Effects of Microsoft contingent worker policy changes

Jul 20th, 2014
Effects of Microsoft contingent worker policy changes

Microsoft announced its new vendor policy restricting external staff to 18 months of work at a stretch, revealed to Geekwire, who obtained an internal memo by Microsoft Procurement to its vendors. While this seems to be related to the 18,000 employee layoff last week (17 July 2014), it actually may be addressing other employment laws and contingent worker model issues- probably in anticipation of increased legal risks. (Read more about the types of contractors at Microsoft here.)

These changes address a long grievance of a-dash temp workers and a-dash staffing agencies like Volt & Collabera whereby contractors on a-dash assignments could only work for 12 months and then have to take a 100 day break to avoid triggering co-employment risk, while v-dash workers could work for unlimited terms for virtually similar projects. This was possible due to a new trend in the staffing industry which leverages a creative way to bypass the permatemp issue.

To bypass labor laws and IRS tests that dictate how contractors can be considered employees fo clients, managers began to change temp staffing requirements into projects, a deliverable based contract- often called Statement of Work (SOW) contract and have the same worker in a v-dash contractor model instead. Technically, since the work (and contract) is now awarded to a consulting company (like Accenture) and not tied to an individual, the contractor is not considered contingent to Microsoft anymore, thus free from any time limits- resulting in contractors working for many years on the same projects. Obviously, this made a-dash contracts less preferred to experienced contract workers who didn't like sittling idle for 3 months. This new policy seems to correct this loophole- not surprising, given Microsoft paid for such employee misclassification not so long ago.

Based on the memo, the policy change also gives a-dash workers an extra 6 months of work, allowing them to work for 18 months, before being required to take a break (which also increased to 6 months). This might actually be a good thing as it gives Microsoft the ability to use these contingent workers for longer in face of the large scale layoffs of FTEs. The increase is also influenced by other companies that use contractors using 18 months as a 'safe term limit' to engage contractors.

By limiting the v-dash assignments to 18 months
1. Microsoft is very likely reducing the co-employment risk from this v-dash segment of the workers, which was being overlooked previously.
2. Making a-dash assignments more attractive and leveling the playing field against v-dash assignments, thus empowering this program. For Microsoft, a-dash assignments are much easier to control rate-wise and for compliance as they are filled through open competition among preferred vendors through their Managed Service Provider (MSP) program.
3. There will be no incentive for Microsoft managers to take advantage of the v-dash loophole which often led to non-transparency and lower competition in this spend.

There are some downsides to this though
1. Offshore vendors like Infosys, TCS and HCL doing long-term projects with employees on H1b visa will be affected negatively. Often these vendors require a portion of their staff onsite for project coordination with offshore teams. They would need to find alternative assignments for this significant population of workers because the INS is unlikely to approve H1b or L1 visas given their client is laying off employees. There are not many companies in Seattle that could absorb this large pool of talent and this could force many of them to look for alternates to Seattle.
2. A number of local consulting companies and independent contractors that relied on v-dash consulting gigs at Microsoft will start being affected by eligibility now. The more experienced ones can't afford artificial breaks of 6 months, causing them to find work elsewhere or raising their rates to cover the downtime.

In brief this new policy is

  1. Somewhat good for a-dash workers as they can now work 18 months at a stretch, followed by a mandatory 6 month break. Anyone currently on an a-dash assignment can get a 6 months extension.
  2. Bad for v-dash workers as they will now start to be monitored for 18 month terms. The only good thing in the memo, is that the clock is not retroactive and starts from July 1st, 2014, so there are 18 more months for folks to find alternatives.
    We suspect these time limits will only apply to onsite staffing type contractors. If a company is working remotely (a non MSFT building) or completely outsourced processes like the cafeteria or callcenters mentioned in the memo, the co-employment risk are much lower.
  3. Very bad for v-dash workers on H1b or L1 visas as the visa approvals which were hard to get are going to be even harder now.
  4. Bad for recent ex-employees of Microsoft (laid off or resigned) as they are ineligible to start work as contingent worker at Microsoft for 6 months- probably to avoid conflict of interest situations. If you are recently laid off and looking, we invite you to check out OnContracting and find out your contracting options in Seattle or other cities.

This is another example where these grey areas in labor laws around contractors need to change. With companies like Uber, ODesk, and online staffing companies like WorkMarket making contract work much more prevalent, it seems absurd for businesses to be held back by artificial, unclear and outdated laws and hurdles. It is hard to fault Microsoft or any other company for this, since they'd much rather not have time limits on contractor use, however they need to balance this with the risks.

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