July 16th, 2024 | Sterling

Countering the compliance risks of the ‘gig’ economy

As employers increasingly look to reap the benefits of the gig economy and are relying ever more on the contingent labour force to fulfil market demand, the associated risks of candidate fraud cannot be overlooked or understated. Robust selection, screening, and vetting procedures must be implemented to ensure that individuals who are either using nefarious methods to conceal identities, or have in the past been culpable of deception, are not hired. In this article, we highlight some of the key areas where employers must be on their guard in order to mitigate candidate fraud.

With the number of people working in the gig economy predicted to rise to 14.86 million by 2026, it is evident that organisations will need to continue to tap into this priceless vault of talent. If businesses don’t have the confidence in their processes to carry out all necessary compliance checks to the highest standards, they increase their exposure to the existential threats of data breaches, cyber-attacks or other types of fraud. The speed at which companies must move to hire and onboard new staff can also invite compliance mis-steps.

The good news for hiring managers and HR teams is that great progress has been made in the realm of digital identity, with companies able to partner with certified identity service providers (IDSPs) who use the latest Identity Document Validation Technology (IDVT) with Optical Character Recognition (OCR) to counter the risks of fraud. And with fraudsters using sophisticated means to trick employers, the need for compliance has never been greater. These certified, reputable partners can carry out a range of controls including ID, Right to Work, and criminal record checks.

Another challenge presented by the gig economy is that, in most situations, workers will typically not meet with any employee of the hiring organisation given the sheer volume and scale of recruiting. This is why organisations need to be able to place trust in their background checks, particularly during the onboarding phase. From reference checks to verifying credentials and qualifications, to the due diligence needed when hiring senior executives, it takes time and the right expertise to get compliance right. The consequences of engaging a worker with a violent or fraudulent past may prove extremely costly, which companies can ill afford in today’s tough economic landscape.  Indeed, the cost-of-living crisis has led to more candidates ‘moonlighting’ and falsifying their credentials, even turning to ‘reference houses’ to boost their chances of employment.    

As more employers seek to tap into global talent pools to help plug their skill shortages, more often than not, they’ll utilize remote interviewing and onboarding methods. This trend has spawned a rise in ‘deepfake’ candidates who use advanced technology (such as AI and machine learning) to collect candidate information and then create false identities by changing images along with audio and video, making it very difficult for employers to spot. And with access to sensitive company information, they can carry out harmful activity, which can lead to businesses facing huge fines as a result of potential security breaches.   

Consider rescreening to bullet-proof your compliance checks 

To further safeguard against the threat of fraud, organisations should not just stop at pre-employment checks. A fundamental (but often overlooked) part of the compliance process for both the gig workforce and permanent staff, is the re-screening of employees after a certain time period, for example six months or a year into their new jobs. Even though an individual may have met all the criteria at the point of hire, companies need to be alert to any subsequent criminal activity that the person may have been involved in or, for example, a change in their immigration status that would affect their right to work.

Other areas to consider include identifying which workers should be subjected to re-screening given the numbers involved. Companies may wish only to look at those who will continue with their employment. Workers will of course need to be informed of any re-screening, so the communications process has to be managed efficiently so that they fully understand requirements and can respond appropriately and in a timely fashion. Companies will also need clarification as to whether the process will be managed internally or externally by a specialist ID screening provider.

Interestingly, our own research also found that a growing dependence on gig workers was actually exacerbating skill shortages within companies’ permanent workforces. In other words, a preference for gig workers and associated temporary employment models was causing further resourcing issues, as organisations find themselves with a dearth of highly skilled labour on permanent contracts. Indeed, four in ten HR and talent management professionals surveyed said that this was affecting their organisations and adding to their already-expanding workloads.  

There are of course many benefits and advantages of a gig workforce, particularly in terms of quick and efficient access to resources to meet spikes in demand. But the rise of candidate fraud and AI-generated audio and visual deepfakes has made it easier for fraudsters to cheat the system. Organisations have been warned: their compliance processes must be able to stand up to scrutiny and cope with the rising threat of candidate fraud.   

This article was orginally published at hr.com (https://www.hr.com/en/magazines/legal_compliance_excellence_essentials/july_2024_hr_legal_compliance_excellence/gig-growth-reignites-need-for-compliance-rethink_ly4cvip1.html)   

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.