Nearly half of enterprises lack full confidence in workforce compliance, new research finds

While more than nine in ten enterprise leaders express confidence in their workforce compliance, almost half are prioritizing improvements, suggesting many believe there is still work to do.

Nearly half (46%) of enterprise organizations lack full confidence that they comply with labor laws and worker classification requirements across the jurisdictions where they operate, according to new global research from People2.0.

That uncertainty matters because contingent workers are a substantial part of many enterprises. Contractors, freelancers and temporary workers make up at least 11% of the workforce at three-quarters (75%) of organizations and more than one-fifth at 43%, according to the study of 700 senior HR and Procurement decision-makers across the US, Canada, UK, Netherlands, Australia and India.

Managing a workforce on that scale is not simple. More than a quarter of respondents named worker classification and misclassification risk (28%), a lack of visibility into workforce data and reporting (28%) and navigating labor laws across jurisdictions (27%) among their biggest challenges. Those challenges may explain why confidence only goes so far. The vast majority (91%) express at least some confidence in their compliance; however, just 54% describe themselves as very confident.

Leaders appear to know there is work to do. Almost half (47%) rank improving compliance and reducing risk among their highest priorities for the next 12 to 24 months, with only reducing costs and increasing workforce flexibility and agility (both 55%) ranking higher and four in ten (40%) plan to improve workforce visibility and reporting. Knowing where the risks sit is the first step, but closing them takes ongoing investment, governance and specialist expertise.

Brittany Lamb, Associate General Counsel at People2.0, said, “Compliance confidence and compliance readiness are not the same thing. The regulatory landscape around worker classification is not static. An organization that was fully compliant two years ago may have exposure today simply because the rules have changed.”

Recent developments bear this out. For example, New Jersey’s regulations on its ABC test, which presumes a worker is an employee unless the hiring business can prove otherwise, took effect in October, while the UK government is consulting until early 2027 on a presumption of worker status in tribunal claims. In Australia, regulators stepped up their focus on sham contracting in March. In each case, businesses need to be confident their classifications stand up to scrutiny and that depends as much on how their contingent workforce is run as on the rules themselves.

That is harder when programs are spread across multiple suppliers. In total, 46% of enterprises use six or more external vendors to manage their contingent workforce, and 17% use more than ten. According to the report, different vendor processes can lead to inconsistent onboarding, classification and interpretation of local employment requirements.

Catherine Chidyausiku, Chief Legal Officer, North America at People2.0, said: “For organizations operating across multiple countries, vendor proliferation is often less a matter of design than geography. The risks that follow are significant: inconsistency in how workers are classified and managed across regions, a substantially higher administrative burden and legal liability if any one of those vendors gets it wrong.”

Responsibility for contingent workforce decisions is also divided, with Workforce Procurement and Talent Acquisition (both 17%) and HR (16%) almost equally likely to be named as the primary decision-maker. Internal alignment ranks as the third biggest challenge (39%), while one in four enterprises (25%) say HR and Procurement are only somewhat aligned or worse.

This lack of alignment can carry real risk. The report warns that a worker classified as an independent contractor but managed like an employee is a liability, regardless of what the contract says, and that closing the gap requires teams to work from a shared view of the workforce.

“Many organizations do not know what they do not know. They may have a policy in place, but they have not mapped that policy against the specific tests that apply where their contractors are working. That gap can leave them exposed to misclassification claims, back pay and penalties they never saw coming,” concluded Lamb.

About the research

This research comprised a quantitative online survey of 700 senior business decision-makers working within enterprise organizations (500+ employees and annual revenues of $100M+) across six key markets: the USA, Canada, the UK, the Netherlands, Australia and India. The study focused exclusively on senior business decision-makers in HR and Procurement professionals, as these functions played a central role in contingent workforce strategy and management. Respondents were also screened using additional qualification questions to ensure they had direct responsibility for, or influence over, contingent workforce decisions.

The sample was weighted towards North America (USA: 200 respondents; Canada: 100 respondents), with 100 respondents surveyed in each of the remaining markets, providing a total sample of 700. At a 95% confidence level, this delivered an overall margin of error of approximately ±3.7%, making the findings robust for identifying global market trends and comparing the perspectives of HR and Procurement professionals. The research explored the challenges enterprise organizations faced in managing contingent workforces, identified which functions held the greatest influence over workforce decisions, and examined the key factors shaping contingent workforce strategies across large organizations. The analysis focused primarily on the overall findings, with comparative insights between HR and Procurement respondents where statistically appropriate.

About People2.0

People2.0 is a global provider of workforce compliance and payroll services for enterprises and talent suppliers, including staffing firms, search and recruiting firms, mass talent entities, and professional services firms. People2.0 helps these businesses navigate employment, labor, and tax regulations across the world.

Specializing in worker classification and compliance, People2.0’s employer of record (EOR) and agent of record (AOR) services streamline talent placement operations, correctly classify workers, and facilitate international placements. Whether hiring locally or globally, People2.0 empowers enterprises and talent suppliers of all sizes to engage the contingent workforce, keeping businesses compliant with local and international regulations. Using its global network of in-country experts, People2.0 enables its partners to hire any worker, anywhere, in any arrangement.