agile, fluid workforce.

And those large employers, he said, have special needs and a unique relationship with their contract worker pool. Often, they have workers with whom they have long relationships — and that verified and approved status is important.

“When there are larger employers who have a private labor pool of approved contractors, this [solution] allows them to send out notice to all participants within the pool to register,” said Politi. “That registration then lets the employer see what types of jobs they’ve done, their ratings, their terms and conditions for contracting and whether their licensing and other things are current. It then makes the ability to move money part of that process.”

So, when a large media company, for example, suddenly needs expert talent in a remote location, they can look through their platform to find the people they need, arrange the contract and even pay on it without having to resort to a complicated process. And if there happens to be three or four qualified candidates in the area, they can bid for the job.

The HR Revolution (And Escaping the Procurement Death Vortex)

In the old days, Politi said, there was a hard line between W-2 workers and 1099 workers when it came to which departments managed the onboarding and payments processes. Employees who received W-2s were the province of human resources; 1099 workers fell under the ownership of procurement, often because contract workers were traditionally thought of as “vendors” and not talent.

“Procurement’s historical orientation is how to secure and manage the cheapest contract — not how to access talent that can leverage the assets of the firm,” said the executive.

But, he noted, that is changing, as 60 percent of HR firms plan to include the 1099 workforce as part of their scope, and as employers start to see the mixed modern workforce for what it is: talent.

Politi said that ADP, now armed with WorkMarket, can help those HR professionals more efficiently manage the payments piece of that puzzle.

“What’s really exciting is that as all of these different themes come together, technology is allowing firms to more fully evolve their strategy,” Politi concluded.