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1 Breakout Session C2 Donna Gallant, Manager, Direct Purchasing and IC Contracting Booz Allen Hamilton Eric Rumbaugh, Esq., Partner Michael, Best and Friedrich, LLP Gene Zaino, President and CEO MBO Partners Date: Monday, November 5, 2012 Time: 3:30-4:45 pm The Rise of Independent Contractors in our Workforce

2 Agenda Our topic Our expert panel 2012 research findings, trends and predictions What should you look out for? Applying “best practices” We want your questions!

3 Who Are We Talking About? 1099s Sub-contractors Consultants Independent contractors Freelancers Single-person small businesses

4 BUSINESS TRENDS Organizations need to be more lean and agile: leading to increased IC usage SOCIETAL TRENDS Unprecedented independent workforce growth VIRTUAL ACCESS Borders disappearing: more talent, more competition REGULATORY TRENDS Deficits drive an increase in compliance enforcement IC ENGAGEMENT PRACTICES Trends Point to a “Perfect Storm”

5 Gene Zaino, President & CEO Donna Gallant, Manager, Direct Purchasing and IC Contracting Eric Rumbaugh, Esq., Partner

6 WORK TOGETHER WE MAKE IT SAFE AND EASY FOR INDEPENDENT CONSULTANTS AND THEIR CLIENTS TO WORK TOGETHER

7 EXPERTISESOLUTIONS FOR ORGANIZATIONS IC focus since 1986 Has served 22,000+ ICs Clients include 40% of Fortune 100 Federal and State agencies Unique technology platform specifically for safe and efficient IC engagement Approved GSA vendor E-Verify technology certified Top Secret clearance Certified Small Business Association of Corporate Counsel Sourcing Interest Group National Contract Mgmt Association Human Capital Institute Staffing Industry Analysts INDUSTRY AFFILIATIONS

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9 Why Businesses Use ICs The Rise of the Project Economy Need for more corporate agility More work delivered in a S.O.W. On-demand experts Bring back former employees Objectivity Specialization Flexibility

10 In Just One Year, Nearly a Million More People Reported In For Independent Work!

11 86% of independent workers are highly satisfied or satisfied And 75% are committed to remaining independent or growing their business 11 AND, 7 OUT OF 10 ARE EXPERTS

12 Independents Less Daunted in 2012

13 America’s New Job Engine

14 INDEPENDENT WORKFORCE PREDICTIONS

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20 Donna Gallant, Manager, Direct Purchasing and IC Contracting Eric Rumbaugh, Esq., Partner Let’s learn about the issues from our experts...

21 IRS Sees ICs and Small Business as a Tax Problem (ESTIMATED) $345 B $450 B $555 B SELF-EMPLOYMENT TAX SMALL CO. BUSINESS INCOME INDIVIDUAL BUSINESS INCOME The U.S. Internal Revenue Service, “Tax Gap for Tax Year 2006.” January, 2012; report on tax year $153 B UNDERREPORTED $198 B UNDERREPORTED $243 B UNDERREPORTED TAX GAP IN BILLIONS

22 The Challenges: Obvious and Not So Obvious The IRS can levy misclassification penalties from 10% to 80% of IC payments.

23 The Most Significant Risk Unhappy or disgruntled workers Poor performance Lost talent Social network rants Lawyer friends

24 A Balanced Approach is the Best Solution RISK MITIGATION ADOPTIONCONTROL RISK MITIGATION STRONG ADOPTION STANDARDS & CONTROL Tax compliance Co-employment and benefits risk mitigation Adherence to business insurance requirements Attract and retain talent Fast, easy on-boarding Minimal manager impact Value to the IC Visibility into spend Consistent, centralized practices Streamlined efficient processes

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